So we've decided to be a cleverer, more patient Strawman Blogger. We're no longer trying to crest the wave of high-frequency snark, but instead follow behind with our pithy insight and vast wisdom.
In that spirit, we've decided to make a quick list of the major points of contention with Ryan's budget. Why a list, you ask? Truly we despair over lists, being as they are tools of weak minds desperate for easy page hits, but in this case we had to relent. If we picked a single topic for each blog post on the budget, the Strawman Blogger front page would quickly stretch into infinity.
That's right. The Ryan Budget: A plan so stupid that a single blog post cannot contain it. Well done all around.
Without further ado, our late (but somewhat more refined) thoughts:
1) The Great Risk Shift
If you care about the deficit, you care about health care. No factor is important to the growth of our long run debt except for the grinding, implacably rising costs of health service. So naturally, if you want to fix the debt problem, your only concern is in changing the trend curve of health care costs.
Fix, you see, is the key word here.
Ryan doesn't fix anything. To his immense credit, he doesn't even try. He doesn't establish new payment practices, doesn't delve deeper into the efficacy of care, and doesn't bother to address the many deficiencies in our current system. He simply ends Medicare. If you turn 65 in 2022, you won't enroll in Medicare. You'll get a voucher which you can use to purchase private insurance.
Vouchers? Well. Premium support payments, in his remarkable lexicon.
As we discuss below, these vouchers grow far slower than your cost of care. So over time your vouchers will be worth less and less and you'll purchase less and less care with them.
Medicare costs are not sustainable over 50 years. But shifting this deficit from the government to the individual doesn't fix health care costs. It just dumps them off the ledger. Seniors will still lack care, will still be indebted far past their ability to pay - but with Ryan's deep cuts and without the support of a strong bargaining position, their suffering will be much more acute. According to the CBO, Ryan's plan will double the out-of-pocket cost of health care. Forget insurance. Over 68% of seniors
This isn't problem-solving. This is willful childish ignorance. Apparently, Ryan attended the Hear, See, and Speak No Evil school of policy design.
2) CPI-U And The Rate Of Inflation
When Ryan first teased hints of his plan, the general thought among the intelligentsia was that he would tie the value of his vouchers to GDP+1%. They also declared that this formula was totally unsustainable. Health care costs grow at some 5% per annum, so anyone holding a voucher will be able to buy less and less in care as the years tick by.
It turns out, however, that even that ambitious stupidity wasn't enough for Ryan. He linked his vouchers to the CPI-U – the rate of general inflation.
To put this in perspective, you can think of the growth in GDP to be the growth in productivity added to the rate of inflation (thanks to Ezra Klein for the breakdown). Ryan has taken a formula that's already too harsh for seniors (Voucher Growth = Production + Inflation + 1%) and made it far, far worse (Vg = I).
Why did he do this? God knows. Klein posits, correctly we think, that when he plugged GDP+1% into his formula he couldn't get it to spit out the savings he wanted.
3) In Which The Heritage Foundation Embarrasses Themselves Somewhat More Than Usual
Once Ryan had put the polish on his plan, he took it over to the fine folks at the Heritage Foundation to have them model the macroeconomic effects1. Not that you could call it modelling, mind. Math like this is why people don't trust economists.
First, it's important to note that the Heritage Foundation projections aren't needed for the plan to work. Ryan's plan makes deep cuts, and those cuts will be effective quite apart from the Heritage analysis. It's worth stating as there's been some confusion on that point.
However, taking the hammer to the social safety net without providing any actual benefits is considered bad form, so Ryan asked the folks at Heritage to break out the trumpet divine and bring the good news. And they did! Sort of.
Heritage found the plan so impressive, so remarkably magical, that they predicted that just enacting it would reduce unemployment to 6.4% by the end of the year. Sweet God, man! That's some powerful stuff.
Not only that, but they posit that unemployment will hit 2.5% in 2020.
Yes. We meant to write that.
...
2.5%.
Let's put that in perspective. Unemployment has only been below 4% once in the last thirty years, and that was immediately followed by a Fed rate hike. It's important to understand why. It takes time for people to find a job. It takes more time to find a job that's right for them. If you imagined a world with 0% unemployment, those unlucky fellows who are fired would be hired the very second they walked out the door.
This, of course, is unlikely.
So any economy has a natural non-zero rate of unemployment. For reasons to lengthy to discuss here, any attempt to drive unemployment below that rate will cause inflation to pick up. To whit, it's commonly called the Non-Accelerating Inflation Rate of Unemployment (NAIRU). Once unemployment hits the NAIRU, inflation ticks up and the Fed steps in with a timely rate hike.
The NAIRU can change, but it's generally between 4-5% in a healthy economy. So to the profound merriment of assorted spectators, the Heritage Foundation declared that Ryan's Roadmap was so powerful that it would actually rewrite the basic rules of macroeconomics.
