Paul Ryan’s Anti-Poverty Plans Have a Political Budgeting Problem

by Patrick Brennan

As I mentioned below, we don’t know yet what Representative Paul Ryan’s proposals for reforming federal poverty programs are going to look like. That will become clear over the coming months, but it’s definitely coming. Journalists who assailed Ryan for talking up his interest in the poor without having offered solutions had a point, until they didn’t. But there’s one major obstacle to Ryan’s plans to reform federal poverty programs in a thoughtful way that doesn’t involve cynicism about conservatives and the poor: the degree of fiscal discipline his past budgets have unnecessarily imposed.

Ryan’s budget last year was designed to balance in ten years, which necessitated huge cuts to domestic discretionary spending and significant spending reforms on entitlements.

This wasn’t necessarily his ideal policy proposal — previous budgets took a slower approach to balancing the federal budget. That’s perfectly sensible: Balancing the budget, in the view of the vast majority of economists, is not important for a federal government as long as economic growth usually outpaces deficits.

Balancing the budget in ten years was instead a goal imposed by something called the Williamsburg Accord, in which House leadership promised the Budget Committee’s 2013 proposal would balance in ten years in exchange for some members’ promising to vote for that year’s debt-ceiling increases (which, remember, would pay for spending the same House had already authorized).

Ryan can propose a sensible conservative anti-poverty program that spends less than the federal government does now on that effort, but maintaining the aggressive budget-balancing goals he had last year would mean cutting programs for the poor deeply and not replacing them.

One illustrative example: His 2013 budget cut $810 billion from projected spending for Medicaid over ten years, a big step toward balance. He restrained spending on the program by something called block granting, which in principle is an excellent idea and should produce some efficiencies and savings. But it won’t produce $810 billion worth.

Medicaid is a joint federal-state program: The federal government gives states between 50 and 70 percent of the money they need to cover their Medicaid-eligible population with almost no flexibility in how to do so and little incentive to spend less. With a block-grant system, states have an incentive to cover the people they need to at the lowest cost possible and will be given the freedom to innovate, so it should restrain spending and improve services.

But Ryan’s budget sets the size of these block grants so low that it wouldn’t realistically provide enough funding for states to provide health insurance to those currently eligible for Medicaid. Block granting should allow states and the feds to cut spending, but it will never allow them to cut as much as Ryan’s budget does without seriously curtailing the scope of the program.

In other words, there are already well-acknowledged reforms to anti-poverty programs that involve less federal spending. But balancing the budget like Ryan did last time around, and as some members of the House GOP caucus want, means cutting programs rather than fixing them or replacing them with wholly new ones that will better accomplish their goals.

Ryan’s welfare reform proposal doesn’t need to be, and shouldn’t be, primarily about fiscal restraint. It ought to differ from his proposal for Medicare reform, which aims to put the program on a sustainable fiscal trajectory while offering more choice and the potential for innovation and better care. Federal anti-poverty programs aren’t on an unsustainable trajectory. Fixing them may involve spending less, but it’s more about making them work (which, of course, should make them cheaper).

Ryan’s Medicare plan does make the program into a sustainable entitlement, but it doesn’t prevent the program from substantially growing in size or balance the federal budget. Which is fine, because the federal budget doesn’t need to be balanced in ten years to keep the U.S. safe from a debt crisis or, more problematically, seeing the federal budget consumed by entitlement programs to the exclusion of important investments and defense spending.

The House budget went further than that last year, and if Chairman Ryan wants a budget that reforms anti-poverty programs rather than slashes them, he can’t do that again.

UPDATE: The Wall Street Journal reports today on two important points: Ryan, according to his spokesman William Allison, intends to put forth a budget that balances in ten years, again — even though, sources point out to the Journal, this will require more spending cuts than last year’s version, because the CBO’s economic outlook over the next ten years is weaker than it was last year.