We’re hearing a lot of scaaaaaaaary things about Paul Ryan’s budget proposal. Taxes will go through the roof on the poor! Budgets will get slashed to Calvin Coolidge levels! Federal spending on wheelchairs will go up — only so we can push grandmas off of cliffs more efficiently!
Does any of this even approach reality? Investors Business Daily does what no other media outlet can apparently do, and actually reads Ryan’s budget plan, which is so super-secret that it’s part of the Congressional Record. (I hear that one can find the Lost Ark and the Charm of Making there, too.) Is the Ryan budget plan for long-term structural reform of federal spending and entitlement programs radical? Hardly:
His proposed spending and revenue levels are above historic averages. His Medicare reform has strong bipartisan support. His tax reform plan is similar to one proposed by Obama’s own bipartisan debt reduction commission.
Ryan’s budget, which passed the House last March, would set the federal government on course to spend an average of 20% of GDP over the next decade. That’s slightly higher than the post-World War II average of 19.8%.
His tax plan would produce revenues averaging 18.3% of GDP. That, too, is somewhat higher than the 17.7% post-war average. What’s more, Ryan’s plan would set tax and spending rates higher than every Democratic president before Obama.
IBD includes this handy chart to measure Ryan’s spending and revenue plans against post-WWII historic averages:
The chart explains why some conservatives don’t particularly like Ryan’s approach. It’s too moderate. In their view, it takes too long to bring the federal budget into balance (more than two decades), and it still spends too much money. Fiscal conservatives would prefer to see an 18% limit on federal spending, or perhaps even lower, as Congress eliminates entire departments of the federal government and devolves responsibility for their work to the states.
On the other hand, Ryan’s budget actually works, and it plays in the arena of the possible, at least in today’s political and media climate. One only needs to look at the hysterical reaction to Ryan’s plan to return to what had been the pre-2000 norm of spending and revenue to understand just how difficult it has been to even getthis common-sense plan passed through a Republican-controlled House.
How does that compare to the Obama plan? IBD has that answer, too:
His last budget, issued in February, would set federal spending over the next decade at 22.5% of GDP, on average, according to the Congressional Budget Office.
For context, federal spending reached or exceeded that level in only seven years out of the past 65 — and three of those were under Obama.
And Obama wants federal revenues to average 19.4% of GDP. That’s higher than all but six of the past 65 years.
What about Medicare? Ryan wants to kill Medicare and toss Grandma to the tender mercies of — quelle horreur — insurance companies! Er, not really:
But under his plan, Medicare spending in the near term would track levels set by Obama. Unlike Obama, however, Ryan wouldn’t use any of those near-term savings to finance ObamaCare, but would direct all that to extending the Medicare Trust Fund.
And starting in 2023, Ryan would offer retirees — who are today 55 or younger — the ability to choose from a range of private insurance options, as well as traditional Medicare, with the government providing a fixed level of premium support.
The thinking is that this will unleash competitive insurance market forces, keeping costs down, while providing greater control over federal spending. But Ryan’s plan would let Medicare spending continue to climb over the long term, just not as fast as projected under current law.
So, if Ryan’s plan for budget reform is so terrible, the Obama administration must have an alternative, right? Right?
Elections are choices. This one’s really not to difficult to make.
Also, be sure to check out Ramirez’ terrific collection of his works: Everyone Has the Right to My Opinion, which covers the entire breadth of Ramirez’ career, and it gives fascinating look at political history. Read my review here, and watch my interviews with Ramirez here and here. And don’t forget to check out the entire Investors.com site, which has now incorporated all of the former IBD Editorials, while individual investors still exist.
And a heads-up — Ramirez will have a new book out soon. We’ll have more on that later this summer.