Paul Ryan: The $5 trillion man

Reuters

Republican vice presidential candidate Representative Paul Ryan (R-WI) speaks during a campaign rally at Miami University in Oxford, Ohio August 15, 2012.

Article Highlights

  • Many differences exist between President #Obama and Rep. Paul Ryan. The single largest one is $5.3 trillion.

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  • Paul Ryan’s Path to Prosperity roadmap has 4 central planks: tax reform, repeal of the #ACA, Medicare and Medicaid reform

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  • Sweeping tax reform similar to 1986 has potential to increase the net present value of national wealth by $7 trillion.

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  • Ryan’s addition to the Republican ticket ensures that entitlement will be forthrightly debated in #Election2012.

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Many differences exist between President Barack Obama and Congressman Paul Ryan. But the single largest one is $5.3 trillion. That's the astonishing difference between the cumulative amount of federal spending the former proposes over the next 10 years and the far lower figure that would result were the nation to adopt Rep. Ryan's Path to Prosperity.

The roadmap put forth by the House Budget Chairman has four central planks: major tax reform, repeal of the Affordable Care Act (ACA), Medicare reform, and Medicaid reform.

I'll leave it to tax experts to wade into the weeds on his ideas for tax reform. Suffice it to say there is bipartisan support for the need for such comprehensive reform as reflected, for example, in the recommendations of the Bowles-Simpson fiscal commission (the individuals appointed by President Obama whose recommendations have been studiously ignored by him). And according to one tax expert, Harvard economist Dale Jorgenson, a sweeping tax reform similar to that enacted in 1986 has the potential to increase the net present value of national wealth by $7 trillion.

Even without a shred of tax reform, the Ryan plan would be well worth considering because of its willingness to tackle our health entitlements crisis head-on. Repeal of ACA (saving $1.572 trillion), Medicaid reform (saving $770 billion), and Medicare reform (saving $205 billion) account for nearly half of the plan's $5.3 trillion in avoided spending over the next decade.[1] 

Under current policy, the CBO's latest spending projections estimate the federal government will increase in size by 48 percent relative to the economy over the next 75 years (as explained in earlier posts). Moreover, U.S. debt is on track to spike as the government is borrowing 35¢ of every dollar it spends. In order to bankroll this spending/borrowing binge, our children and grandchildren will see the share of their household budgets allotted to federal taxes increasing by more 50 percent.

What does federal spending have to do with health care? Every penny of the projected increase in the size of the federal government can be attributed to growth in federally funded healthcare entitlements, i.e., Medicare, Medicaid, and exchange subsidies. This is why it is critical to have a grown-up discussion about how to get these health care entitlements under control. Congressman Ryan has demonstrated great courage in putting forth a bold plan to address these issues and eradicate our rapidly rising federal debt by the year 2050.

In the meantime, the president has been AWOL on this issue. He has ignored the recommendations of his own fiscal commission and, instead, made the entitlements problem much larger by pursuing a misguided health law bankrolled in part by diverting a half trillion dollars in resources out of the Medicare program. Some readers will remember that it was Mr. Ryan who-weeks before it was finally enacted[2] -brought to the president's attention all the smoke-and-mirror budget gimmicks embedded in the health law, demonstrating beyond any reasonable doubt that it not only would not bend the cost curve, as promised, but also would grossly violate the president's own pledge not to sign a bill that would add one dime to the deficit. As Rep. Ryan deftly showed, the bill (when honestly scored) threatened to add $2 trillion to deficits in its first 20 years). Unfortunately, the President and his allies in Congress ignored these pleas for common-sense health reform.

Rep. Ryan has demonstrated great political courage in telling American voters the truth about entitlements. Medicare and Medicaid are empty promises that cannot possibly be sustained in their present form over the long haul. The unfunded liabilities for Medicare alone (inclusive of Part D prescription drug benefits) exceed $100 trillion. His plan squarely addresses and solves that problem. Critics may disagree with that plan, but it is incumbent on them to devise an alternative approach that would do better. Simply taking potshots at his plan and running political ads showing Rep. Ryan shoving Granny over the cliff will not solve our entitlements crisis.

His addition to the Republican ticket helps ensure that this issue will be forthrightly debated this election. That's good news for all voters.


Footnotes

[1] See Table S-4 for year-to-year details of these savings.

[2] The now-viral 6-minute video is undated, but it occurred at the February 25, 2010 Bipartisan Meeting on Health Reform. The Affordable Care Act was passed on March 23, 2010. Rep. Ryan's comments appeared in Part IV, but it is quite interesting and illuminating that at the White House web site, his devastating critique is not included among the 20 clips singled out as "recommended highlights" from that discussion.

 

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About the Author

 

Christopher J.
Conover

  • Christopher J. Conover is a Research Scholar in the Center for Health Policy & Inequalities Research at Duke University, an adjunct scholar at AEI, and a Mercatus-affiliated senior scholar. He has taught in the Terry Sanford Institute of Public Policy, the Duke School of Medicine and the Fuqua School of Business at Duke. His research interests are in the area of health regulation and state health policy, with a focus on issues related to health care for the medically indigent (including the uninsured), and estimating the magnitude of the social burden of illness. He is the recent author of The American Health Economy Illustrated and is a Forbes contributor at The Health Policy Skeptic.


    Follow Chris Conover on Twitter.

  • Phone: (919)428.4676
    Email: chris.conover@duke.edu

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