Another
stellar posting, Madame, that leaves little for me to contribute. Heed her words well, readers!
Just
as I said I would examine Ferguson’s article, and did, I said I would also look
at “the Ryan Plan,” and I have. My
analysis follows:
First,
there are problems because he—or rather, his office—submitted to the
Congressional Budget Office for analysis a plan that was focused primarily on
Medicare and Medicaid. Yet he and his
office later “augmented” it (conveniently AFTER the CBO had submitted its
analysis) with parts about other areas.
That
Ryan didn’t know the specifics of his own plan when asked a softball question
about it from Britt Hume of Fox News shows that he didn’t really design it—his staff
or some think tank did. Still, it’s not
like he shouldn’t have been up on the basics, especially as those basics are
easy to find, especially when the CBO did all the hard work for him.
In
summary, his plan shifts costs to individuals (for Medicare) and the states
(for Medicaid), with some initial help (but effectively decreasing help) from
the federal government to do so. While
the method may be disputed, one can agree with Ryan at the imperative of attempting
to control the fiscal monster of Medicare (and to an extent, Medicaid) spending. The elderly consume the vast lion’s share of
health costs. The reason is similar to
cars: the older a car is, the more its maintenance and repair and parts
replacement costs go up. That Americans
have taken particularly poor care of their health only makes things
dramatically fiscally worse, and adding an unpaid for prescription drug benefit
has only intensified that (the reader can assess who benefitted from that). That the great baby boom wave is becoming
elderly further sends costs off the scale.
Medicare
is “funded” by 1.45% tax on workers, matched by a 1.45% contribution from their
employers, plus a small premium on the actual recipients (taken out of Social
Security benefits). It’s all not anywhere
nearly enough. Present deficits run in
the hundreds of billions of dollars annually.
Unlike
Social Security, which is at most only moderately underfunded, Medicare is
already dramatically underfunded, and Medicaid has no separate revenue stream
at all. One part of Ryan’s proposal—the only
thing real about his “Plan”—is a shock to a system that doesn’t want to face
certain realities. One of those
realities is that you can’t have both guns and grandma’s bread and butter.
Democrats
don’t face it squarely. Republicans address
it deceptively. It’s nauseating to
watch. At least the Affordable Care Act
(ACA) does slow the growth of the monster, although one can sympathize with the
many providers who get the short end of the stick from the restrictions of
costs (although on another angle, generally, the insurance companies don’t need
our sympathy for how the ACA restricts what they can charge, given their
colossal profits). For all his MANY
faults, Barack Obama deserves credit for trying to do something, although the
result was far less than what was needed.
The Ryan
proposal makes no changes in Social Security.
On
to some relevant specifics of the plan:
Age
for Medicare goes up to 67. Voucher
payments become what one gets, instead of direct payment for care received. Critics are correct that this means the present
simplified system will become complex, and a burden to the elderly, especially
when they must shop in the marketplace to get insurance that they hope their
voucher will cover. If they have past
history or pre-existing conditions, this could prove problematic. It would prove impossible if ACA is
repealed. Furthermore, effective control
goes to the insurance companies; heretofore, not the best idea, but in
fairness, there’s also been a lot of waste and fraud in Medicare too.
Seniors
would pay more for health care, regardless.
Premium assistance from the government would not keep up.
Higher
income folks receive would receive less in voucher amounts. Not a bad idea that.
Medicaid
becomes block grants.
The
Ryan Plan has some hidden provisions.
For instance, the present health insurance mandate would be repealed, as
would the tax credits for small employers that offer health insurance. This is indirect partial dissolution of ACA.
Medical
savings accounts are established in 2022 for poverty level citizens.
Ryan’s
proposal does give more certainty about Medicare and Medicaid payments, which
could balloon wildly under the present system.
Up to this point, one could have policy differences, and things could be
discussed reasonably. From here,
however, the Ryan “Plan” is no plan at all—it is worse than smoke and
mirrors. It’s fantastical, delusional,
deceptive.
Discretionary
spending, both defense and non-defense, are projected to go down, but no measures
are proposed. Revenues are projected to
go up, with also no measures proposed.
This is magical thinking of the worst order. I agree with Paul Krugman. Most of this is not a plan. It is a political game. More manipulation.
Both
mandatory and discretionary government spending are just assumed by the Plan to
decline to half their present GDP levels by 2022. Revenues had a similar sort of projection,
from 15 percent of GDP to 19 percent of GDP by 2028. CBO had an often repeated phrase in their
analysis for this kind of utter fantasy:
“No proposals were specified that would generate that path.”
Most
of the so-called deficit shrinking of the Ryan Plan comes from some magical
reduction in defense and domestic spending, which together are supposed to (by
magic!) shrink to 3.5 percent of GDP.
Defense right now hovers around 4 percent of GDP just by itself. And as you’ll see below, this becomes even
more absurdly deceptive when Ryan calls for at least initially INCREASING
Defense spending.
