On the Ryan plan

Charles Krauthhammer defends Paul Ryan’s budget plan, which Democrats are decrying in apocalyptic terms for the way it slashes the budget, even though that will not be enough to balance the budget until 2040!  That’s how bad our deficit is!

The conventional line of attack on Ryan’s plan is already taking shape: It cuts poverty programs and “privatizes” Medicare in order to cut taxes for the rich.

Major demagoguery on all three counts.

(1) The reforms of the poverty programs are meant to change an incentive structure that today perversely encourages states to inflate the number of dependents (because the states then get more “free” federal matching money) and also encourages individuals to stay on the dole. The 1996 welfare reform was similarly designed to reverse that entitlement’s powerful incentives to dependency. Ryan’s idea is to extend the same logic of rewarding work to the non-cash parts of the poverty program — from food stamps to public housing.

When you hear this being denounced as throwing the poor in the snow, remember that these same charges were hurled with equal fury in 1996. President Clinton’s own assistant health and human services secretary, Peter Edelman, resigned in protest, predicting that abolishing welfare would throw a million children into poverty. On the contrary. Within five years child poverty had declined by more than 2.5 million — one of the reasons the 1996 welfare reform is considered one of the social policy successes of our time.

(2) Critics are describing Ryan’s Medicare reform as privatization, a deliberately loaded term designed to instantly discredit the idea. Yet the idea is essentially to apply to all of Medicare the system under which Medicare Part D has been such a success: a guaranteed insurance subsidy. Thus instead of paying the health provider directly (fee-for-service), Medicare would give seniors about $15,000 of “premium support,” letting the recipient choose among a menu of approved health insurance plans.

Call this privatization if you like, but then would you call the Part D prescription benefit “privatized”? If so, there’s a lot to be said for it. Part D is both popular and successful. It actually beat its cost projections — a near miraculous exception to just about every health-care program known to man.

Under Ryan’s plan, everyone 55 and over is unaffected. Younger workers get the insurance subsidy starting in 2022. By eventually ending the current fee-for-service system that drives up demand and therefore prices, this reform is far more likely to ensure the survival of Medicare than the current near-insolvent system.

(3) The final charge — cutting taxes for the rich — is the most scurrilous. That would be the same as calling the Ronald Reagan-Bill Bradley 1986 tax reform “cutting taxes for the rich.” In fact, it was designed for revenue neutrality. It cut rates — and for everyone— by eliminating loopholes, including corrupt exemptions and economically counterproductive tax expenditures, to yield what is generally considered by left and right an extraordinarily successful piece of economic legislation.

Ryan’s plan is classic tax reform — which even Obama says the country needs: It broadens the tax base by eliminating loopholes that, in turn, provide the revenue for reducing rates. Tax reform is one of those rare public policies that produce social fairness and economic efficiency at the same time. For both corporate and individual taxes, Ryan’s plan performs the desperately needed task of cleaning out the myriad of accumulated cutouts and loopholes that have choked the tax code since 1986.

Ryan’s overall plan tilts at every windmill imaginable, including corporate welfare and agricultural subsidies. The only thing left out is Social Security. Which proves only that Ryan is not completely suicidal.

But the blueprint is brave and profoundly forward-looking. It seeks nothing less than to adapt the currently unsustainable welfare state to the demographic realities of the 21st century. Will it survive the inevitable barrage of mindless, election-driven, 30-second attack ads (see above)? Alternate question: Does Obama have half of Ryan’s courage?

via After Ryan’s leap, a rush of deficit demagoguery – The Washington Post.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • Louis

    They are all demogogues.

    But, why aren’t you guys more upset about military waste and overspend?

    Case in point: The USAF is ordering 2443 F-35 war planes. This means that in a decade’s time, the US will have 15 times as many fighters as China, and 20 times as many as Russia. What the …?!?!?

    With overruns, maintenance as well as primary cost, the US is spending more ON THIS PLANE than the Australian GDP. (for full details, see http://www.theatlantic.com/national/archive/2011/03/the-f-35-a-weapon-that-costs-more-than-australia/72454/ )
    But with lobbying etc etc., nobody is going to suggest cutting there (for instance).

    I’m no pacifist, but realism has long departed the scene, it seems. If cuts are needed, and they are, then across the board cuts should be done.

    But which politician will have the balls to stand up and say it?

    ***crickets chirping***

  • Louis

    They are all demogogues.

