February 12, 2010
Paul Ryan's Lonely Challenge
By Robert Samuelson
WASHINGTON -- Paul Ryan, a six-term Republican congressman from Wisconsin who is the ranking minority member of the House Budget Committee, has yanked himself from obscurity by doing something no one else in Congress or apparently the White House has done: design a specific plan to control long-term government spending and budget deficits. That he stands virtually alone is a damning commentary on our politics.
Many public policy problems are genuinely hard. How to guarantee job creation? Provide financial stability? Improve inner-city schools? There are no panaceas. By contrast, solutions to the long-term budget imbalance are obvious: cut spending or raise taxes. Given the predictable retirement of baby boomers, it was no secret that promised government benefits would overwhelm the existing tax base. This problem could have been fixed.
It hasn't because our political culture is so wedded to public opinion that it can't (or won't) govern. To govern is to choose, and our leaders recoil from unpopular choices. Americans want generous benefits and low taxes, so that's what the system -- led by either Democrats or Republicans -- provides.
President Obama continues this tradition. His administration's long-term budget projections show skyrocketing debt. In 2008, federal debt held by the public equaled 40 percent of the economy (gross domestic product). The administration has it rising to 77 percent of GDP in 2020, 99 percent in 2030 and 218 percent in 2050.
In reality, not choosing is a choice: to govern by crisis. Someday, the debt and associated interest payments (projected at $840 billion in 2020, a seventh of federal spending) may trigger a financial backlash. Lenders won't lend or will demand much higher rates. Congress would then be forced to cut benefits or raise taxes. The unstated hope is that the crisis occurs on someone else's watch.
Ryan rejects this consensus. He would make choices now. Here are some features of his plan:
-- Social Security: For those 55 or older today, the program would remain unchanged. For those younger, benefits would be reduced -- with no cuts for the poorest workers. Workers 55 or younger in 2011 could establish individual investment accounts that would be funded with part of their payroll taxes. Government would guarantee a return equal to inflation.
-- Medicare: Current recipients and those enrolling in the next decade would continue under today's program, though wealthier recipients would pay somewhat higher premiums. In 2021, Medicare would become a voucher program for new recipients (those today 54 or younger). With vouchers, recipients would buy Medicare-certified private insurance. In today's dollars, the vouchers would ultimately grow to $11,000. Eligibility ages for Medicare and Social Security would slowly increase toward 69 and 70, respectively.
-- Spending Freeze: From 2010 to 2019, "non-defense discretionary spending" -- about a sixth of the federal budget, including everything from housing to parks to education -- would be frozen at 2009 levels.
-- Simpler Taxes: Taxpayers could choose between today's system or a streamlined replacement with no deductions and virtually no special tax breaks. Above a tax-free amount ($39,000 for a family of four), taxpayers would pay only two rates: 10 percent up to $100,000 for joint filers and 25 percent on income more than that.
Parts of Ryan's plan I like. It acknowledges the necessity of controlling Social Security and Medicare benefits. Eligibility ages should rise, reflecting longer life expectancy. Medicare vouchers might force a restructuring of the health care delivery system so that networks of hospitals, doctors and clinics compete on the basis of cost and quality. Simpler taxes would be desirable.
Other parts I dislike. Individual Social Security accounts are a confusing mix of government welfare and private investment. Medicare reforms should start sooner. The discretionary spending freeze would probably result in across-the-board cuts when we should eliminate bad programs. Ryan limits taxes to 19 percent of GDP, slightly above their 1970-2009 average of 18 percent. As a result, Ryan's plan -- though producing much less debt than Obama's budgets -- still doesn't work. It wouldn't balance the budget until 2063, estimates the Congressional Budget Office.
Yikes -- that's far too distant. Any sound proposal would include greater tax increases than conservatives like and greater spending cuts than liberals like.
But the larger point is that Ryan is trying to start a conversation on the desirable role and limits of government. He's trying to make it possible to talk about sensitive issues -- mainly Social Security and Medicare -- without being vilified. President Obama recognized that when he called Ryan's plan a "serious proposal." But since then, Democrats have resorted to ritualistic denunciations of him as pillaging Social Security and Medicare. Legitimate debate becomes impossible. If Democrats don't like Ryan's vision, the proper response is to design and defend their own plan. The fact that they don't have one is a national embarrassment.