Any
deficit shrinking even under this magic depends on what assumptions are made,
and what scenarios. For the first 15
years or so, the proposals actually increase the size of the deficit. Projected reversals of this come from
assertions (not even assumptions) untied to any reality, plus unspecified “broadening
of the base.” Surpluses, small ones at
first, don’t start showing up until 2040—several generations in American
politics. How convenient. And it’s all fantasy anyway. The government is underfunded by the 2001 and
2003 tax cuts first and foremost, yet those are not addressed in any fashion.
AFTER
the CBO did the analysis, the Ryan camp added provisions for cutting taxes on
corporations and the wealthy, and also provisions to INCREASE Defense. Ryan also has drastic cuts in spending for
infrastructure and education, not to mention the safety net of medical care and
food assistance for poor and for children.
How deceptive. These added
provisions make an already fantastical mirage become one with a Trojan
Horse. It’s almost like it’s designed to
deflect first, confuse second, then award plutocrats and defense contractors,
and finally make the government pathetically weak. It comes across as a Randian long-range plot
to collapse government fiscally and force the country to accept a system with
nearly no government at all.
Some
samples of what the CBO said of how things could and/or would progress: A
growing portion of people’s savings would go to purchase government debt rather
than toward investments in productive capital goods such as factories and
computers; that “crowding out” of investment would lead to lower output and
incomes than would otherwise be the case.
Ferguson
in his article I reviewed last week says that Paul Ryan is “truly sincere”
about addressing the fiscal crisis the country is in. The reader can look at what I have detailed
above and see if they agree with that.
Ferguson
says, incredibly, that there is “literally no one in Washington who understands
the challenges of fiscal reform better” than Paul Ryan. If that’s the case, it’s time to bid sayonara
to America’s days as a Great Power.
Ferguson
does not acknowledge—appears not to know, although that seems impossible—who really
has power in this country. For whatever
reasons, he keeps couching things in terms of only Democrats or Republicans.
11 comments:
Hello JC! Thank you for your inputs!
I looked at the “Ryan Plan” (which should be more accurately called the “Ryan Plans,” as things have undergone continual changes, and not just because of being married up into a “Romney-Ryan Plan”) in detail. The one with the most to it is the one concerning Medicare and Medicare. Is it accurate to say it “takes” money away from the elderly? Consider the following and decide for yourself. For those under 55, it would change Medicare to a voucher system, and for many seniors who now enjoy (probably unrealistically and unsustainably) low-cost health care, their out of pocket expenses would increase for most, and for some, would go up considerably. Unlike earlier versions, the very latest Ryan (well, actually Romney-Ryan) Plan offers traditional Medicare as one of the insurance options, not just insurance company plans, and proscribes coverage options for all seniors. Even though Medicare has at present administrative cost and other advantages, those would likely disappear under the latest proposal, and changes would come to the program, as it could not hold in its present form even with the subsidies and offsets inside the new Plan.
There ARE Trust Funds for both Social Security and Medicare (well, Part A at least), but they exist only as inter-governmental obligations (sort of special Treasury bonds). Meaning, that we the people, along with our politicians, haven’t wanted to face hard realities for a long time. Which is why any actual funds that were supposed to go into those Trust Funds from yearly surpluses in each of those programs were instead spent during each year to help mask the true size of the deficit in the overall federal budget.
There is no fund for Medicaid (health insurance for the poor, including the poor elderly), so all of it becomes a yearly expense item of the overall federal budget. It is also, along with much other aid to the states, an item planned to be reduced dramatically in the Ryan Plan.
Medicare runs a big deficit right now, and is depleting (on the books) all of its Trust Fund money very rapidly. Social Security, assuming this payroll tax deduction (which has been hurting the situation) is not renewed, will go back to being mildly to moderately underfunded. Its Trust Fund has quite a ways to go to depletion.
The Ryan Plan concept, aside from a late stage (2022) medical savings account for the poor elderly, and possibly a Medicare C-like option for a general medical savings account, is only MILDLY similar, except perhaps in principle, to IRA/Roth IRA/401-K plans. 401-Ks were pitched to American workers as a way to “save uncompetitive pension costs,” “avoid losing your pension through fraud because you don’t control it,” and “give you control over what becomes your actual property (money), including what the company will match.” The first point was half a lie, the second point almost all a lie on both ends of the spectrum, and the third point a clever deception, as workers weren’t going to be paid enough to save enough and it would end up benefitting management the most, who had the most to save and would get the most to match. It also became a way for employers and management to avoid any responsibility to their workers’ futures. Finally, and perhaps most tellingly, it became another way for Wall Street to both profit and manipulate, preying on the powerlessness and ignorance of individuals.
