Ryan Budget: Medicare Privatization, Big Spending and Tax Cuts

Paul Ryan's budget was released this morning. He kicked it off with another pretentious video preview and a somewhat less pretentious and more standard op-ed in the Wall Street Journal. Ryan's budget resolution is similar to last year's version, which passed the House and went nowhere in the Senate.

The charges are similar, too. He claims that Democratic-led Senate hasn't passed a budget in three years, though the Budget Control Act sets out spending targets for the next ten and, in the mind of Senate Democrats, obviates the need for an annual resolution. He produces a chart that creates a "current path" for the budget and deficits by merely drawing a sharply rising line with no basis in actual numbers. And he asserts that the GOP budget "strengthens the safety net by returning power to the states, which are in the best position to tailor assistance to their specific populations."

This means block grants for Medicaid, which just caps funding for a program that's growing along with health care costs. "Returning power to the states" means that they have to fend for themselves on any additional funding for the program. It's a massive cut-off of state funds to the most vulnerable population in the country.

But the three big aspects of the GOP budget are this: First, Ryan ends the Medicare guarantee by instituting his "premium support" plan with Ron Wyden. This will fragment the large population in traditional Medicare today and raise costs significantly throughout the system. It also shifts those costs onto seniors by providing inufficient vouchers for adequate health coverage,while expecting the beneficiaries to make up the difference.

It also doesn't save the government any money, as the GDP +1 growth rate of Medicare, which is how fast the vouchers will increase under Ryan's plan, is also the target rate under the Affordable Care Act to which the Independent Payment Advisory Board (IPAB) will seek to hold costs. House Republicans will try to repeal the IPAB this week.

Second, the Ryan budget drives non-defense discretionary spending well under the cap set by the Budget Control Act in the debt limit deal, about $20 billion to $1.028 trillion, the same amount it was for FY2013 in his budget last year. It also cancels out the first year of the trigger on defense cuts with more non-defense discretionary cuts, this time with cuts to the federal workforce. Senior Senate Democrats Dan Inouye (chair of Appropriations) and Kent Conrad (chair of the Budget Committee) made their position known on this yesterday in a letter to John Boehner and Eric Cantor.

"We believe that ignoring the BCA represents a breach of faith that will make it more difficult to negotiate future agreements," they wrote in the letter addressed to House Speaker John A. Boehner and House Majority Leader Eric Cantor (R-Va.).

"Rather than trying to tear down the BCA, we should be holding it up as an example of what can be accomplished if we are willing to set aside our differences and work hard to find bipartisan solutions to our nation's challenges," they continue.

Boehner responded by whining that Democrats should write a budget instead of a letter. Democrats say the Budget Control Act is their budget resolution. And on and on.

Finally, the big surprise in the new Ryan budget is the introduction of a compressed tax code with only two tax brackets, at 10% and 25%.

The proposal would replace the current tax structure's six brackets with just two tax levels, a 10-percent marginal tax rate for lower income earners and 25-percent for upper income earners.

That would be a reduction from a top marginal rate of 35 percent under the current structure. The plan would also lower the top corporate income tax rate to 25 percent and virtually eliminate taxes on corporate profits brought back from overseas. And it would do away with the Alternative Minimum Tax, which was designed to hit the wealthiest taxpayers but increasingly also affects upper-middle-income earners.

The only way to do all this - while keeping the military relatively whole - and somehow move the budget on a path to balance is to virtually eliminate all spending on the safety net. When we see the numbers, we will realize that much of the budget is smoke and mirrors, where "dynamic scoring" assumes economic growth will increase tax revenue when you cut it to almost nothing. But understand one thing - the GOP House voted for a balanced budget amendment last year. This budget from Ryan doesn't meet that test. In fact, you can say of it exactly what was said of President Obama's budget by the CBO - it lards on trillions of dollars of debt over the 10-year budget window.

Democrats aren't planning on helping Republicans pass their budget, and they may need the help. For all the radicalism of the Ryan budget, hardline conservatives will probably vote against it, because it doesn't cut spending deep enough. The Medicare piece served Democrats well last year in the spin war, and they plan to use that to full effect again.

But I'm glad that Ryan released this budget. Unlike some Republicans of prior years (and some Democrats, to be honest), he has not hidden the true face of his policies. We know exactly where Republicans want to take the country.