All agree that reducing the United States’ current $14 trillion indebtedness is a critical national priority. The President’s plan would reduce the deficit by $4 trillion over 12 years, enough to stabilize the national debt so that it increases no faster than the economy. Rep. Ryan’s plan would have no perceptible impact on the federal deficit, since by his own estimation, his proposed $4.3 trillion in spending cuts are entirely offset by his proposed $4.2 trillion reduction in taxes.
Balanced Approach and Shared Sacrifice
President Obama follows the Bowles-Simpson deficit reduction commission’s recommendation that deficit reduction be 2 parts spending cuts to 1 part revenue increases. 50/50 would be a fairer balance, but there is at least the semblance of shared sacrifice as the wealthy are asked to give up their Bush era tax cuts when they expire next year.
Congressman Ryan’s budget has no balance or shared sacrifice. At least 2/3 of his recommended spending cuts are to programs for people of limited means, and he not only asks for no contribution from the wealthy but significantly enriches them by making the Bush tax cuts permanent, further weakening the estate tax, and lowering the top tax rate from 35 to 25%.
Distribution of Spending Cuts
The President would cut defense spending by $400 billion over 12 years and would also cut agricultural subsidies. Ryan’s budget does not cut in either of these areas, thus unfairly concentrating his proposed cuts on only limited parts of the budget.
Investing for the Future
While the President’s plan makes deep spending cuts in a number of areas, it also includes spending increases in areas he identifies as drivers of economic growth, including energy innovation, education, health care reform and infrastructure. Ryan’s budget makes no investments for the future.
The fundamental differences between the Ryan and Obama plans come into high relief when their recommendations for the publicly funded health care programs Medicare and Medicaid are compared.
Ryan’s health care plan includes no cost containment measures and would, according to the non-partisan Congressional Budget Office, substantially raise overall costs for Medicare beneficiaries. It lowers federal health care spending solely by shifting costs on to the states and the elderly, disabled and low-income people who participate in these programs. Ryan would cut Medicaid funding by $1.4 trillion over the next ten years; Illinois’s share of this cut would be $47 billion.
In addition, Ryan would “block grant” the Medicaid program, meaning the amount of federal funding the state receives each year would be fixed and would not be adequately adjusted for such cost drivers as medical cost inflation, growth in the population, and aging of the population. The impact of block granting Medicaid would be harshest during recessions, when federal funding would no longer automatically increase to assist more people who lose their jobs, income, and health insurance. This would not only increase hardship and destitution in recessions, but also would further weaken a slumping economy and lead to the loss of many more jobs. And it would deprive states of one of the most important forms of enhanced federal support during recessions, deepening state fiscal crises and crippling the ability of states to meet the greater needs of their citizens in recessions.
Ryan would also end the Medicare program, which provides guaranteed health care to all persons over 65. He would replace it with a voucher paid to private health insurance companies that would shrink in value over time, shifting more and more of the cost of health care onto the elderly.
Obama proposes to bring down the cost of coverage by bringing down the cost of health care itself, instead of just shifting the cost. He would build on the cost containment measures in the Affordable Care Act, producing $100 billion in savings over twelve years from actual cost reductions. There would be no cost shifting to the states or program participants. He would not block grant Medicaid nor would he end Medicare.
Rep. Ryan’s plan imposes over 2/3 of its spending cuts on the politically safest target, low-income people, while offsetting all spending savings with extremely large tax breaks for the wealthiest Americans, accomplishing no net deficit reduction at all. He asks for no sacrifice from his base, and he creates clear winners among the financial backers of his political party.
President Obama’s plan provides a balanced approach (albeit relying somewhat too much on spending cuts and not enough on revenue increases), shared sacrifice, and real deficit reduction without undermining the fundamental structure of our health care safety net programs. There will be significant pain among core elements of his base. The President leveled with the American people, making clear that the solution will not be achieved by magical elimination of “waste and abuse” or reduction of programs like foreign aid, but instead by austerity in basic programs and services that the vast majority of Americans want or need and a shared responsibility to produce needed revenue.
The Shriver Center acknowledges the Center on Budget and Policy Priorities analysis of the Ryan and Obama plans, on which this piece relies heavily.