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Three Things to Know About Paul Ryan’s New Budget

Paul RyanThe Wisconsin representative’s plan is filled with distortions and half-truths. Here are a few things to look out for.

1. Premium support will not lower costs for the health system or ordinary Americans:

2. Medicaid block grants are a fancy way of cutting spending for the program:

3. Tax cuts aren’t magic:



Later this morning, House Budget Chairman Paul Ryan will unveil his latest budget plan, “The Path to Prosperity.” Like the “Roadmap” released last year—and passed by House Republicans—the Path to Prosperity fits neatly within Ryan’s self-described Randian ideology: It would slash social and entitlement spending and direct the savings to lower taxes on rich people and corporations. Despite this, as Matthew Yglesias points out, Ryan has a habit of portraying his policies as somehow beneficial to the broad majority of Americans. I plan to be in the audience for Ryan’s unveiling, but in the meantime, here are a few things to remember and look out for as Ryan tries to sell his program to the public.

1. Premium support will not lower costs for the health system or ordinary Americans: Ryan’s plan for Medicare vouchers came under fire last year and contributed to the unpopularity of House Republicans. This time around, Ryan has replaced vouchers with “premium support,” a plan in which seniors would buy private insurance plans with direct support from the federal government. But as Paul van de Water at the Center on Budget and Policy Priorities explains, the effect of this would be exactly the same:

The Ryan-Wyden plan would shift substantial costs to Medicare beneficiaries rather than protect them from cost increases, in part because the payment that beneficiaries would receive to help them buy coverage would likely fail to keep pace with health care costs. The plan also would likely lead to the gradual demise of traditional Medicare by making the pool of Medicare beneficiaries smaller, older, and sicker — and increasingly costly to cover. […]

This gets to a more important fact: Medicare has been remarkably successful at holding down growth in health-care costs, and Medicare will not run out of money in the next few decades. The program needs changes, but it doesn’t need to be dismantled.

2. Medicaid block grants are a fancy way of cutting spending for the program: In his budget, Ryan proposes “converting the federal share of Medicaid spending into a block grant that gives states the flexibility to tailor their Medicaid programs to the specific needs of their residents.” As Yglesias points out, this is just a pleasant way of describing cuts to the program, which provides health care for children, the poor, and the elderly:

Because health care is proejcted to grow more expensive over the next fifty years, the cost of this program is projected to go up substantially. One way of preventing that from happening is to just refuse to pony up the money, and make Medicaid beneficiaries get by with less health care. And that’s what Ryan’s plan does. On the one hand, it excuses states from their minimum coverage responsibilities. On the other hand, it reduces the amount of money that’s available to give people coverage.

3. Tax cuts aren’t magic: In the “Path to Prosperity,” Ryan makes fantastical claims of what his budget would do if passed:

Creates nearly 1 million new private-sector jobs next year, brings the unemployment rate down to 4 percent by 2015, and results in 2.5 million additional private-sector jobs in the last year of the decade. Spurs economic growth, increasing real GDP by $1.5 trillion over the decade. Unleashes prosperity and economic security, yielding $1.1 trillion in higher wages and an average $1,000 per year in higher income for each family.

Ignoring, for a moment, that we’re on track to create 1 million jobs by the summer—under the supposedly “job-killing” Obama administration—there’s simply no proof for any of these claims in Ryan’s budget. At most, he relies on a “dynamic scoring” analysis from the Heritage Foundation. But as economist Jason Furman explained for the CBPP more than five years ago, dynamic scoring is imprecise at best. Put another way, anyone can make their policies look amazing if they assume the best possible conditions and the best possible reactions.

Which is to say that, for all of his posturing, Ryan’s budget contains little in the way of realtalk about our fiscal future.