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'Trojan horse' or 'bold and exciting'? Ryan budget is a lightning ro

This article first appeared in the St. Louis Beacon, April 10, 2012 - WASHINGTON – President Barack Obama called it “a Trojan Horse” that hides an underlying “social Darwinism.” Begging to differ, GOP presidential contender Mitt Romney praised it as “bold and exciting.”

A New York Times editorial condemned it as “cruel” to the poor, while libertarian U.S. Rep. Ron Paul, R-Tex., said it failed to tackle the nation’s “dire fiscal crisis,” which requires deeper cuts in “the welfare state.”

The target of praise and criticism is the U.S. House-passed budget of Rep. Paul Ryan, R-Wisc., the thoughtful and controversial chairman of the Budget Committee who has emerged as a leading contender for the vice presidential pick if Romney becomes the Republican nominee.

Even though it faces almost certain demise in the Democratic-controlled Senate, Ryan’s budget blueprint has emerged not only as a lightning rod in the national political debate over entitlements and taxes, but also as a key issue in political races across the country, including the U.S. Senate race in Missouri.

While Sen. Claire McCaskill, D-Mo., asserts that Ryan’s plan threatens to “pull the rug out from under Missouri’s seniors in order to reward corporations and the richest Americans,” all three of the candidates for the GOP nomination to oppose her – Rep. Todd Akin, R-Wildwood., former state Treasurer Sarah Steelman, and business executive John Brunner – say that the plan would not balance the federal budget fast enough.

Even so, the Missouri Republicans generally defend Ryan's budget. Akin, who voted for it even though he wanted deeper cuts, said in a statement that Ryan’s plan “cuts federal spending, makes responsible cuts to the real drivers of our national debt, ends special-interest favoritism and corporate welfare, embraces an all-of-the-above energy strategy, and gives American taxpayers more control over their health-care decisions.”

But Democrats, backed by numerous studies from left-leaning groups, paint a dire picture of the budget’s impact on the elderly, the poor, college students and others. Sen. Dick Durbin, D-Ill., the second-ranking Senate Democrat, said in an appearance Sunday on NBC’s “Meet the Press” that Ryan’s budget “would basically say Medicare is going to be a different program. It's going to be a support program. We're going to hand you a check and good luck finding health insurance in the open market.”

Obama, Romney clash on Ryan plan

With Romney tying himself to both Ryan and his “marvelous” budget, and Obama launching a frontal attack on the “Ryan-Romney” plan, the proposals promise to become an element in the upcoming presidential campaign.

Defining his position, Obama said in a recent speech at an Associated Press luncheon that cuts to Medicaid “would put access to health care at risk for 19 million Americans -- the elderly in nursing homes, low-income children, middle-class families with children who have autism and Down syndrome.”

The president added: “Under Ryan’s plan for Medicare, seniors who retire in 10 years would receive vouchers that allow them to choose between private health plans and traditional Medicare.” In addition, he said, “If health-care costs rise faster than the amount of the voucher, that’s too bad. Seniors bear the risk.” That approach would “ultimately end Medicare as we know it.”

In support of Obama’s arguments, Democrats refer to an Office of Management and Budget analysis as well as studies by other groups, including the generally liberal Center for American Progress and the Center on Budget and Policy Priorities.

Ryan begs to differ. He wrote in an op-ed: “Our budget's Medicare reforms make no changes for those in or near retirement. For those who will retire a decade from now, our plan provides guaranteed coverage options financed by a premium-support payment. And this year, our budget adds even more choices for seniors, including a traditional fee-for-service Medicare option.”

And Ryan wrote that the House budget “delivers real spending discipline... by ending the epidemic of crony politics and government overreach.” And he asserted that the plan “strengthens the safety net by returning power to the states, which are in the best position to tailor assistance to their specific populations.”

The House Budget Committee’s blueprint, summary, report and other information can be found here

On the Obama administration side, Jeff Zients, acting director of the Office of Management and Budget, wrote that “this budget does not ask all Americans to do their share to get our fiscal house in order and create an economy that is built to last.”

