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Posted by on Aug 8, 2010 in Economy, Politics, Science & Technology | 0 comments

Paul Ryan: I’m Right and You’re Wrong

Rep. Paul Ryan has an op-ed in today’s Milwaukee Journal-Sentinel about Paul Krugman’s response to his “Roadmap” budget to eliminate the deficit. Unfortunately, Ryan spends most of his piece criticizing Krugman for misrepresenting his proposed solutions and trying to “win the debate by default” while failing to substantively defend or support the very “solutions” he claims are being misrepresented:

What critics such as Krugman fail to understand is that our looming debt crisis is driven by the explosive growth of government spending – not from a lack of tax revenue.

Krugman also recycles the disingenuous claim that the “Roadmap” – the only proposal certified to make our entitlement programs solvent – would “end Medicare as we know it.”

Ironically, doing nothing, as Democrats would prefer, is certain to end entitlement programs as we know them, and in the process, beneficiaries would face painful cuts to these programs. Conversely, the “Roadmap” would pre-empt these cuts in a way that prevents unnecessary disruptions for current beneficiaries.

It reforms Medicare and Social Security so those in and near retirement (55 and older) will see no change in their benefits while preserving these programs for future generations of Americans. We do not have a choice on whether Medicare and Social Security will change from their current structure – the true debate is if and how these programs will be made solvent.

Far from the “radical” label that critics have tried to pin on it, the Medicare reforms in the “Roadmap” are based on suggestions made by the National Bipartisan Commission on the Future of Medicare, chaired by Sen. John Breaux (D-La.). That commission recommended in 1999 “modeling a system on the one members of Congress use to obtain health care coverage for themselves and their families.” With respect to Medicare and Social Security, the “Roadmap” puts in place systems similar to those members of Congress have. There has been support across the political spectrum for these types of reforms.

By dismissing credible proposals as “flimflam,” critics such as Krugman contribute nothing to the debate. Standing on the sidelines shouting “boo” amounts to condemning our people to a future of managed decline. Absent serious reform, spending on entitlement programs and interest on government debt will consume more and more of the federal budget, resulting in falling standards of living and higher taxes as we try to sustain an ever larger social welfare state.

Emphasis above is mine. The “systems” Ryan proposes in his “Roadmap” (details summarized here) would, in abbreviated explanation, replace Medicare, Medicaid, and Social Security with various types of flat, fixed cash amounts — refundable tax credits (a maximum of $2,300 for individual filers and $5,700 for joint filers), medical “savings” accounts, “debit cards” (with $5,000 being the maximum for the poorest families and an extra $1,000 to pay for pregnancy expenses) and stock market investment schemes for Social Security recipients. For individuals who are shut out of the private insurance market because of poverty or because of preexisting conditions or health problems that make privately purchased insurance prohibitively expensive, states would be provided funds to set up “high risk pools” to “assist” such individuals in purchasing insurance that appropriately addresses their health care needs. The exact definition of “low-income individuals and families” would vary depending on what each individual state decided “low-income individuals and families” meant.

Is this similar to the Medicare and Social Security benefits that members of Congress get now? Are there actually members of Congress whose incomes do not exceed 200 percent of the poverty level? Rep. Ryan does not address these questions in an op-ed piece that is supposedly a response to Krugman’s “misrepresentation” of his “Roadmap for America.”

Krugman’s response focuses mainly on Ryan’s dodge on revenue assumptions. Ryan writes:

The assertion by Krugman and others that the revenue assumptions in the “Roadmap” are overly optimistic and that my staff directed the Congressional Budget Office not to analyze the tax elements of the “Roadmap” is a deliberate attempt to misinform and mislead.

I asked the CBO to analyze the long-term revenue impact of the “Roadmap,” but officials declined to do so because revenue estimates are the jurisdiction of the Joint Tax Committee. The Joint Tax Committee does not produce revenue estimates beyond the 10-year window, and so I worked with Treasury Department tax officials in setting the tax reform rates to keep revenues consistent with their historical average.

Krugman responds:

If you read either this article or his original response to the Tax Policy Center, you could easily get the impression that nobody would do a revenue estimate, that CBO said it was JCT’s job, and JCT balked. … But read the original response carefully:

The Tax Policy Center analysis covers a 10-year period, but the Roadmap is a long-term plan with spending and revenue projections covering 75 years. As such, the analysis is not consistent with the long-term horizon of the plan. Staff originally asked CBO to do a long-term analysis of both the tax and spending provisions in the Roadmap. However, CBO declined to do a revenue analysis of the tax plan, citing that it did not want to infringe on the traditional jurisdiction of the JCT. JCT, however, does not have the capability at this time to provide longer-term revenue estimates (i.e. beyond 10 years) [my emphasis]. Given these functional constraints for an official analysis, staff relied on its original work with the Treasury Department and other tax experts to formulate a reasonable expected path for long-term revenues given the tax policies in the Roadmap combined with the economic growth projections available at the time.

In other words, Ryan could have gotten JCT to do a 10-year estimate; it just wouldn’t go beyond that. And he chose not to get that 10-year estimate. So it was Ryan’s choice not to have any independent estimate of the 10-year revenue effects.

I also have to add this final sentence from Krugman’s response:

Finally, why is Ryan denying that he proposes dismantling Medicare as we know it? Replacing the system with vouchers surely fits that description.

Cutting out the heart of the Medicare program and then insisting that it’s still Medicare is both dishonest and callous.

Michael Hiltzik, a columnist at the Los Angeles Times, has some strong words about the “bogus math” behind the Social Security shortfall “myth.”