    But, why aren’t you guys more upset about military waste and overspend?

    Case in point: The USAF is ordering 2443 F-35 war planes. This means that in a decade’s time, the US will have 15 times as many fighters as China, and 20 times as many as Russia. What the …?!?!?

    With overruns, maintenance as well as primary cost, the US is spending more ON THIS PLANE than the Australian GDP. (for full details, see http://www.theatlantic.com/national/archive/2011/03/the-f-35-a-weapon-that-costs-more-than-australia/72454/ )
    But with lobbying etc etc., nobody is going to suggest cutting there (for instance).

    I’m no pacifist, but realism has long departed the scene, it seems. If cuts are needed, and they are, then across the board cuts should be done.

    But which politician will have the balls to stand up and say it?

    ***crickets chirping***

  • Booklover

    Louis, Glen Beck agreed with you on his show yesterday, and suggested this very thing.

    What was troubling to me was when the announcement was made that the young soldiers and soldiers-in-training would not be getting their paychecks this month. Will this happen, or will they in fact be paid??? When I heard of this cut, yet that Planned Parenthood would continue to be funded, it was hard to breathe.

  • Booklover

    Louis, Glen Beck agreed with you on his show yesterday, and suggested this very thing.

    What was troubling to me was when the announcement was made that the young soldiers and soldiers-in-training would not be getting their paychecks this month. Will this happen, or will they in fact be paid??? When I heard of this cut, yet that Planned Parenthood would continue to be funded, it was hard to breathe.

  • utahrainbow

    There are problems and blind spots all over with the Ryan plan, but think about the ramifications of the Medicare portion. Firstly, $15,000 vouchers to cover seniors in 11 years? This would be a fundamental shift of risk onto the elderly and the families and churches that care for them. It is indexed to CPI, not to anything remotely resembling the health care cost/insurance cost inflation of recent years. What about elderly people with poor health, would they even be insurable? Can families really bear those kind of costs? And will churches be ready for many elderly folks in great need of very expensive medical care? For people who are pro-life, imagine the implications of that shift for end-of-life issues. We can say all day long that the culture should value life above all cost, but it does not, and I don’t think we should bet that that attitude will change in time for this to take effect.

    Just call me skeptical that allowing health insurance companies to get their cut out of Medicare will bring down costs. As Louis noted @1 , I suspect there are better, more sane ways to deal with these problems.

  • utahrainbow

    There are problems and blind spots all over with the Ryan plan, but think about the ramifications of the Medicare portion. Firstly, $15,000 vouchers to cover seniors in 11 years? This would be a fundamental shift of risk onto the elderly and the families and churches that care for them. It is indexed to CPI, not to anything remotely resembling the health care cost/insurance cost inflation of recent years. What about elderly people with poor health, would they even be insurable? Can families really bear those kind of costs? And will churches be ready for many elderly folks in great need of very expensive medical care? For people who are pro-life, imagine the implications of that shift for end-of-life issues. We can say all day long that the culture should value life above all cost, but it does not, and I don’t think we should bet that that attitude will change in time for this to take effect.

    Just call me skeptical that allowing health insurance companies to get their cut out of Medicare will bring down costs. As Louis noted @1 , I suspect there are better, more sane ways to deal with these problems.

  • Porcell

    Louis, at 1, military strength in the final analysis poses the sort of credible threat in the long run prevents rather than causes war. Churchill’s view was that WWII could have been prevented had the allies credibly threatened Hitler in the thirties.

    American defense spending is about 4% of GDP, a reasonable and historically rather low amount. America’s spending problem has little to do with defense spending and largely to do with out of control soft social welfare spending.

    In the real world diplomacy and security are tightly related to credible military power. The Europeans learned back in the nineties that they could contain Serbia’s Milosevich, as he knew that they were militarily weak. It finally took a combination of American military strength and action along with shrewd diplomacy to defeat Serbia.

    I fear that your moralism is showing again.

  • Porcell

    Louis, at 1, military strength in the final analysis poses the sort of credible threat in the long run prevents rather than causes war. Churchill’s view was that WWII could have been prevented had the allies credibly threatened Hitler in the thirties.

    American defense spending is about 4% of GDP, a reasonable and historically rather low amount. America’s spending problem has little to do with defense spending and largely to do with out of control soft social welfare spending.