And you know what? It gets better.
After several days of highly enjoyable mockery, the Heritage Foundation deleted the offending table from their website. This was a mistake for reasons three. 1) It is 2011 and, thanks to the timely invention of the PrntScn key, the original table was widely available 2) You can still calculate the 2.8% rate from the rest of their datasets, and 3) By taking a ridiculous idea that no one but Heritage believed and turning into a ridiculous idea that even Heritage couldn't stand behind, it naturally made the rest of their rosy numbers look rather suspect.2
4) Oh. Also He Sort Of Ends Medicaid.
The current funding mechanism for Medicaid will be ended and states will be given block grants instead. We don't have much to say about this, except to note that, warts and all, Medicaid is the single most effective service at holding down health care costs. It is probably the opposite direction than where we should be heading.
5) Really. Really, This Looks A Lot Like The Affordable Care Act
Remember the no good awful socialist Affordable Care Act? It worked sort of like this:
- People received need-based vouchers for care
- People were able to shop and compare private plans on health care Exchanges
- The plans in the Exchanges had to meet a basic quality
- The plans were extremely limited in their ability to discriminate with price
- Seniors receive need-based vouchers for care
- Seniors are able to shop and compare private plans on health care Exchanges
- The plans on the Exchanges have to meet a basic quality
- The plans are limited in their ability to discriminate with price
Now, we aren't saying that you have to hate Ryan's plan just because you hated ObamaCare. We, for example, made our peace with the Affordable Care Act because a) no one looked especially inclined to give us single-payer, and b) giving crappy insurance to previously uninsured sick people looked like a step in the right direction. Ryan, however, is planning giving extremely crappy insurance to a bunch of old people who currently have perfectly good insurance, thank you very much, before taking the extra step of making it even more crappy over time.
Needless to say, we are unamused.
But while you can hate/love ObamaCare and RyanCare with perfect logical consistency, you cannot actually consider ObamaCare a socialist takeover and RyanCare a triumph of the free market. Please, people. You have to at least look like you're trying.
5) It's Not Just Medicare
It's also worth mentioning that Ryan finds time to increase taxes on most of the bottom 90% of society, while reducing taxes on the top 10%. The top 1% saves rather a lot, actually - about 15% of income.
He also, in an astonishingly crazy fashion, promises to reduce all other spending, apart from medicine and social security, from 12% of GDP to 3.5%. Since he's promised only cursory cuts to defense, the damage to the social programs in non-defense discretionary, such as food stamps and Pell grants, will likely be catastrophic.
6) If It's Such A Bloody Good Idea: Why Not Now?
One final, and in our eyes, most damning question. If Ryan's plan is so effective, if it really holds down the costs of care, results in major savings, promotes individual choice, but in no way damages the efficacy of health care - why wait? Why not start it now?
You would need time, of course, to get the exchanges up and running. ObamaCare needed four years - we'll round it up to five, just to give Ryan the benefit of the doubt. Five years to set up the exchanges, and in 2016 Medicare ends and every once and future senior gets a voucher for care.
Sound good?
It doesn't to Ryan. It doesn't because it's a terrible plan and seniors reliably vote Republican. So in an extreme act of cowardice, Ryan reverses course. No one over the age of 55 will be affected. This isn't "save the future for our children." It's "save the present, screw the future."
As others have pointed out, this creates a completely unsustainable political dynamic. Seniors turning 65 in 2022 will see their peers get lavish Medicare benefits, while they're sent scurrying for scraps in the wasteland of the exchanges. This is hardly going to last. Ryan's plan isn't just cruel and irresponsible. It's cruel and irresponsible and unlikely to work.
In Close
All in all, we're bemused by Ryan's plan. If we had set our enviable intellect to the task of creating a plan that would be hated by the public, pilloried by the Democrats, and be the mass political suicide of the Republicans, we could not have done better.
We reserve the right to add to this post as the mood strikes us.
Update: An earlier version of this blog incorrectly stated that seniors would pay for 68% of their health care costs under Ryan's plan. The CBO estimated that they will pay for 68% of their insurance premiums.
Update, Again: In what can only be described as a divine taste for cruel irony, the original version of this blog had extensive errors. See? We told you we shouldn't have rushed into anything. The original confused the Plan For Prosperity budget with Ryan's Roadmap, which would have been only a minor irritation, except we linked to the wrong CBO report. Mentions of the Roadmap have been corrected and the link has been fixed. The percentage of insurance premiums was actually correct. At least we didn't screw that up twice.
1Other picks from the Heritage Foundation highlight reel: The Bush tax cuts will increase household income and the Bush tax cuts will pay off our national debt by 2010.
2As of writing this, they just took down the entirety of their original forecast and replaced it with something marginally less insane. Very marginally. Small improvements, and all that.
