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Paul Ryan Takes His Budget Plan to the Public

But he doesn't tell the whole story

May. 4, 2011
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Congressman Paul Ryan has been conducting listening sessions around Wisconsin to tout the benefits of the House Republicans' new budget plan, which is largely modeled on ideas Ryan has been promoting for years in his "Roadmap for America's Future."

He's gotten a mixed reaction, including getting booed in Middleton from residents who are upset with his intention to cut taxes for the rich and privatize Medicare.

In Racine last Friday, Ryan received applause from seniors who wouldn't be affected by the congressman's Medicare plan, but heckles and boos when he discussed the changes he has in store for everyone 54 and younger. Instead of receiving Medicare benefits, these folks would get government subsidies so that they could purchase insurance on the open market—subsidies that won't keep up with the skyrocketing costs of health care.

Ryan was only telling part of the story with his doom-and-gloom predictions about government spending and unwavering faith in the free market's superiority. Here's what Ryan did—and didn't—tell the Racine crowd:

  • Ryan's Plan: Ryan explained that under his plan to provide vouchers for private insurance, seniors would receive the same kind of benefits enjoyed by federal employees and members of Congress.
  • The Reality: Contrary to Ryan's promises, the two plans are very different. According to a New York Times analysis, the federal employees' coverage largely keeps track with the cost of health care, while Ryan's plan offers a subsidy linked to the rate of inflation. That subsidy won't be enough to cover the ballooning cost of health care—and seniors would have to foot the bill for the rest. By 2030, a typical 65-year-old would have to pay twice what he or she would have to pay under the current Medicare plan, the Times reported. Remember, too, that Ryan is increasing the age for Medicare eligibility from 65 to 67, leaving seniors to fend for themselves in a market that prefers to insure young, healthy consumers.
  • Ryan's Plan: Ryan argued that health insurance costs would be controlled through more competition in the market. As more seniors are let loose from the Medicare program and into the arms of private insurers, Ryan promises that these mostly for-profit companies would keep their rates affordable so that they can attract these new customers.
  • The Reality: Citizen Action of Wisconsin disputes this claim, saying that the only way to get health care costs under control is to implement the Affordable Care Act passed last year, which Ryan's plan repeals altogether. "Even worse, Ryan's privatization of Medicare will transfer $30 trillion [over a 75-year planning period] to the health insurance industry, which amounts to a $100,000 wealth transfer from every man, woman and child in the U.S.," the group stated in a press release.

Economist Dean Baker of the Center for Economic and Policy Research stressed that the Ryan-backed wealth shift does not include the extra money that seniors would need to spend to cover their health care. "The $30 trillion represents higher payments that would go to insurers, pharmaceutical companies, medical supply companies, doctors and other health care providers because the private system put in place under Ryan's plan is less efficient than the Medicare program," Baker wrote.

Ryan's favoritism for the private insurance industry shouldn't be surprising, since the industry has been Ryan's top campaign contributor over his entire congressional career, providing the Janesville Republican with almost $700,000 since 1998.

  • Ryan's Plan: As part of his plan to reduce "entitlement" spending, Ryan wants to turn Medicaid, which covers low-income individuals and families, into block grants so that governors can have more flexibility in tailoring their programs to their state's specific needs.

  • The Reality: Instead of providing needed flexibility, a New York Times analysis shows that Ryan's plan would merely shift costs from the federal government to the states. The grant would be linked to the rate of inflation, which is much less than the rate of health care costs. By 2022, the federal payment would be 35% lower than it is currently, and by 2030 it would be reduced by 49%.

"To make up the difference, states would probably have to cut payments to doctors, hospitals or nursing homes; curtail eligibility; reduce benefits; or increase their own payments for Medicaid," the Times concluded. "The problems do not end there. If a bad economy led to a sharp jump in unemployment, a state's grant would remain the same. Nor would the block grant grow fast enough to accommodate expensive advances in medicine, rising demand for long-term care, or unexpected health care needs in the wake of epidemics or natural disasters. This would put an ever-tightening squeeze on states, forcing them to drop enrollees, cut services or pump up their own contributions."

How would Wisconsin fare under Ryan's plan? If federal payments were to be reduced 49%, Wisconsin would lose $3 billion during this biennial state budget, according to numbers crunched by Citizen Action of Wisconsin.

  • Ryan's Plan: Ryan argued in Racine that cutting corporate tax loopholes and tax shelters for the top 1% of income earners would bring in enough revenue to support government spending and reduce the deficit. In exchange for closing loopholes and ending tax shelters, Ryan also wants to lower the top tax rate from 35% to 25%. "We've got to keep our taxes low so we can grow the economy," Ryan told the Racine crowd. He also brushed aside the recommendation to raise taxes on the wealthy. People think that taxes are "the magic fairy dust of budgets," he scoffed.
  • The Reality: Forcing the wealthy and profitable corporations to pay their fair share is commendable. But all that Ryan's admittedly vague proposal would do is increase the taxes paid by the wealthy through the elimination of some loopholes, and then reward them with a huge cut in their tax rates—so the wealthy end up paying significantly less in taxes overall.

Although it's difficult to estimate because Ryan didn't spell out his tax cut policy in detail, the best estimates by the nonpartisan Tax Policy Center show that his plan would reduce revenue by $2.9 trillion (that's trillion with a T) over a decade. The Christian Science Monitor called Ryan's proposal to control the deficit by cutting taxes for the wealthy a "classic only-in-Washington moment." Nobel Prize-winning economist Paul Krugman noted that the tax cuts for the wealthy are "almost exactly equal to the proposed cuts to Medicaid, food stamps and other programs helping lower-income Americans" and wondered if Ryan's goal wasn't to reduce the deficit but rather to "transfer income upward."


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