The Corner

A Commendable Budget Proposal

Today House Budget Committee chairman Paul Ryan unveils his plan to save America’s future. I expect that three aspects will get a lot of attention: the proposal for Medicare, the reform of Medicaid, and the ten-year budget numbers. However, I think the most important feature of the budget is a vision for the role of government that restores the promise of long-term fiscal sobriety, economic growth, and intergenerational fairness.

Imagine this: It will pay off the national debt by 2050.

Critics from the left will quickly attack “premium support” for Medicare and “block grants” for Medicaid as cheap attempts to shift costs to seniors and the poor who are ill-equipped to handle the burden. In fact, premium support will likely be means-tested to reflect economic circumstances, risk-adjusted to give those who are ill more support, and indexed to reflect rising prices. The reform will protect those in or near retirement and then shift to a system that essentially mirrors what Congress has right now. Seems hard to object.

Similarly, the “block grant” is likely to be indexed for inflation and population, making it responsive to the current economic conditions. Governors will have the flexibility to take advantage of the potential for efficiency gains from managed plans and other approaches that match their populations.

But the simplest response to such criticisms is to note that Medicare and Medicaid are unsustainable. So their constituencies are already at risk and to do nothing is the cruelest of options.

Critics from the right will complain that the budget is not balanced in the next ten years. That is a commendable goal, but doing so would require draconian reductions, including cuts to current entitlement beneficiaries. Any such proposal would be dead on arrival and end any chance of real reforms. No reform means a guarantee of continued high spending, deficits, and debt in the future. No reform means that conservatives would be left with only one fiscal task: raising taxes to pay for the welfare state.

The House budget proposal is commendable because it addresses the real problem: the structure of the entitlement programs. Under this plan, there is a vision of small, contained government that supports rapid economic growth, is fair to future generations, and restores America’s exceptionalism.

Douglas Holtz-Eakin is president of the American Action Forum.


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