What Ryan's Budget Really Says: 'I Love Rich People'

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Beat the Press / CEPR

What Ryan's Budget Really Says: 'I Love Rich People'

It's not just that he wants to change the 'relationship between Americans and their government'

Ezra Klein looked at Paul Ryan's latest budget and told readers:

"Ryan’s budget is intended to do nothing less than fundamentally transform the relationship between Americans and their government. That, and not deficit reduction, is its real point, as it has been Ryan’s real point throughout his career."

Well, that is one possibility. There is another option: Paul Ryan wants to makes rich people richer. I think the evidence supports the latter view.

Let's look at some of Ryan's trademark policies. Ryan repeatedly has proposed replacing Medicare with a voucher system or "premium support" as he likes to say. Note that Ryan has not proposed just eliminating Medicare and telling people when they turn age 65 (or 67) that they are on their own. 

What's the difference between handing people a voucher to buy insurance from private insurers and giving them access to a government-run Medicare system when they turn age 65? Over Medicare's 75-year planning period the difference is tens of trillions of dollars in additional money for private insurers and the health care industry, according to the Congressional Budget Office (CBO). 

As CBO and many other independent analysts have documented, using private insurers raises rather than lowers costs. We can believe that Representative Ryan is ignorant of this research or alternatively we can believe he knows and understands the findings, but still wants to use private insurers anyhow.

We can tell the same story about Ryan's plans to privatize Social Security. He has never suggested that workers would hit retirement and the government would just tell them they are on their own. Instead he has proposed that the government would require that they put a portion of their wages into an account run by the financial industry. This would raise the cost of running Social Security by a factor of 20 or 30 since the administrative costs of private accounts are far higher than the administrative costs of Social Security. This implies a transfer of trillions of dollars from workers to the financial industry. Again, we can believe that Representative Ryan is unaware of the evidence or we can believe that he knows what the research shows and does not care.

There are many ways in which the government interferes in the market to redistribute income upward. The most obvious is patent and copyright protection. In the case of the pharmaceutical industry alone, patent monopolies raise the price of drugs by more than $250 billion a year above the free market price. The total amount of money transferred as a result of government-granted patent monopolies could be as much as $1 trillion a year, more than a fourth of the federal budget.

Again, it's possible that Representative Ryan doesn't know anything about patents and copyrights. Alternatively he may not care about these forms of government intervention in the market because they have the effect of redistributing income upward.

The list of such policies can be extended at some length. (Yes, this is all a plug for my book, The End of Loser Liberalism: Making Markets Progressive.) The point is that we can believe that Representative Ryan has a philosophical commitment to reducing the size and importance of government. Alternatively we can believe that Ryan primarily wants to give more money to rich people.

Arguably the evidence supports the latter view. Needless to say, even if Ryan's mission was to redistribute income upward, he would not present his case this way since there are not enough rich people to win elections. A politician seeking to get support for policies that redistribute income upward will get much farther claiming to support a free market and getting government out of the way. If Ryan's agenda is in fact redistributing income upward the media do him a great favor when they describe it instead as a commitment to free market principles.

Dean Baker

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer and the more recently published Plunder and Blunder: The Rise and Fall of The Bubble Economy. He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.

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