Instead, Zients asserted, Ryan’s plan “gives those making over $1 million per year an average tax cut of at least $150,000 and preserves tax breaks for oil and gas companies and hedge fund managers. These tax breaks are then paid for by ending Medicare as we know it and implementing deep cuts in what we need to grow our economy and create jobs in years to come.” (Zients analyzed the Ryan plan in greater detail in a later blog item.) 

‘Fact-checking’ debate over Ryan’s budget

An analyis by FactCheck.org – a nonpartisan project of the Annenberg Public Policy Center – sought to sort out fact from fiction (or exaggeration) in the debate over Ryan’s plan.

Specifically, FactCheck looked at Obama’s assertion that the budget could throw hundreds of thousands of children out of Head Start, eliminate air traffic control at some airports and “ultimately end Medicare as we know it.” Romney accused Obama of “distortions and inaccuracies.”

FactCheck found “grounds for fault” in both Ryan's and Romney’s description of the plan and Obama’s criticism. Here is a shortened summary of the findings:

  • Obama attacked Ryan’s plan to give seniors premium-support payments and a choice between traditional Medicare and private plans, beginning in 2023. But the president's claim that the plan would herd older, sicker patients into traditional Medicare “isn't necessarily true,” the analysis found: “Ryan's plan would require private insurance companies to take all comers, regardless of their condition, and it includes risk adjustments to give incentive payments to plans that end up covering less healthy individuals.”
  • Obama’s assertion that Ryan's budget “breaks our bipartisan agreement and proposes massive new cuts in annual domestic spending” exaggerates the situation. The budget deal last summer called for automatic cuts in defense only if Congress could not agree on an alternate way to reach the same level of deficit reduction. But it is true that “Ryan's plan calls for smaller cuts in military spending, and deeper cuts in domestic programs, than the bipartisan deal struck last year,” the analysis found.
  • Obama's list of popular programs that would be slashed or eliminated – from student loans and cancer research to air traffic controllers – assumes “these cuts were to be spread out evenly.” (For example, the White House released an estimate of the Ryan budget’s impact on Pell Grants, Head Start and other education programs here.)
  • But the GOP plan does not make across-the-board cuts, so the White House examples are largely speculative, the analysis found.
  • While Ryan says his plan makes “dozens of specific assumptions to justify our numbers,” details are scarce. Romney explained that “you wouldn’t cut programs on a proportional basis. There would be some programs you would ... eliminate outright.”

Even so, FactCheck.org found that Obama “is mostly correct" when he complains that Republicans "don't specify exactly the cuts that they would make.”
Ezra Klein, an economics and budget columnist for the Washington Post, also pointed out that Ryan’s budget mostly avoided specifics on cuts. In his blog, Klein wrote that “Ryan has said how his cuts will be distributed on the category level,” and the total size of the reductions in non-defense spending. “But he hasn’t said how those cuts will be distributed among the programs in that part of the budget.”

Klein added: “There’s a bottom line here: You can’t cut spending without cutting spending. But Ryan wants to have it both ways: He wants to get the credit for cutting spending, but he doesn’t want to have to propose specific spending cuts.”

But the GOP staff and members of the House Budget Committee aggressively defend Ryan’s plan. Responding to Obama’s allegations, Ryan posted a “myth vs. fact” essay to try to ally public concerns. A few key assertions:

Addressing the “myth” that the Ryan plan eventually would end Medicare, Ryan responded that his budget “stops the raid on Medicare started by the president’s health-care law ... [and] saves Medicare from bankruptcy. It makes no changes for those in or near retirement. For future generations, patient-centered reform will save and strengthen Medicare, offering guaranteed coverage options, including a traditional fee-for-service Medicare option, financed by a premium-support payment that guarantees affordability.”

On the question of whether his budget would slash key federal investments, Ryan wrote that it would “advance reforms that modernize the federal government so it can deliver on its critical responsibilities in the 21st century. It delivers real spending discipline by ending the epidemic of crony politics and government overreach.”

