Ryan's revolution

By Patrick Garry

There are three incontrovertible facts concerning the federal budget and the government health care entitlement programs. First, each is in a crisis state. Neither the budget deficit nor the current spending levels of Medicare and Medicaid are sustainable. With national debt as a percentage of gross domestic product rising under President Obama's budget to above 90 percent, America is on a straight track to the kind of debt crisis experienced by Greece, Ireland and Portugal,.

The second fact we know is that Representative Paul Ryan's recent budget proposal has been, until just this past week, the only long-term plan for dealing with the budget deficit and the Medicare/Medicaid crises. Indeed, the last-minute drama over a government shutdown last week occurred because Congress failed to pass a budget last year and has since relied on temporary measures to keep the government funded.

The final fact on which everyone should agree is the need for economic growth in the United States. This was the lesson taught by President Reagan: that only economic growth could bring America out of the stagflation doldrums of the 1970s. Indeed, with increasing competition from countries like China, India and Brazil, the United States must continue to grow economically if it is to avoid a long-term competitive decline in the global arena. And it can only grow if it is cut loose from the shackles of debt.

Given the obvious reluctance of the President or the Democratic Senate to get involved in offering any fundamental solution to the budget deficit and the Medicare/Medicaid crises, Mr. Ryan's plan is all the more bold and courageous. It is the most serious attempt to reform government in at least a generation, outlining a specific plan to address the roots of the federal government's fiscal disorder.

With respect to the Medicare crisis, Mr. Ryan's budget proposal unmasks the falsity of Democratic arguments that Medicare reforms are simply 'privatization' efforts that will destroy or undermine the current entitlement benefits. The truth is that to do nothing, to continue the program as it is, will simply drive Medicare into an irreparable insolvency, thereby depriving all seniors of any benefits. The debt crisis to which the federal budget is heading will bring escalating interest rates and financial chaos, which in turn will require draconian cuts in all government programs, including Social Security and Medicare. This looming debt crisis further highlights the recklessness of the creation of yet more debt-escalating entitlement programs through ObamaCare.

Representative Ryan's plan calls for a $6.2 trillion reduction in spending over the next ten years, bringing federal spending back to a level of 20 percent of gross domestic product — a figure consistent with the post-war average. As for Medicare, people who retire after 2021 will be able to choose the best-suited private insurance plan from a menu of government-supervised and guaranteed private insurance options. The premium costs for these plans would be subsidized by a government contribution approximately equal to what the government now pays for each Medicare beneficiary.

This new "premium-support" program would resemble the kind of health care program that members of Congress currently enjoy. It would give individuals greater choice in their health care, while providing additional help to the poor and those with greater health risks. Lower income and sicker beneficiaries would get larger subsidies than healthier, wealthier people.

Under the existing system, the government is not only the largest buyer of health care in America, but also the most inept. It sets arbitrary prices for medical services, then pays these prices to just about any doctor or hospital delivering those services, regardless of the quality of the services. Health care providers who try to deliver services at lower costs are not rewarded for their efforts. This is why Medicare spending is increasing more than 7 percent a year and will double over the next decade.

The Ryan plan helps people afford private coverage, enabling them to choose and direct their own health care. It actually strengthens the safety net for the poor and sick by ensuring the survival of a Medicare system that is not left continually vulnerable by a steadily increasing debt. But his plan has already received the usual criticism that it amounts to a "war on seniors," even though it will not change the current Medicare provisions for anyone older than 55 years of age, thereby giving people at least ten years to plan for its implementation. The Ryan plan and its spending reductions have also been called "extreme," even though the plan does not envision a balanced budget until the 2030s.

Aside from addressing the fiscal crisis in Medicare, the Ryan proposal serves a number of even larger goals. First, by giving seniors the flexibility to purchase plans tailored to their own needs, the proposal injects more market competition into the system, which in turn will work as a check on costs. Insurers will compete to offer the services valued by consumers, with providers having incentive to innovate in their health care delivery. Unlike the current Medicare system, Ryan's proposal would put the consumer/patient in charge of health care by determining the demand, and hence prices, of health care services.

