At first, I was taken in myself. I heard that U.S. Rep. Paul Ryan's bold attack on the deficit would reduce federal spending by some $4 trillion. It sounded like a truly new start after months of haggling about whether to reduce the budget by thirty-some billion or sixty-some billion; now we were finally talking about real money. And I could not but agree that it took political courage for the Republican chairman of the House Budget Committee to take the knife to Medicare. But then I looked at the small print.
Actually, it did not take a lot of digging to see something was amiss.
Ryan's proposal enlarges the federal debt (as a result of accumulating deficits each year) by $8 trillion over the next 10 years and continues to generate deficits until 2040. One wonders: How is it possible to significantly cut Medicare spending, which is often said to be a major reason our deficits are so large, and still grow the deficit? The answer is that the Ryan plan calls for making permanent the Bush tax cuts for the super-rich and further reduces the taxes levied on top individual and corporate earners. To maintain the plan's revenue targets with these cuts, as a new analysis by the Tax Policy Center shows, Congress would have to eliminate more than $2.9 trillion in tax breaks over the next decade. This would probably require the elimination of tax breaks like the mortgage interest deduction.
Cutting these deductions on a large scale makes for good copy, but in fact, such cuts are not likely. Ryan's suggestion would be much more believable if he followed the "pay-as-you-go" idea and demonstrated that his favors to the rich and to business would not exceed what can be gained by closing loopholes.
As to Ryan's plan to rely on private health insurers, this will do nothing to address major causes of rising health care costs: reimbursing doctors and hospitals for procedures (which generates an incentive to do more) rather than paying them per patient care (known as "capitation"); reimbursing health care providers for interventions that have no proven benefits, which are estimated to costs up to $325 billion every year; and administrative costs that are nearly double those of countries like Canada.
One may say that insurers will compete with each other, and thus the costs will decline. However, by looking at those who are now covered by private insurers (many of whom are too young to qualify for Medicare), we see that this is not the case. Instead, insurers are raising rates, in some cases by as much as 60%. Bold can cut both ways: It can be very good or God awful. This one is good for the richest Americans and bad for the rest of us. One must give credit to Ryan for not trying to hide that he is, in effect, transferring trillions of dollars from future retirees to businesses and the super-rich. In this way, he is miles ahead of what happened in 2010, when a similar maneuver was carried out.
First, the GOP fought and gained a two-year extension of the Bush tax cuts for the richest 2% of Americans, costing some $82 billion lost in revenues to the government in the next two years (and if they are extended again, $700 billion over the next 10) -- one of the very few items it agreed to enact without offsetting the cost by making cuts elsewhere in the federal budget. (At the same time, it opposed extending unemployment benefits unless some parallel cuts in expenditures were made.)
Then, the GOP and even some so-called moderate Democrats pointed to the swelling deficit as a major reason why social programs and entitlements, including Medicare, must be cut. Thus, it was not obvious that the cuts in domestic programs that followed were in effect paying for the tax cuts for the rich. The virtue of Ryan's plan -- that he plans to stand Robin Hood on his head by taking from all future retirees in order to increase the income of those least in need -- is there for all to see.
-----------One can only hope that Kathy Hochul's upset in NY is an indication that Americans won't stand for this.
