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Romney-Ryan could stimulate contest of ideas

Aug. 13, 2012 - 19:42 By Yu Kun-ha
By choosing U.S. Representative Paul Ryan as his running mate, Mitt Romney has added some verve to what had been a tedious presidential contest.

Romney deserves credit for his audacity, to borrow a word from his opponent. The question is whether the Republican campaign’s newfound energy will be used more to obfuscate or illuminate. If the latter, voters might find that the two presidential candidates agree more than they would have you believe.

The debates over such phony issues as whether Romney or President Barack Obama has sent more jobs offshore will continue, of course. Now we have the potential at least for a true contest of ideas: What is the optimum size and role of government? What is the best way to reduce trillion-dollar annual deficits and $15 trillion in total debt? With a rapidly graying population and entitlements that eat up most of the federal budget, can Medicare’s growth be stopped without impoverishing senior citizens? Is it time to raise taxes, even on the middle class?

Ryan would cut taxes, shrink the government, semi-privatize Medicare and turn Medicaid, the health-care program for the poor, into block grants to states. Some of this agenda is radical. Once the details are understood, they may not sit well with seniors, independents or even some Republican voters. Nevertheless, the proper time to debate them is in a presidential campaign, not as part of a needless fight over the federal debt limit.

How, then, to size the tickets up? One way is through the candidates’ own words. Ryan calls the federal safety net a “hammock that lulls able-bodied people into lives of complacency and dependency.” Obama calls the safety net a “basic measure of security” against “hard times or bad luck, a crippling illness or a layoff” that could strike even hard- working people.

Yet between these apparently incompatible views of government, there is some surprising common ground. Both Obama and Ryan would attack red ink by moving broadly in the same direction, albeit at different speeds. Here’s a quick primer:

― Medicare: Ryan originally proposed phasing out Medicare in favor of vouchers, but in his 2013 budget proposal he offers seniors a choice between vouchers and the traditional program, attracting the support of at least one Democrat, Senator Ron Wyden of Oregon. Ryan’s idea, a so-called premium-support plan, would give seniors a fixed amount of money with which to buy private coverage. Competition among health insurers for seniors’ business will bring down costs, or so the theory goes.

Some analysts suggest that cost increases are coming under control already, but history shows that sharp increases always resume after an economic recovery. The Congressional Budget Office projects that Medicare will run out of money in nine years. Ryan would limit Medicare spending to the growth of the economy plus 0.5 percent more than inflation, the same cap as Obama’s. The CBO estimates that, by 2030, spending on the average Medicare beneficiary in the Ryan plan would be $7,400 (in 2011 dollars), 14 percent lower than current law.

Cost shifting? Yes. But it’s less than the Obama camp would have you believe.

― Domestic spending: Ryan would shield the Pentagon from significant cuts, and calls for dramatic reductions in food stamps and other programs for low-income Americans. The administration has expanded funding for Pell college tuition grants, while Ryan has sought reductions. He would reduce housing-assistance programs and farm subsidies. Overall, Ryan cuts nondefense spending, which accounts for 12 percent of the budget, too much and too quickly.

― Tax cuts: Obama would raise taxes on high-earners while Ryan would collapse the number of tax brackets to two from six, dropping the top rate to 25 percent from next year’s 39.6 percent and setting the other rate at just 10 percent. Corporate taxes would be cut to 25 percent from 35 percent under Ryan’s plan and to 28 percent by Obama. The 2001 and 2003 tax cuts under the George W. Bush administration would be extended by Ryan; Obama would continue them only on household earnings up to $250,000. Both would limit the ability of high-earners to take advantage of tax expenditures.

Altogether, Ryan would cut revenue by $4 trillion and spending by about $6 trillion over the next decade. Obama would cut spending and raise taxes by $4 trillion over 12 years, bumping tax revenue to 19.8 percent of GDP, up from 15 percent now. Revenue under Ryan’s plan would rise to 18.75 percent of the economy, less than Obama but more than the historical average of 18 percent.

These plans are not separated by a huge chasm. According to the CBO, the 2022 deficit under Obama’s fiscal 2013 budget proposal would be about 3 percent of GDP, down from about 8.1 percent this year. Ryan would bring the deficit to 1.25 percent of GDP by 2023.

Ryan’s plan falls short by not spelling out which tax breaks he would end, other than to say well-to-do Americans should bear the brunt. As the Tax Policy Center has pointed out, the math would seem to dictate major cuts in most popular tax expenditures, including deductions for mortgage interest and company-paid health insurance. The center also says plans such as Ryan’s (and Romney’s) would ultimately leave all but the richest taxpayers worse off.

― Health care reform: Obama, through his health care reform law, establishes state-based exchanges for insurance plans that compete for the business of individuals and small- business owners, some of whom get a premium subsidy. Ryan would seek to repeal the Affordable Care Act, but establish exchanges in which health plans compete for the business of Medicare- eligible seniors, who would get a premium subsidy. It wouldn’t be a stretch to combine the two approaches by establishing competitive exchanges under which health plans market themselves to one and all, with the government setting minimum coverage standards and offering subsidies to the poor, disabled and elderly.

Already, the airwaves are filling with negative ads about the Romney-Ryan ticket, and you can be sure the response will be swift and low. Is it too much to hope that negative ads won’t define the remaining 80-plus days of this campaign? Probably. No single candidate, even one as earnest and wonky as Paul Ryan, can singlehandedly raise the level of political debate in the U.S. But if voters ― or, going out on a limb here, the presidential candidates themselves ― ever tire of pointless politics, both tickets now offer plenty of substance over which to disagree.

(Bloomberg)