Josh Barro on Chairman Ryan’s Budget

First, I want to endorse Josh’s post on how to block grant Medicaid. I particularly agree with him on the notion that the federal government needs to play a counter-cyclical role, as state governments don’t have that option:

It should be a measure that tracks the Medicaid-eligible population. Since states would be able to set their own eligibility standards, actual eligibility wouldn’t work. Instead, the federal government should set a standard for “typical” coverage—e.g., 100 percent of the federal poverty line—and adjust the block grant as that population grows and shrinks. (The population measure should also take into account the less-volatile population that receives nursing care through Medicaid.)

I’d also like to discuss Josh’s City Journal article on “Magical Health-Care Savings,” the most trenchant criticism of the House GOP budget proposal I’ve seen thus far. I’ll just underline that Josh and I have expressed sympathy for the premium support model in the past, as in this NR article from last year:

Many on the left have attacked the Ryan plan for “privatizing” and “gutting” Medicare. Again, what the plan actually does is to voucherize Medicare, giving seniors money to buy insurance on the private market. The vouchers grow slightly more slowly than medical costs do, a gap the plan hopes to make up with cost-saving health reforms. We are enthusiastic about these reforms, which include efforts to introduce more-effective price signals in the health-care market, along with tort reform and modification of health-insurance mandates. But a clearer picture of the likely cost savings will be needed — along with a willingness to adjust if sufficient savings do not materialize. 

The problem, as Josh makes clear in City Journal, is that the new Ryan approach grows premium support much more slowly than medical costs. This will be very difficult to sustain politically, particularly as medical providers lobby for an endless round of “premium support fixes.” Josh does, however, offer constructive criticism:

An opportunity for health-care cost control that has so far been overlooked lies in the tax code: if we reduced or ended tax preferences for health benefits, we’d lessen people’s incentive to consume too much health care, and costs would rise more slowly. Both Obama and Ryan have said, without specifics, that we should enact a tax reform that broadens the income-tax base, and Ryan has previously called for ending the exclusion of employer-paid health benefits from income tax and replacing it with a one-size-fits-all credit that doesn’t get bigger when you consume more health care. If he incorporates that idea into his budget proposal, he’ll be able to make a much stronger claim that his plan slows health-care cost growth. 

As David Leonhardt noted over the weekend, the tax exclusion for employer-sponsored insurance cost $264 billion last year. Eliminating it could purchase a great deal of deficit reduction or it could fund deep cuts in marginal tax rates, or some mix of both, while encouraging cost-consciousness. 

My guess is that some conservatives will object to Josh’s analysis, seeing it as too pessimistic if not “politically counterproductive.” I see things differently. Criticisms of the Path to Prosperity have tended to come from people who see efforts to reduce the federal spending burden as a moral outrage, which makes it hard for the people right to take these criticisms seriously, even when they contain a grain of truth. This creates a serious blind spot that makes it harder to advance conservative public policy goals over the long run. 

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

Most Popular

Politics & Policy

Students’ Anti-Gun Views

Are children innocents or are they leaders? Are teenagers fully autonomous decision-makers, or are they lumps of mental clay, still being molded by unfolding brain development? The Left seems to have a particularly hard time deciding these days. Take, for example, the high-school students from Parkland, ... Read More
Elections

Romney Is a Misfit for America

Mitt’s back. The former governor of Massachusetts and occasional native son of Michigan has a new persona: Mr. Utah. He’s going to bring Utah conservatism to the whole Republican party and to the country at large. Wholesome, efficient, industrious, faithful. “Utah has a lot to teach the politicians in ... Read More
Law & the Courts

What the Second Amendment Means Today

The horrifying school massacre in Parkland, Fla., has prompted another national debate about guns. Unfortunately, it seems that these conversations are never terribly constructive — they are too often dominated by screeching extremists on both sides of the aisle and armchair pundits who offer sweeping opinions ... Read More
U.S.

Fire the FBI Chief

American government is supposed to look and sound like George Washington. What it actually looks and sounds like is Henry Hill from Goodfellas: bad suit, hand out, intoning the eternal mantra: “F*** you, pay me.” American government mostly works by interposition, standing between us, the free people at ... Read More
Film & TV

Black Panther’s Circle of Hype

The Marvel Cinematic Universe (MCU) first infantilizes its audience, then banalizes it, and, finally, controls it through marketing. This commercial strategy, geared toward adolescents of all ages, resembles the Democratic party’s political manipulation of black Americans, targeting that audience through its ... Read More