The GOP Goes The Full Ryan

Apr 16 2011 @ 3:29pm

There are two possible responses to the news that the House has put its votes on the line and endorsed the Ryan plan for the budget. It behooves me to note that I doubted they would ever get  this specific, given their refusal to raise any of these specifics in the election campaign. You can gloat that the GOP has committed political suicide by essentially ending Medicare and Medicaid as   we know them, but that is not a substantive response. They deserve political props for nailing this proposal to the door of the White House.

GT_PAULRYAN_04162011But the substantive criticism is still salient. It is that simply shifting Medicare to private insurance plans with subsidies that will mean progressively less and less healthcare for seniors does not really bring down healthcare costs – just shifts their responsibility away from the federal government. The likelihood that the insurance companies will actually want this new more vulnerable population without at some point, begging the government to provide more resources is … well, slim. But since the GOP proposal is simply indifferent to whether people have healthcare or not (they effectively withdraw coverage for all those covered by the ACA), this is a feature, not a bug.

The much bigger problem with the GOP plan is its view of taxes. Even though we have historically low income tax rates for high-earning individuals, even though revenues have collapsed in the recession, even though we have empirically discovered that big tax cuts have not generated more economic growth, the GOP still insists on reforming taxes not to raise revenue but to reduce it. This is where the whole thing gets surreal. The very Laffer untruth that sank America into debt in the early 1990s s one still being peddled against all the relevant evidence to guide us through the next few decades. In my view, if we maintain that ideological fantasy, the US will become a banana republic in short order.

Bruce Bartlett explains:

[R]evenues were 20.6 percent of GDP in 2000 and 18.5 percent of GDP in 2007, at the peak of the business cycle before the recession reduced them to 14.9 percent of GDP, where they have been for the last two years. (The postwar average is about 18.5 percent of GDP.) Without the Bush tax cuts – and those added by Obama – revenues would likely be more like 17.5 percent of GDP, which is where they were at the trough of the last three recessions.

If revenues had been 2 percent of GDP higher over the last 10 years, the federal debt would be about $2.5 trillion smaller. Instead of having a debt of about 60 percent of GDP last year, it would have been about 44 percent. And that doesn’t take into account all the interest that would have been saved that now adds about $60 billion to the deficit annually. Together, higher revenues and lower interest spending would have reduced last year’s deficit by one-third.

One third.