Ryan's Radical Budget: The Triumph of 'You're on Your Own' Economics

The 'Path to Prosperity' sets out to drown government in a bathtub.

paul ryan
T.J. Kirkpatrick/Getty Images
Paul Ryan presents the House Budget Committee's FY2013 budget in Washington, DC.
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Yesterday, Rep. Paul Ryan of Wisconsin and his House Republican colleagues released their budget.  What follows is an overview of what’s in there, but I suppose, as much as I’d like you — need you! – to read what follows, I should begin with this admission:

This budget isn’t going anywhere.  The Senate won’t accept it; the president will not sign it. 

So why read on?  I mean, even if it was going to be implemented, it’s a rare person who’d spend his or her free time reading about a federal budget.

Here's why: Because the House GOP budget is a strikingly clear example of where today’s conservatives are at regarding the basic role and functions of government.   You need to be aware of the choices and priorities in this budget; they are not going away.  They represent a threatening vein in the body politic.

A good way to evaluate a budget is to start with a list of the broad functions of government and see how this plan meets these challenges. Government can and should

• provide a safety net to catch people when they fall out of a tough economy

• provide retirement and health care security for people beyond their working years

• invest in public infrastructure and education

• defend the nation, via the armed services

• raise adequate revenue to do all of the above

The House budget seriously damages the safety net.  One way to undermine the way the nutrition and health care support programs (food stamps and Medicaid) work is to turn them into block grants.  That is, instead of structuring them such that they can expand in recession and contract in economic expansions, you just set a fixed amount that the federal government sends to the states each year to administer the program. 

That’s what we did with welfare (TANF—temporary assistance to needy families) and of all the safety net programs, it was by far the least responsive to need during the Great Recession.   Medicaid and food stamps (SNAP—supplemental nutritional assistance program) performed their safety-net functions.  TANF did not.  My CBPP colleague Edwin Park points out that Rep Ryan’s budget “would add tens of millions of Americans to the ranks of the uninsured and underinsured.”

Their budget also does serious damage to health care security for the elderly.   Medicare becomes a "premium support" program, meaning seniors get a voucher to shop for health coverage, but — and this part is new compared to Ryan’s plan of a year ago — they can purchase Medicare if they want.  That’s right—the R’s have a “public option,” dreamed up as a collaboration between Rep. Ryan and Sen. Ron Wyden (D-OR).

But don’t get too excited.   It’s absolutely the case that we need to slow the growth of health care spending, both in the public sector and even more so on the private side of the market, where costs are growing more quickly.  But you can lower the growth of Medicare spending by shifting more costs onto its beneficiaries or by squeezing waste and inefficiency out of the system.  

When you set up a program that generates cost savings by providing vouchers whose value grows more slowly than health costs, as this budget plan does, you’re not saving … you’re shifting. The health care reform law, the 2009 Affordable Care Act, tries to save, by going after ineffective treatments, quality over quantity, more efficient delivery systems.   None of that may work – we’ll have to see.   But the point is that if you view health security for retirees as an important function of government, that pushes you to start by looking for savings on the system side, not by shifting costs to recipients.

Investments in people, infrastructure, research, clean energy – this part of the budget gets a tremendous whack.  Remember the failed supercommittee?  Well, the penalty for their failure is a scheduled $1.2 trillion in cuts to the non-entitlement part of the budget—the part that gets appropriated every year – starting next year. 

But Rep. Ryan’s budget queers the deal.  First, he lowers the discretionary spending limits excruciatingly agreed to last summer by $19 billion.   Then, he shields defense, meaning that much more has to come out of the investment agenda noted above. 

As my CBPP colleagues put it today, outside of defense, Social Security, and health care, if we go down the path dictated by this budget, eventually the rest of the federal government would practically "cease to exist … [t]hat includes everything from veterans’ programs to medical and scientific research, highways, education, nearly all programs for low-income families and individuals other than Medicaid, national parks, border patrols, protection of food safety and the water supply, law enforcement, and the like."

Finally, there’s paying for what’s left after all these cuts.  Here, we’re stuck with the reality that a) almost every House Republican has signed conservative activist Grover Norquist's pledge never to raise taxes, and b) Paul Ryan is a devout supply-side, trickle-downer.   In fact, the budget is not content to simply extend the Bush tax cuts; it proposes cutting the top rate from its current 35% down to 25%, both on the individual and corporate side of the code. 

What of the budget deficit?  Even with trillions in cuts, can the R’s raise the revenue they need to match their anti-deficit rhetoric? 

Sort of, but only by assumption.  That is, their budget claims it will make up the revenue they lose from the lower rates by "broadening the base," i.e., closing tax loopholes. Unspecified tax loopholes.  Moreover, Rep. Ryan says he intends to protect middle class people for any of those loophole closures.  But that math doesn’t work.  You can’t lower the rates that much, protect the middle-class, and get back anywhere near the revenue you’d need to keep the deficit from growing.

The results from the scorecard are clear: Were we to implement this budget, each function of government outside of defense would take a huge hit. 

This is extreme YOYO’ism – the economics of "You're on Your Own."  This budget looks at the challenges we face – the need for a safety net to offset poverty when markets fail, the basic right of affordable health security for seniors, the need to invest in the future in parts of the economy where markets won’t do so, the need for fiscal sustainability – and it punts.

In a sense, the House Republicans do us a favor by drawing such a stark vision of the role of government.  As I said above, I recognize that this stuff is arcane, but I hope this catches your attention.  The key thing now is to weigh the contrasting visions of government’s role as this election year unfolds.

You can email me at info@jaredbernsteinblog.com. I look forward to your feedback.

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities. From 2009 to 2011, he was the Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team.

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