    In the real world diplomacy and security are tightly related to credible military power. The Europeans learned back in the nineties that they could contain Serbia’s Milosevich, as he knew that they were militarily weak. It finally took a combination of American military strength and action along with shrewd diplomacy to defeat Serbia.

    I fear that your moralism is showing again.

  • Porcell

    Pardon me, in the above last paragraph, it ought to have been “The Europeans learned back in the nineties that they could not contain Serbia’s Milosevich…

  • Porcell

    Pardon me, in the above last paragraph, it ought to have been “The Europeans learned back in the nineties that they could not contain Serbia’s Milosevich…

  • DonS

    Louis @ 1: See this article re the total number of F-35′s the USAF will probably ultimately order http://www.airforcetimes.com/news/2009/10/marine_f35_103109w/ Apparently, the U.S. military has a habit of vastly exaggerating its aircraft acquisitions at the outset of a new program.

    I think thoughtful conservatives recognize that the Defense Department is going to have to participate in the budget cuts, and that we need to be a lot more careful about committing our armed forces to conflict. However, as Porcell points out, defense spending is at historical levels for peacetime, at about 4% of GDP, and total defense spending is only about half of this year’s deficit, a remarkable fact! So, only a minor portion of the budget savings needed could ever hope to be derived from defense budget cuts. Keep in mind, also, that our common defense is a primary constitutional role of the federal government. Bestowing goodies on some citizens by redistributing wealth taken from other citizens is not.

    Ryan’s proposals, if anything, don’t go far enough to resolve the catastrophic problems we have visited upon ourselves and our children. But, they are a good start. We need to change our mindset — it’s not about us, people! It’s about the future of our nation, and the well being of our children and those yet unborn.

  • DonS

    Louis @ 1: See this article re the total number of F-35′s the USAF will probably ultimately order http://www.airforcetimes.com/news/2009/10/marine_f35_103109w/ Apparently, the U.S. military has a habit of vastly exaggerating its aircraft acquisitions at the outset of a new program.

    I think thoughtful conservatives recognize that the Defense Department is going to have to participate in the budget cuts, and that we need to be a lot more careful about committing our armed forces to conflict. However, as Porcell points out, defense spending is at historical levels for peacetime, at about 4% of GDP, and total defense spending is only about half of this year’s deficit, a remarkable fact! So, only a minor portion of the budget savings needed could ever hope to be derived from defense budget cuts. Keep in mind, also, that our common defense is a primary constitutional role of the federal government. Bestowing goodies on some citizens by redistributing wealth taken from other citizens is not.

    Ryan’s proposals, if anything, don’t go far enough to resolve the catastrophic problems we have visited upon ourselves and our children. But, they are a good start. We need to change our mindset — it’s not about us, people! It’s about the future of our nation, and the well being of our children and those yet unborn.

  • Tom Hering
  • Tom Hering
  • Louis

    Porcell, I understand all the rheoric around military might etc etc – that is not my target here. The question is not why new planes, or why should they have more planes than Russia & China, but why on earth 15 – 20 times more. The question is about scale and affordability, about waste and needs. Double as much would have sufficed, no?

    DonS, so instead of 15 to 20 times more, they’ll have 7.5 to 10 times more. Still too much, I think?

  • Louis

    Porcell, I understand all the rheoric around military might etc etc – that is not my target here. The question is not why new planes, or why should they have more planes than Russia & China, but why on earth 15 – 20 times more. The question is about scale and affordability, about waste and needs. Double as much would have sufficed, no?

    DonS, so instead of 15 to 20 times more, they’ll have 7.5 to 10 times more. Still too much, I think?

  • Louis

    Look, it is not as if I am against Ryan, at least he is trying to suggest something. But the deal is that you guys have to do 2 things, that are quite divergent:

    1. Run a stable country with growth potential.
    2. Cut costs and balance the budge (a), then start paying off debt (b).

    The best approach would be one not tainted with ideological concerns, ie “close down the military, tax all big business heavily” (leftwing) or “let the bums look after themselves, lower taxes to promote growth” (rightwing). There are elements of this in Ryan, but I think he still fails.

    You could look at how the Liberals under Chretien, here in Canada, achieved a balanced budget back in 1995, after 2 decades of failed attempts at balancing the budget by both parties:

    Rather than stick to their current plan, Harper and Flaherty can set Canada apart from the rest of the world, much like the Liberals did back in 1995, when they set forth a plan to reduce spending and balance the budget.

