WASHINGTON -- The Concord Coalition today commended House Budget Committee Chairman Paul Ryan (R-WI) for putting forward a serious proposal to reduce projected deficits by more than $1.6 trillion over the coming decade. Concord cautioned, however, that the proposal’s policy mix is unlikely to attract bipartisan support and is best viewed as a marker for future negotiations with the Senate and the Obama administration.
“The deficit reduction goal of Chairman Ryan’s proposal fits the magnitude of the fiscal challenge we face,” said Robert L. Bixby, Concord’s executive director. “He does not pretend that we can address this challenge with discretionary spending cuts alone. By including major savings from entitlement programs, primarily Medicare and Medicaid, he has grabbed the ‘third rail’ of politics and clearly identified the main source of projected federal program growth. By acknowledging the fact that we spend money through the tax code, and recognizing how crucial it will be to close loopholes and broaden the revenue base, this budget plan takes an important step towards sensible tax policy.”
The Ryan proposal would reduce outlays, revenues and deficits compared to either the President’s budget or the Congressional Budget Office (CBO) baseline. However, even with dramatic savings from spending cuts, debt held by the public (67.5 percent of GDP) would remain higher than it is today (62 percent of GDP). This level is also higher than recommended by many bipartisan deficit reduction proposals, including the President’s fiscal commission and the Rivlin-Domenici task force.
“By declining to use any of the savings from base-broadening tax policy to help reduce the deficit, Ryan’s proposal fails to take full advantage of an important reform strategy and misses a key opportunity to forge bipartisan consensus,” Bixby said.
With respect to discretionary spending, the proposal leaves defense spending largely untouched and assumes a disproportionately large share of cuts from non-defense discretionary spending that would be enforced using statutory caps. Achieving these savings will require a commitment to fiscal discipline that has rarely occurred in the annual appropriations process.
The Medicare and Medicaid reforms follow models that have been proposed by numerous bipartisan fiscal commissions and policy experts over many decades. These reforms -- block grants for Medicaid and premium support for Medicare -- are aimed at controlling federal spending on health care by placing limitations on what the government contributes to those programs.
A key challenge for such plans is determining a level of contribution that is both sufficient and sustainable. In that regard, concerns expressed about Ryan’s health care proposals are similar to concerns about the recent health care reform law -- are the cuts in Medicare and Medicaid sustainable for patients, providers and state governments?
“While setting spending targets for federal health care programs provides an incentive for efficiency, and increasing out-of-pocket costs for some beneficiaries provides an incentive for economizing, we will still need cost controls, delivery system reforms, and research on best practices, to have any chance of reaching those targets,” said Concord Coalition Policy Director Josh Gordon.
While the budget plan mentions the need to reform Social Security, it does not include any specific proposals to do so.
“The Social Security trigger proposal in this budget plan is simply another task-avoidance device,” Bixby said. “Once again, hard choices are put off. This is disappointing because the reform options are actually much clearer for Social Security than they are for Medicare and Medicaid. Moreover, the size of the problem is not as great.”