Ryan's Budget Proposal

Representative Paul Ryan (R-WI), chairman of the House Budget committee, has put forth a 2012 federal budget proposal that initially got favorable reviews as the first to take a serious crack at addressing the federal deficit. Paul Krugman of The New York Times begs to differ.

How ridiculous is it? Let me count the ways — or rather a few of the ways, because there are more howlers in the plan than I can cover in one column. First, Republicans have once again gone all in for voodoo economics — the claim, refuted by experience, that tax cuts pay for themselves. In particular, the original voodoo proposition — the claim that lower taxes mean higher revenue — is still very much there. The Heritage Foundation projection has large tax cuts actually increasing revenue by almost $600 billion over the next 10 years.

Krugman is correct that this part of Republican orthodoxy has long been disproven. FactCheck.org has called this claim "highly misleading." The Bush administration's claim that its tax cuts paid for themselves was refuted by the administration's own analysts. Finally, the non-partisan Tax Policy Center reports that the Ryan plan will actually increase the federal deficit because of its tax cuts.

Krugman goes on:

And then there’s the much-ballyhooed proposal to abolish Medicare and replace it with vouchers that can be used to buy private health insurance. The point here is that privatizing Medicare does nothing, in itself, to limit health-care costs. In fact, it almost surely raises them by adding a layer of middlemen. Yet the House plan assumes that we can cut health-care spending as a percentage of G.D.P. despite an aging population and rising health care costs.

The only way that can happen is if those vouchers are worth much less than the cost of health insurance. In fact, the Congressional Budget Office estimates that by 2030 the value of a voucher would cover only a third of the cost of a private insurance policy equivalent to Medicare as we know it. So the plan would deprive many and probably most seniors of adequate health care.

In short, this plan isn’t remotely serious; on the contrary, it’s ludicrous.

UPDATE: Ezra Klein agrees with Krugman's take on Ryan's treatment of health care on his Washington Post blog.

Democrats don’t just have a proposal that offers a more plausible vision of cost control than Ryan does. They have an honest-to-goodness law. The Affordable Care Act sets more achievable targets, and offers a host of more plausible ways to reach them, than anything in Ryan’s budget. “If this is a competition betweenRyan and the Affordable Care Act on realistic approaches to curbing the growth of spending,” says Robert Reischauer, who ran the Congressional Budget Office from 1989 to 1995 and now directs the Urban Institute, “the Affordable Care Act gets five points and Ryan gets zero.”

--Ballard Burgher