Monday, June 11, 2012

Taking Republicans Seriously: The Ryan Plan

Wisconsin Congressman Paul Ryan is the GOP’s favorite policy wonk. Ryan’s budget blueprint, The Path to Prosperity lays out a comprehensive vision of the future of the federal government.The wide-ranging document addresses everything from tax policy, defense and domestic spending, to entitlement reform.

Most politicians are known for their vacuous rhetoric. Ryan’s plan lays out the GOP agenda in stark numbers and explains how his party intends to govern, how they will balance the budget and their plan for the future. This plan has been put before US House of Representatives and approved, with near-unanimous acclaim, by the Republican majority.

Mitt Romney has joined the chorus of approval calling Ryan’s plan “marvelous”. And so this document represents, not just the guiding vision for the modern Republican Party, but a detailed plan of action.

The plan is not without its detractors. Commenters outside the GOP have suggested that the plan is a sham and that Ryan is a fraud. But given that is budget resolution has been put before and approved by the US Congress, it deserves serious consideration. Is it possible that all these pundits, politicians, and would-be presidents have heaped so much praise on this plan without considering its implications? Would the Republican majority vote to enact this plan into law if it didn’t reflect their values? Of course not.

So, it is worthwhile to examine this document and see what it says about the priorities and governing vision of the Republican party.

The GOP wants to raise your taxes. A lot.

Broaden the tax base to maintain revenue growth at a level consistent with current tax policy and at a share of the economy consistent with historical norms of 18 to 19 percent in the following decades.

Currently, federal revenue comes in at a little under 16% of GDP. Republicans want to increase that to 18% of within the next two years and to 19% over the next decade. These increases would generate an additional $13 trillion over the next decade.

The GOP does not plan to increase taxes across the board. The Ryan plan calls for the AMT to be eliminated and the top tax rate to be reduced to 25%. That means tax cuts for the rich. The increased revenue comes from the elimination of deductions. Regardless of the deductions eliminated, anyone currently paying more than 25% is going to get a substantial tax cut. In order to meet the revenue targets, a large number of Americans are going to be taxed at the 25% rate. Deductions are going to take a big hit. The home mortgage deduction, employer-sponsored health care, child care, earned income tax credits will all be on the block.

In order to meet aggressive revenue goals, and still offer generous tax cuts for the rich, the plan calls for steep tax increases for the poorest and middle-class Americans.

That means you get a big tax increase.

Republicans aren’t interested in controlling the cost of Medicare and Social Security.

the per capita cost of this reformed program for seniors reaching eligibility after 2023 could not exceed nominal GDP growth plus 0.5 percent.

The initial version of the Ryan budget contained a controversial plan to end conventional Medicare and replace it with a voucher program. The 2012 version of the plan modifies that idea, leaving the private plans as an optional addition. It sets the cap in Medicare cost growth at GDP growth + 0.5%. This is the exact same rate of increase President Obama has proposed.

The Ryan plan would not save the government any money relative to the Democratic alternative. It does eliminate Medicare cost controls that are part of current law, raising the likelihood that medical costs for seniors will rise faster than the Medicare payments. This will result in worse coverage and increased cost to patients and seniors.

The plan calls for a study of Social Security, proposes no specific reforms.

The Ryan plan eventually eliminates the entire federal government.

Entitlement and domestic  programs outside Medicare, Medicaid and Social Security would shrivel from the 12.5 percent of G.D.P. it reached in 2011 to 5.75 percent in 2030 to 3.75 percent in 2050, according to the Congressional Budget Office.

The GOP budget cuts funds for Medicaid and turns it over to the states to do more with less. It increases spending on defense and doesn’t cut Medicare or Social Security. The tax increases in the plan are not sufficient to achieve major debt reduction. The debt reduction comes from unspecified cuts in non-entitlement government spending.

These cuts are quite severe. They are so severe that by 2050 the plan calls for non-entitlement spending to be only 3.75% of GDP. That number includes defense spending. Republicans have stated that defense spending must not fall below 4% of GDP. So, under this plan, there won’t be enough money for all the proposed defense spending. And there won’t be any money at all left for anything else. At all.

Implementing and sticking with this plan would turn the federal government into an insurance company with an army. Everything else (FBI, veterans benefits, border patrols, federal prisons, education funding, housing, R&D, every federal department and agency, food inspection, homeland security, parks, energy... etc..) would be rapidly squeezed and, ultimately, eliminated.

The Republicans have been very clear that the Ryan Plan is their plan. If they win the presidency and the majority, this is their agenda. Tax cuts for the wealthy. Big tax increases for everyone else. Medical costs continue to rise. Everything else gets slashed or eliminated.

Will they actually follow through with it? I don’t know.

But, that’s the plan.

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