    Under Chrétien and Martin, the Liberals enacted historic reforms, starting with their proposal to cut actual program spending – not spending growth – by almost nine per cent over just two years. The Liberals even outperformed their goal and reduced spending from $123.2-billion to $111.3billion -a 9.7 per cent drop. In the process, they reduced the size of the federal government relative to the overall economy from 16 per cent to 13.3 per cent.

    Unlike the incumbent Conservatives, the Liberals did not spare any spending from potential cuts. The Tories have explicitly stated they will not reduce or change the level of transfers to the provinces. But under the Chrétien Liberals, everything was up for review. Transfers to the provinces, business subsidies, spending on transportation, military spending and Employment Insurance benefits were all scaled back. The Liberals also enacted reforms that enabled the government to get more and better results from less spending.

    From: http://www.calgarybeacon.com/2011/03/tories-should-take-a-lesson-from-1995-budget/

  • Louis

    Look, it is not as if I am against Ryan, at least he is trying to suggest something. But the deal is that you guys have to do 2 things, that are quite divergent:

    1. Run a stable country with growth potential.
    2. Cut costs and balance the budge (a), then start paying off debt (b).

    The best approach would be one not tainted with ideological concerns, ie “close down the military, tax all big business heavily” (leftwing) or “let the bums look after themselves, lower taxes to promote growth” (rightwing). There are elements of this in Ryan, but I think he still fails.

    You could look at how the Liberals under Chretien, here in Canada, achieved a balanced budget back in 1995, after 2 decades of failed attempts at balancing the budget by both parties:

    Rather than stick to their current plan, Harper and Flaherty can set Canada apart from the rest of the world, much like the Liberals did back in 1995, when they set forth a plan to reduce spending and balance the budget.

    Under Chrétien and Martin, the Liberals enacted historic reforms, starting with their proposal to cut actual program spending – not spending growth – by almost nine per cent over just two years. The Liberals even outperformed their goal and reduced spending from $123.2-billion to $111.3billion -a 9.7 per cent drop. In the process, they reduced the size of the federal government relative to the overall economy from 16 per cent to 13.3 per cent.

    Unlike the incumbent Conservatives, the Liberals did not spare any spending from potential cuts. The Tories have explicitly stated they will not reduce or change the level of transfers to the provinces. But under the Chrétien Liberals, everything was up for review. Transfers to the provinces, business subsidies, spending on transportation, military spending and Employment Insurance benefits were all scaled back. The Liberals also enacted reforms that enabled the government to get more and better results from less spending.

    From: http://www.calgarybeacon.com/2011/03/tories-should-take-a-lesson-from-1995-budget/

  • cattail

    I’d far rather be able to buy my own insurance instead of paying for both Medicare B and the supplemental HMO premium! Unfortunately I will be grandfathered (grandmothered?) into the current Medicare system, so no chance of this for me. One considerable cost saving not mentioned is that a flat per-person subsidy will get the government out of the Medicare bookkeeping business!

    Simplifying the tax structure would put a lot of accountants out of work, but would certainly make life easier for everyone else (including this retired accountant who would rather do anything else for a living than do other peoples’ taxes).

  • cattail

    I’d far rather be able to buy my own insurance instead of paying for both Medicare B and the supplemental HMO premium! Unfortunately I will be grandfathered (grandmothered?) into the current Medicare system, so no chance of this for me. One considerable cost saving not mentioned is that a flat per-person subsidy will get the government out of the Medicare bookkeeping business!

    Simplifying the tax structure would put a lot of accountants out of work, but would certainly make life easier for everyone else (including this retired accountant who would rather do anything else for a living than do other peoples’ taxes).

  • DonS

    If I’m not mistaken, cattail, the Ryan plan allows for one to voluntarily relinquish her “grandmothered” :-) rights, and to enter the new system.

  • DonS

    If I’m not mistaken, cattail, the Ryan plan allows for one to voluntarily relinquish her “grandmothered” :-) rights, and to enter the new system.

  • LAJ

    The military has been cost-cutting according to my son in the air force. The airport he works at is operating with many fewer airmen than they need. How many people do you know in the military that are getting 6 figures for salaries? Yet other government workers are being hired at 6 figures right now!

  • LAJ

    The military has been cost-cutting according to my son in the air force. The airport he works at is operating with many fewer airmen than they need. How many people do you know in the military that are getting 6 figures for salaries? Yet other government workers are being hired at 6 figures right now!


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