It is simultaneously amazing and distressing that an economist who has risen so high in his profession could be such a lousy economist. But that is the only hypothesis that can explain Alan Blinder’s screech today in the Wall Street Journal, “Paul Ryan’s Reverse Robin Hood Budget.” Apparently, Paul Ryan’s plan to rationalize entitlement spending for the long term and reduce the burden of federal debt without a tax increase is the “worst” among the available options.
Why? Because (1) the value of the Medicare “vouchers” (premium subsidies) will be eviscerated by the rising cost of health-care services. Will there be no salutary effect of improved individual incentives on cost growth? Blinder fails to tell us, although the very first question that any economist ought to ask is how a change in incentives will affect supply-and-demand dynamics. Blinder seems not to have entertained the question; in his apparent view, cost growth in medical care simply is a constant, like the speed of light, and an increase in the marginal cost of medical care actually paid by patients will have no effect on demands. He has been in (or of) the Beltway far too long.
(2) Blinder seems enamored of Obamacare’s “cost-containment” measures — a more accurate description of them would be “price controls and top-down rationing.” Medicaid patients already have substantial difficulty seeing primary-care physicians, and Medicare patients are being forced along that path; the rationing that will result from the comparative-effectiveness review process and the IPAB bureaucracy in Obamacare will reduce spending, but that is very different from reducing costs. The federal government has interest groups rather than patients; less spending combined with less service means higher true costs for patients. Period.
(3) “Medicaid … is a lifeline for the poor.” Really? In California — always a canary in the coal mine of leftist policy — primary-care physicians receive something on the order of $20 (or less) from MediCal for an office visit, an amount insufficient for the cost of the office staff during a visit. And so MediCal patients, again, have great difficulty getting appointments; or the doctors are forced to see them for increasingly short periods of time. So much for the claim that “universal coverage” will reduce the pressures on the emergency rooms. Does Blinder actually believe that the eternal condition of limited resources somehow has been defeated by Medicaid? Or, more generally, by government health coverage?
(4) Blinder’s claim about “copious tax cuts” for “the rich” in the Ryan framework simply is dishonest, as the reductions in marginal rates are combined with elimination of innumerable tax preferences. (One wonders if Blinder approves of the Orwellian term “spending through the tax code,” but never mind.) Whether the “rich” would pay more or less, or more or less as a proportion of total income-tax revenues, or as a proportion of GDP, is entirely unclear.
There is much more to mock, but you get the point. If this is the best that the defenders of Obama can do, we already have won, at least intellectually.
— Benjamin Zycher is a senior fellow at the Pacific Research Institute.