“…[I]f voters want the status quo, they can vote for Pelosi Democrats. The country wants leaders who are willing to risk their popularity to address America's serious problems. The Ryan budget is a worthy marker.”
The introduction of Paul Ryan's House fiscal 2013 budget yesterday is an important political moment even if it has no chance of becoming law this year. It shows that the reform wing of the Republican Party is alive and well, one year after Democrats and the press corps had called Mr. Ryan's fiscal 2012 budget political suicide.
Perhaps you remember the TV spot in which Democrats had an actor resembling Mr. Ryan dump grandma in a wheel chair off a cliff. Democrats chortled that the Budget Chairman's Medicare reform would help them retake the House in 2012, and President Obama chipped in by trashing Mr. Ryan as he sat in the front row as a White House-invited guest to a speech at George Washington University.
But a funny thing happened on the way to oblivion. Mr. Ryan survived. GOP candidates in special elections beat back the Mediscare onslaught. Slowly, the causes of entitlement and tax reform have advanced, picking up converts and forcing GOP Presidential candidates to embrace them at least in part.
Far from retreating on Medicare, Mr. Ryan once more leads the charge by re-proposing his "premium support" reform. The plan would offer seniors a fixed payment to buy insurance from a government-approved list of vendors. So, for example, a retiree stepping down from a private business with insurance from Aetna would be able to slide smoothly to an Aetna Medicare policy.
Mr. Ryan's concession this year is that his formula for increasing the support payment over time would be more generous. And as part of his compromise with Oregon Democrat Ron Wyden, Mr. Ryan would allow seniors to stay on fee-for-service Medicare if they prefer. The policy bet is that seniors will migrate en masse to private plans over time given the right incentives. The compromise is an easier sell politically, though it means reform (and thus any savings) would be more gradual.
The White House in its re-election bunker claims that all of this will "destroy Medicare as we know it," but in fact it is the only reform that will prevent Medicare from destroying itself. Mr. Obama's demagoguery on this subject is his Presidency at its most cynical.
The Ryan budget also stakes out clear policy differences with the President on taxes and spending. Mr. Ryan's proposal would reduce spending over a decade by some $5 trillion. Mr. Obama's would increase spending by $1.5 trillion above the current budget baseline. Spending as a share of GDP never falls below 23% under Mr. Obama but slows to 20% of GDP under Mr. Ryan.
Mr. Obama's budget contains $1.9 trillion in tax increases over the next decade and raises income, dividend and capital gains tax rates. The Ryan budget outlines an ambitious tax reform, collapsing today's six rates to two—25% and 10%—while retaining the 15% tax rates on capital gains and dividends and eliminating inefficient tax deductions and credits. He gets the corporate tax down to 25%, roughly the international average, and below the 28% rate Mr. Obama suggests. The Ryan plan isn't a pure flat tax, but it takes the IRS code a giant stride in that direction and creates a tax system far more conducive to faster job creation and greater investment.
The House Republican budget includes a host of other major reforms, notably block-granting Medicaid, food stamps and dozens of other welfare programs to states. Republican Governors have told the White House and Congress that this is a deal they would readily take: less money but more discretion and fewer federal rules.
This is crucial to balancing the budget. Medicaid is expected to cost $804 billion by 2019, more than double the $379 billion in 2009. Because of Medicaid's rationing through price controls, it also provides a low level of care. Mr. Ryan notes that "by some measures, such as in-hospital death rates following major surgeries, Medicaid patients fared even worse than the uninsured." ObamaCare would put some 15 million more Americans on Medicaid.
One complaint about Mr. Ryan's budget, especially from conservatives, is that it won't balance the budget within 10 years. But the most important goal is to get the deficit down to a manageable level of GDP. The Ryan budget gets the deficit down to 3% of GDP by 2015, a gigantic improvement over the roughly 9% average in Mr. Obama's four years. With pro-growth tax and budget reforms, the economy will grow much faster and the budget could well be balanced sooner than even Mr. Ryan predicts.
Details aside, the Ryan budget shows a House majority that realizes it has an obligation to reform the listing, unaffordable entitlement state. The GOP's reform impulse withered under George W. Bush and Tom DeLay, but it has seen a revival with Governors like Mitch Daniels (Indiana), Scott Walker (Wisconsin), John Kasich (Ohio), Sam Brownback (Kansas) and Bobby Jindal (Louisiana)
Many Republicans are still afraid and would prefer to dodge these great debates. But if voters want the status quo, they can vote for Pelosi Democrats. The country wants leaders who are willing to risk their popularity to address America's serious problems. The Ryan budget is a worthy marker.