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Rep. Paul Ryan, to his credit, has taken two big swings at long-term budget reform, “A Roadmap for America’s Future” and “The Path to Prosperity.” Both are serious, structurally sounds plans — supply-side tax reform, Medicare premium support, block granting Medicaid to the states. Good stuff. The plans’ overt message is “We can do this.” But their subtler message is “We can do this, but it will be really, really hard.”
With the Roadmap, it takes until 2043 before the US debt-to-GDP ratio actually declines — and from the rather higher level of 100% debt/GDP. The plan doesn’t show its first annual budget surplus until 2063. And it doesn’t return debt levels to their pre-Great Recession levels until 2073. That, even though the Roadmap a) pegs tax revenue levels above their historical average, b) basically keeps longer-term Medicare spending flattish as a share of output despite demographics, and c) cuts Medicaid by 50% as a share of output.
For its part, the Path wouldn’t return debt/GDP to pre-Great Recession levels until after 2040 even with spending reduced to just over 20% by 2023 and then trending lower. The Ryan plans, as I interpret them, quietly — maybe too quietly — begin to sell several fiscal realities to GOPers:
1. Those spending levels are almost certainly too low given an aging America.
2. Tax revenue at 19% of GDP is also probably too low, at least if you want to remain a global military superpower.
3. The faster you begin Medicare reform the better.
That last point is particularly relevant right now. The Hill:
House Republican centrists are furious that GOP leaders are considering abandoning their pledge not to change Medicare retirement benefits for people 55 years and older.
According to several sources, a handful of centrist GOP lawmakers attending a recent Tuesday Group luncheon erupted when Budget Committee Chairman Paul Ryan (R-Wis.) and House Majority Whip Kevin McCarthy (R-Calif.) broke the news.
After agreeing to write a budget resolution that will balance the budget over the next decade, Ryan conceded that he might have to adjust the age to as high as 59.
Ryan and McCarthy are two guys serious about debt reduction as an issue and not just as a talking point. If the GOP as a party is just as serious, it will follow Ryan’s lead and accelerate plans for Medicare reform. After all, if the national debt really is an unfolding crisis, shouldn’t it begin to be solved sooner rather than later?
Update: Yes, I know the plan uses conservative CBO growth numbers. Faster growth would no doubt help, but would also not invalidate my thesis.
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