Google+
Close

The Corner

The one and only.

So How Are They Going to Reduce the Debt?



Text  



Last night in Tampa, vice-presidential candidate Paul Ryan put debt and the risk that our country faces because of it at the center of his speech:

So here we are, $16 trillion in debt and still he does nothing. In Europe, massive debts have put entire governments at risk of collapse, and still he does nothing. And all we have heard from this president and his team are attacks on anyone who dares to point out the obvious.  

They have no answer to this simple reality: We need to stop spending money we don’t have.

He also told the crowd that time is running out.

Before the math and the momentum overwhelm us all, we are going to solve this nation’s economic problems. And I’m going to level with you: We don’t have that much time. But if we are serious, and smart, and we lead, we can do this.

But how will Paul Ryan do that? How will he solve the country’s fiscal problems and the upcoming explosion of debt before it’s too late? I know that Paul Ryan understands what’s at stake if we don’t reduce the debt (reduction in GDP growth through debt overhang, maybe higher interest rates, but even if not, lower standards of living over time and higher unemployment rates especially for the weakest in society). I also know that he knows what the problems are. We have all watched him develop into the thoughtful policy wonk/politician that uses charts and data to make sure we understand the gravity of the problem he is concerned about.

And in fact, Ryan must be commended for refusing to be passive in the face of spending trends that threaten to swamp the nation’s economy. To his credit, he was the first Republican to finally put his foot down and say that “entitlement programs” needed to be reformed. While only a handful of Republicans in Congress supported his efforts before the 2010 elections, he has introduced several plans that think through the implications of the past decade’s wild spending spree, and propose to reform entitlement spending and originally a reform of Medicare in particular.#more#

Last night, however, Ryan made it clear that his party is the party of Medicare. They won’t cut the program except to make it solvent on paper (that’s what the $700 billion in cuts are supposed to achieve). However, solvency for Medicare is an unachievable dream when you are effectively promising voters that you will preserve the program for everyone today and tomorrow, and when you say that there would be no benefit cuts and/or no increase in the payroll tax, premiums, and other fees that fund the program. And while Ryan welcomes the debate over Medicare, he explained yesterday that:

The greatest threat to Medicare is Obamacare, and we’re going to stop it. . . .

Medicare is a promise, and we will honor it. A Romney-Ryan administration will protect and strengthen Medicare, for my Mom’s generation, for my generation, and for my kids and yours. 

I am not surprised, obviously, since this is a line of argument that was pursued by many Republicans, but not Ryan, during the debate against Obamacare. It doesn’t make it right. As Peter Suderman of Reason wrote last night, this line of argument “weakened one of the party’s most promising policy reformers”:

What we’re seeing is the war between two Paul Ryans. He has always been a conservative policy reformer as well as a good party soldier. But when the two have come into conflict, the party soldier has almost always won. That’s made him an effective politician, and helped him carry his policy case into the spotlight. But ultimately it will probably make him far less successful as a policy entrepreneur..

Whether this will be good for his career or his party, I don’t know. What I know is that, last night, I lost some of my illusions that reform was coming. Romney/Ryan probably cut Medicare [even though, as Suderman notes, the party's latest platform acknowledges that Medicare is the largest driver of the debt.] Also, based on the Romney program, we shouldn’t expect radical changes to Social Security.

So that leaves us with defense spending — the third-biggest item in the budget. But they won’t cut that either. Talking to a conservative TV host a few nights ago, Ryan came across as a true military Keynesian who believed in target growth for the economy of 4 percent through government policies and stopping the scheduled defense sequestration cuts.

What is left then? Medicaid reform won’t be enough even matched with large nondefense cuts.

Is economic growth the answer? Economic growth without reform isn’t the answer. As my colleagues Jason Fichtner and Chuck Blahous have demonstrated in their chapter in The 4 % Solution, there is no way to grow the economy enough — to even grow it by 4 percent — without fundamental reforms of Social Security and Medicare.

The bottom line is that we won’t grow out of debt unless we reform Medicare and Social Security. That’s why we must continue to speak truth to power and hold our elected officials’ feet to the fire. There is too much at stake not to hold them accountable.

Update: Here is my previous post about the Ryan budget. Also, it is worth noting that under the Ryan plan, Medicare spending grows as fast as under the Obama budget. And in theory, after 2023, if the premium option is actually implemented the competitive bidding will drive the cost down.



Text