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Dean Baker

Dean Baker is co-director of the Center for Economic and Policy Research

April 18th, 2011 2:52 PM

Representative Ryan Puts the Republicans on the Record

For years people have accused the Republican Party of being the servants of the rich and powerful at the expense of the broader public. In the past, they would deny this charge and claim that they just had a different view of how the economy works.

Republican House Budget Committee Chairman Paul Ryan sought to eliminate any confusion on this point. He proposed, and last week the Republican House approved, a budget bill that will transfer tens of trillions (yes, that is "trillions" with a "T") of dollars from ordinary working people to the insurance industry, the pharmaceutical industry and generic rich people from any industry. This money will come in the form of higher payments by seniors in their old age for health insurance and another round of tax breaks for the country's richest people.

The Medicare story is the bigger transfer here. Representative Ryan wants to replace the current Medicare system with a voucher system. The size of the voucher in Ryan's plan is held even with the overall rate of inflation. This means that it will not rise at anywhere near the rate of projected health care cost growth. As a result, a greater portion of the cost of health care will be shifted from the government to retirees.

However, this is the less important part of the story. The main reason that retiree health care costs will increase is that the private sector is less efficient at delivering care than the existing Medicare program. The Congressional Budget Office (CBO) projects that, under the Ryan plan, the increase in the cost of buying Medicare equivalent policies would be more than $30 trillion over Medicare's planning horizon.

This additional waste comes to almost $100,000 for every man, woman, and child in the country. It is approximately equal to six times the size of the projected Social Security shortfall. This waste is a direct transfer from retirees to the insurance industry and the health care industry.

This is not the only way that Representative Ryan and the Republicans dip into the pockets of ordinary workers for the benefit of the obscenely rich. He also wants to give an additional $2.9 trillion in tax breaks to the wealthy over the next decade. These tax breaks would be paid for with cuts to Medicaid, Food Stamps and other programs that middle-income and poor people depend upon.

The tax breaks would be real money for the people who get them. For example, Representative Ryan's tax breaks could give Lloyd Blankfein, the CEO of Goldman Sachs, another $3 million a year based on his $20 million annual paycheck. That's the equivalent of more than 2,600 monthly Social Security checks.

Representative Ryan and the Republicans in Congress are likely to justify their budget by saying that they believe that their health care plan will hold down costs and their tax cuts will spur economic growth. While we can never know what politicians believe, we do know that these are not plausible stories.

We have already tested expanding the role of private insurers in the Medicare system. We did this in the 90s when the Gingrich Congress pushed through their Medicare Plus Choice plan. We did it again more recently with the Medicare Advantage program that was promoted by President Bush. These plans did not lower costs; they raised them. That is the basis for the non-partisan CBO's projections that the Ryan plan will raise costs.

Similarly, Representative Ryan and the Republicans claim that tax cuts for the wealthy will spur growth. We have also twice tested this one. The first time was when President Reagan gave us big tax breaks beginning in 1981. The 80s were the worst decade of growth since the Great Depression, prior to the 00s, when President Bush tested his tax cuts for the wealthy. Certainly the economy's bad performance during these decades cannot be blamed solely on the tax breaks for the wealthy, but it is a bit hard to maintain tax cuts to the wealthy gave a big boost to growth in these years.

While Representative Ryan and the Republicans may actually believe that giving private insurers more control over health care lowers costs and that cutting taxes for the rich increases growth, who cares? These people may believe that the moon is made of green cheese, but this does not make the green cheese theory true or even plausible.

We have extensively tested both parts of the Ryan transfer program to the wealthy, and they don't work as he claims. They redistribute money to the rich: end of story. Thanks to Representative Ryan we have the Republican Party on record as supporting these massive transfers to the wealthy. We just have to hope that the Democratic Party takes a different position.

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