The other larger and even more fundamental goal pursued by the Ryan plan is to restore the traditional relationship between government and individuals. The assumption underlying the welfare state in general and the existing Medicare system in particular is that the individual is vulnerable and helpless, and that only through a reliance on government can an individual achieve security or prosperity in life. But this assumption denies personal responsibility and the potential for upward social mobility. It also sees the federal government, rather than the people, as the creator of prosperity and social identity. It puts the national government as the mover of society, with the people as mere bystanders.

Representative Ryan is attempting to revive the limited government principles that held sway for the first century and a half of our nation's history. He is attempting to restore the traditional private/public balance. In so doing, his budget proposal does not keep feeding an out-of-control government bureaucracy. It does not keep expanding government control and influence over society and the economy. Contrary to Ryan's plan, President Obama's budget completely ignores the entitlement drivers of our national debt.

The Ryan proposal would reverse the trend of deepening the dependency of the middle class on government benefits. Ever since Lyndon Johnson's Great Society agenda, making the middle class dependent on government entitlement programs has been a primary aim of the social welfare state. But this approach differs substantially from historical tradition, where government was seen as limited and individuals were seen as responsible, entrepreneurial and self-reliant. Consequently, Representative Ryan's budget proposal tries to free us from the welfare state's most debilitating assumption: that the only provider for some of the most important goods and services should be the most inefficient institution in American life — the government.

Mr. Ryan's plan seeks to reverse nearly eight decades of retreat from the founding principles of American constitutional government. It seeks to revive and reinvigorate the notion of a federal government limited to its stated constitutional functions. And in doing so, it attempts to release us from the stranglehold of outmoded programs from the past — namely, the New Deal and Great Society agendas.

The New Deal attempted to address the worst economic crisis in the nation's history. But it adopted government entitlement programs that would later mushroom out of control and overwhelm the federal budget. Ryan wants to have government adjust to the realities of modern life — realities that include retirees living much longer than they did during the New Deal period, and health care costs rising exponentially higher than they could have ever been envisioned by Lyndon Johnson's Great Society.

One of the founding principles of American constitutional government that the New Deal abandoned and that Mr. Ryan's budget seeks to revive is federalism — an historic principle of American governance recognizing the dynamism of American diversity. Under Ryan's proposal, the federal portion of Medicaid, the health care program for the poor, would be converted to a block grant to states, giving states more flexibility to design their own programs so as to save a projected $750 billion over the next ten years. This mirrors the welfare reform approach taken during the mid 1990s — one of the great public policy successes of recent time. Welfare reform was successful in large part because it gave states more flexibility and empowered individual welfare recipients to take control of their lives.

Representative Ryan is attempting to do the same thing with Medicaid — giving states more flexibility to design new ways of meeting the unique needs of their own populations and more incentives to hold down costs, instead of simply obeying universal federal mandates. But this is a stark contrast to how the New Deal and Great Society programs operated, seeking to transfer all power and control to a growing central government. As President Clinton said nearly a decade and a half ago, the era of big government is over.

Representative Ryan is trying to rectify a post-New Deal social welfare legacy that has become unsustainable and threatens to bankrupt our public sector. His proposal is important not only on its own merits, but for its implication on an even bigger battle yet to come, involving yet another legacy of the New Deal period that has become unworkable in modern times. That battle is Social Security reform, which everyone knows is also unsustainable, with its $17 trillion in unfunded liabilities.

For too long, policy makers in Washington have continued to make irresponsible promises of government benefits; but those were false promises, based on burdening future generations with the debt of those benefits. Those promises were so false, in fact, that we can no longer even pass them off to future generations. The crisis has arrived. And Paul Ryan has called us to arms, challenging us to leave our children a nation free of the addiction to reckless spending and escalating debt — a nation less controlled by federal bureaucrats, less enslaved to foreign creditors — a nation more free and dynamic.

© Patrick Garry