House Budget Committee chairman Paul Ryan has released his budget plan. The plan has the merit of acknowledging our long term fiscal problems, and it is an attempt to balance the budget reasonably quickly. Balancing our books within ten years is actually fairly easy — at least on paper. Whether you keep the budget constant, you only grow spending by 2 percent a year or you cut one cent out of every federal dollar spent, you will get a balanced budget. The real trick is to stay balanced in the long term. Considering the budget pressure coming from the explosion of entitlement spending, there is no way for the budget to stay balanced without reforming that portion of spending. This plan reflects the need for long-term reform, so it repeals Obamacare and introduces, once again, a premium-support plan as an alternative to Medicare. It also block grants Medicaid and offers a way to reform the tax code. Here is a good summary of the plan by the Washington Examiner’s Philip Klein.
There is much to like in this plan. However, many of the problems with the chairman’s previous plans remain. Here are a few examples:
- The plan repeals Obamacare, but once again, it pushes off urgent Medicare reforms until 2024. Why? I understand that many Republican voters are seniors, but this is not the time to continue business as usual. According to the Trustees’ Report, Medicare will become insolvent by 2024. If you read the letter at the back of the Trustees’ report, however, it is obvious that these are extremely rosy estimates and that Medicare will be insolvent way sooner than that.
- The proposal includes no credible plan to force future Congresses to implement its reforms.
- Once again, this plan fails to reform Social Security. Again, why? Even if you want to preserve Social Security, without reform, the program will drive itself into insolvency, at which point benefits have to be cut by some 25 percent, hurting the poorest in our society.
- It waives defense sequestration cuts in FY 2014 and going forward (it finds “savings” elsewhere, i.e., in nondefense spending). But there is no way we can balance the budget by only cutting nondefense spending; it will surely backfire. That’s what happened in the 1980s — President Reagan and the Democrats in Congress sheltered defense spending and entitlement from sequestration and expected some $100 billion in required cuts to come from nondefense spending. It will happen again this time around, and nothing will get cut.
- To be fair, the defense-spending numbers for FY 2014 are slightly lower than in the previous plan, by some $15 billion. However, that’s still much more defense spending than under sequestration.
- The plan relies on reduced war costs for a big chunk of its savings, cuts that have been scheduled for years. We have all given the president a hard time for doing the same thing, and I am surprised that this plan uses the same gimmick.
- It assumes unrealistic levels of revenue. By FY 2023, revenues are projected to be almost $5 trillion, up from $3 trillion in FY 2014. These are the same numbers as the CBO baseline budget. If you use any more realistic assumptions, the budget won’t be balanced in 2023.
- The unrealistic projections in revenue are even more problematic in light of the growth in spending. By 2023, this plan would spend close to $5 trillion, up from $3.5 trillion in FY 2014. [In other words, no matter how you look at it, under this plan the government is still growing.]
Considering the situation we are in today, the size of government, the level of our debt, and the continuous violations of our economic and personal freedoms, free-market advocates should be on the war path every day and fighting for truly smaller government. To be sure, Chairman Ryan deserves some credit for proposing a plan. Year after year he has made the case for his Medicare-reform idea, and year after year he has made the case for the need to put our country on a sustainable fiscal path.
However, even if the plan beats the president’s budget (Peter Suderman at Reason correctly notes that it is possible that only way to understand this plan to look at it as an attempt to be what the president’s plan isn’t), it still falls short of what we need. This is especially true considering the level of compromises and the amount of watering down that Congress will do once they put their hands on this or any budget. That means that the original document should have been much stronger. It should have given up on budget gimmicks, put everything on the table (including defense and Social Security), and started reforming entitlements today.