Praising Congressman Ryan

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The Republican budget
Praising Congressman Ryan
At long last somebody is trying to grapple with America’s fiscal troubles

BARACK OBAMA, as we unhappily noted when he produced his budget in February, has no credible plan for getting America’s runaway budget deficit under control. Up to now the Republicans have been just as useless; they have confined themselves to provoking a probable government shutdown in pursuit of a fantasy war against the non-security discretionary expenditures that make up only an eighth of the total budget, rather than tackling the long-term problem posed by the escalating costs of entitlements. The only people with the guts to talk about such things have been various independent commissions which the two parties have ignored.

Now that has changed. On April 5th Paul Ryan, the young chairman of the House Budget Committee, laid out a brave counter-proposal for next year’s budget and beyond (see article)—brave both in identifying the scope of the problem and in proposing the kind of deeply unpopular medicine that will be needed to cope with it. It is far from perfect; but it is the first sign of courage from someone with actual power over the budget.

Unlike Mr Obama, Mr Ryan puts fiscal responsibility at the centre of his plan: it aims to bring the budget into primary balance as early as 2015 and federal government spending down to below 20% of GDP in 2018. He also outlines a simplification of America’s mad tax code, bringing the top rate for both individuals and businesses down to 25% by eliminating loopholes. Above all, he aims at the core of the problem, the ever-rising cost of health care for the elderly.

At the moment, retirees in America are entitled to Medicare, an all-you-can-eat buffet of care provided by the private sector but paid for by government-run insurance. Under Mr Ryan’s scheme, future retirees would have to take out private insurance plans, helped by a government subsidy. The effect would be a bit like changing from a defined-benefit pension to a defined-contribution one. The savings come because the subsidy would not cover everything that is currently provided: people will either end up with less lavish care or have to pay more. Mr Ryan also wants to turn Medicaid, government-financed health care for the poor, over to the states in the form of “block grants”. This would force them to manage their budgets more responsibly than they have needed to when they have been able to send much of the tab to Washington.

Let the debate begin

There is plenty wrong with Mr Ryan’s plan. Too much of the gain goes to the rich, and too much of the pain is felt by the poor. Some of his figures are deeply suspect. Mr Ryan should not have ruled out any revenue gain from broadening the tax base. He says nothing substantive about Social Security. He would cancel Obamacare, which though flawed addresses one of America’s great problems. And there are practical difficulties: his proposals are far too radical to engender the sort of compromise needed in Washington. Even if the plan passes the Republican-controlled House (by no means certain), it will fail in the Democrat-controlled Senate.

Yet at least Mr Ryan accepts that the present system is unaffordable and destined to collapse. Everyone else, including Mr Obama, is pretending that it isn’t. Mr Ryan’s willingness to confront the scale of the problem has set a standard by which other proposals will now have to be judged. And there might even be political mileage in telling the truth. Two years ago, when Britain’s prime minister, Gordon Brown was unable to mention the word “cuts”, George Osborne, the Tories’ shadow chancellor, made a speech saying they were inevitable. It changed the political debate. Mr Brown’s protestations looked increasingly ridiculous. Mr Obama should take note.