Would the Ryan budget unravel the “safety net” of federal programs? Ryan contends that the House budget would “modernize government benefits for those in need by converting the federal share of spending on assistance programs into block grants to the states – just like the government did with welfare in the late 1990s.”

Can deficit be solved without additional revenue?

One major objection to Ryan’s budget, at least among conservatives, is that it would take so long to balance the federal budget.

Over the next decade, Ryan’s plan would run a deficit estimated at about $1.3 trillion. While that is far less than the $6 trillion deficit projected by the proposed White House budget, the federal budget would take many years to return to balance under Ryan.

(The Congressional Budget Office analysis of the long-term impact of the House budget, using data on the plan supplied by Ryan’s staff, is here.)

Indeed, Ryan’s budget is relatively tame compared to Ron Paul’s draconian “Plan to Restore America,” which the House did not take up last month. Paul wants to slash $1 trillion in spending in the first year and balance the budget in the third year.

To do so, Paul would dissolve five departments (Energy, Housing, Commerce, Interior and Education) and limit federal spending to 2006 levels. He would extend the Bush-era tax cuts, reduce government payrolls, lower the corporate tax rate and allow companies with profits overseas to “repatriate” them without paying taxes.

The chance of congressional approval for Paul’s plan is minuscule. What many economists regard as a more realistic approach would combine budget cuts with revenue increases, mainly by increasing taxes.

That was the general thrust of the recommendations made in late 2010 by the National Commission on Fiscal Responsibility and Reform – known as the “Simpson-Bowles” commission – which are viewed by some experts as the best approach.

But shortly before approving Ryan's budget, the House soundly rejected (in a 382-38 vote) a budget blueprint modeled on Simpson-Bowles. The Obama administration’s budget also was rejected overwhelmingly by the House.

The sticking point in rejecting Simpson-Bowles was the reluctance of congressional Republicans to impose any significant tax increase. Instead, Ryan and his allies argue for tax reform to lower income tax rates without adding to the deficit. But Ryan's plan is fuzzy on how it would make up for the lost revenue, estimated at more than $4 trillion over a decade.

Instead, Ryan has proposed ending or reducing unnamed deductions, exemptions and loopholes. He denies claims by Democrats that the plan would protect tax breaks for the wealthy and contends that it would roll back deductions “that go overwhelmingly to a relatively small class of mostly higher-income individuals.”

But the White House and most Democrats contend that the wealthy would benefit most from the tax overhaul suggested by Ryan. “The average tax cut for millionaires under this Republican budget plan is at least $150,000,” says Rep. Marcy Kaptur, D-Ohio, a member of the Budget Committee.

“There are even more tax breaks buried in this Republican budget on top of the extension of the Bush tax cuts for the wealthy,” she wrote. “Companies that ship American jobs overseas and oil companies also see their taxes cut by this Ryan Republican budget.”

An analysis by the Urban-Brooking Tax Policy Center says the Ryan plan would likely lead to new tax cuts that would provide huge windfalls to wealthy households. People earning more than $1 million a year would receive $265,000 apiece in new tax cuts, on average, on top of the $129,000 they would receive from the Ryan budget’s extension of Bush’s tax cuts, according to a summary of the study.

In an election year, both sides are using the budget and tax debate to their political advantage, so few experts expect real progress in addressing the deficit before November. But many economists and nonprofit groups are calling for action once the dust has settled from the fall elections.

“Both parties are guilty of telling people what they want to hear instead of owning up to the cold hard truth: For too long we've lived beyond our means and now we must find new revenue, cut spending and reform entitlements,” said a statement by Taxpayers for Common Sense – a nonpartisan group that seeks to reduce wasteful government spending.

The group called on all sides in the budget debate to “stop the fuzzy math” and “stop the pandering” to special interests.

“We can’t step back from the fiscal brink by holding defense, entitlements, taxes or [insert your favorite policy here] as untouchable,” the group said. “We need shared sacrifice and we can't achieve that if politicians keep telling their own constituencies that the buck stops over there.”