Republican Budget Proposals Will Cut $4 Trillion on Path to Prosperity

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April 4, 2011; Source: Wall Street Journal | Congressman Paul Ryan (R-WI) is the GOP’s House intellectual when it comes to fiscal matters. On behalf of his Republican colleagues, he is releasing a budget alternative to President Obama’s FY2012 proposals – even though the nation still doesn’t actually have an approved FY2011 budget as the two parties play government shut-down brinksmanship. His proposal is titled, “Path to Prosperity,” oddly reminiscent of his FY2009 proposal called “Path to American Prosperity” (PDF).

Ryan is nothing if not consistent.

Ryan’s new Path looks a lot like the old Path. In 2009, he proposed cutting federal spending by $4.8 trillion over 10 years. The new Path aims at only $4 trillion, perhaps reflecting the deep cuts that have already been made to federal programs. The difference is the plan to transform Medicare and Medicaid. Medicare would basically be replaced by a “premium support system” for the elderly. This conversion would apply to people who are currently younger than 55, meaning that people 55 or older would still be able to participate in Medicare as it currently exists.

The new program would offer retirees an array of private insurance plans. The federal government would pay the first $15,000 in premiums, a sum that would rise for poorer seniors or seniors in poor health, the savings realized in what the government won’t pay for over $15,000. Ryan crafted this with longtime Democratic budget expert Alice Rivlin, but heading into the 2012 election, Republicans don’t anticipate a lot of crossover Democratic support for the idea.

Medicaid would also end somewhere along Ryan’s Path, converted into a “series of block grants to give states more flexibility” and save the federal government money. Ryan has some unspecified plans in his Path for Social Security, but the news reports in advance of the official release don’t clarify.

What is clear is that Ryan’s alternative budget matches the objectives of its namesake in 2009, aiming to reduce federal spending to about 20 percent of GDP. To do that, the Path has to include massive cuts in social programs unless Ryan and his GOP colleagues take the unprecedented step of slashing defense spending.

Where does Paul Ryan’s Path lead? Maybe some macroeconomists will find that Ryan’s cuts will lead to some sort of prosperity, but it is difficult to imagine that the prosperity will be equally shared by the poor and the middle class.—Rick Cohen