Seniors still likely have to buy insurance with the Ryan Plan (if they can, both financially and coverage wise). The Ryan Plan, while it—as I said in my analysis—at least opens a discussion on a real problem (spiraling health costs), it does shift costs and responsibility to the elderly (vouchers will NOT keep up with costs, except—MAYBE—for the healthiest seniors in the healthiest insurance pools). One of the reasons is that—unlike Congress, which ties its own healthcare plan to the healthcare index—the Ryan Plan effectively ties the voucher payments to the general cost index, which is far lower. Maybe shifting costs and responsibility to seniors needs to happen because financially there’s no other way, but people should make that decision with all the facts, not deceptive misrepresentations. Aside from medical savings accounts for the poor elderly, most elderly will have only vouchers to buy insurance, and those vouchers will not keep up with costs. Health Savings Accounts, which already exist as a possibility for everyone, are still too restrictive, have negative revenue impact, and are in reality only fundable to a meaningful extent by the well-off anyway. Perhaps an emphasis on those IS what is needed for financial sustainability, but shoving it out as solution, in this bleak fiscal environment for the lower and middle classes, is just setting people adrift to drown.
Comparing the Ryan Plan’s effects on Medicare with the ACA’s effects on Medicare is problematic. The highly respected Annenberg Center had this to say: “We don’t see conclusive evidence that Ryan’s market-based approach will work either better or worse than Obama’s regulation-based system, or that either will work at all.”
This is key. Too much is unknown. There is paralysis of analysis, because there are too many variables, and too much lead time, to project with any meaningful reliability, and, perhaps most tellingly, the multiple directions even ONE variable could go would change the parameters for all sorts of other variables that have various levels of determinant just from the one variable!
Costs of health care are increasing much faster than prices for most everything else. Tying premium payments to the general prices index or even to GDP would mean either cuts or forcing seniors to pay more each year. This is of course the opposite of Congress’ own health care plan, which is tied to the health care cost index, not the general prices index (I know, you’re shocked they would give themselves a better deal than their supposed constituents!)
It’s helpful to know the differences and funding streams (or lack thereof) of all four parts (A-D) of Medicare, because NOT knowing those allows one to be confused or misled by the claims made by both sides in this campaign. Since this is a potentially VERY long explanation, I will leave it for another time.
Ryan’s latest “Path to Prosperity” proposal (to be fair, it includes more ideas than just his staff’s) makes more sweeping assertions, with no foundation whatsoever, that bring the budget to supposedly balance faster (by magic!) while cutting taxes and increasing defense spending. It is as deluded, just more grandly, than its initial predecessor.
Even when we know intellectually that it is an institution—Congress—that makes and sets fiscal policy for the most part, it is faceless to us except for our own Congress men and women, who we generally think are doing a great job while “all the others are terrible.” :) We therefore hold a single individual—the President—“responsible” for things which are sometimes outside much control. I’m always amused that so much ability to economically influence positively is ascribed to the president. As I said in my blog post, presidents can influence negatively, but without good cooperation from Congress, the Fed, and the G-20, influencing positively (or rather the CHANCE to influence positively) is small.
I’m not very impressed by D’Souza’s past work, and this one doesn’t impress me either.
When a government runs a deficit, you have to look at two cause sets: revenues and expenditures. The most directly attributable are revenues, which are either there or they aren’t. So, ignoring the Bush and previous presidents’ deficits and analyzing only the deficits of the Obama years:
From 33-40% of that debt increase is due to the 2001 and 2003 Bush tax cuts that set deficit patterns into place. Patterns that only worsen each year as more interest must be paid on the previously accumulated deficits which add up on the total national debt.
Another 10-25% of the debt is from the effects of the lingering deep recession, which we only technically came out of in 2009. The pattern of anemic job growth, and the continued poor standing of the middle class (and corresponding lack of consumer demand), mean that revenues are down and costs (unemployment and other aid, etc.) up. Much of this is structural, as Reagan’s budget director David Stockman has told us recently. That structural change has sinister implications.
Then we come to the harder portion, expenditures. Since many expenditures are continual, rather than one time, and go up naturally over time, it is more difficult to ascribe causation, or even to attribute properly. This is why political foes can scream at each other and say some specified spending “caused” the deficit. To avoid this partisan trap, one must therefore look at increases which appear to be out of the ordinary. Doing so gives us the following:
“Off-line” (budget) Wars (“supplemental” appropriations) and defense spending accumulated increases and their indirect effects on other spending (veterans, for example): 11-23%; bailouts of banks and corporations, 2-10%; Medicare and Medicaid and Social Security deficits: 7-20%; Stimulus spending in attempting to address lingering recession: 12-28%.
As always, the ranges come from different assumptions, and effects on different variables, as well different calculated effects on different dependent variables. Medicare and Medicaid, as was discussed previously, have been getting a lot of attention because of their continuingly increasing costs, which would only drive the deficit further into the red.
Most of the pattern, with the possible exception of the stimulus, is beyond Obama’s administration in nature, and has become part of our structural dysfunction. It can have the effects that D’Souza and your professor describes, but ascribing it to Obama is misleading. It is part and parcel of our collective delusion about MANY things, as well as our choices (historically high “defense” spending for example). WE are responsible, not one individual, and especially not a pragmatic moderate like Obama, who is more symptom of our troubles than cause. In typical psychological fashion, we ascribe all our failings to him—and then expect him to impossibly “fix” what we have broken and continue to break.
I refer all readers back to the book Empire of Illusion for how and why this is so.
Post a Comment