Washington’s partisan divide has grown so deep that President Obama and House Budget Committee chairman Rep. Paul Ryan, R- Wisc., can’t even agree that they agree, as election-year scrimmaging is obscuring the agreement in principle between those two policy wonkish leaders on curbing the growth in entitlement spending.
The two are still far apart when it comes to the revenue side of the budget deficit equation – making any comprehensive solution impossible for now.
Ryan’s budget plan was approved by the House Thursday, with no Democrats voting for it and ten Republicans voting against it. Ryan’s plan won't be enacted by the Senate but serves as a campaign statement -- for both parties.
GOP presidential contender Mitt Romney, whom Ryan endorsed Friday, has endorsed his budget proposal and Ryan will campaign with Romney in Wisconsin Friday.
Ryan said after Thursday’s vote that his plan would “save us from a debt crisis” and in assessing the plan, the Congressional Budget Office said that by 2040 it would reduce debt held by the public to less than 40 percent of Gross Domestic Product, compared to debt of nearly 200 percent of GDP if current policies are allowed to continue.
Much of the Democrats’ rhetoric attacking the Ryan plan focused on his design to cut the growth rate of Medicare spending and his lack of detail on which tax preferences and credits he’d eliminate in order to be able to reduce income tax rates.
But before it’s forgotten in the campaign rhetoric, here’s where Obama and Ryan agree: Each would require higher-income people to pay more for Medicare benefits. Obama and Ryan choose different methods, but they agree in principle: the wealthier retirees must pay more.
Each is proposing changes in benefits for future recipients, not present ones: Obama’s proposal, detailed in his Fiscal Year 2013 budget blueprint, would take effect in 2017, right after he leaves office if he wins a second term. Ryan’s would take effect in 2023.
The Obama proposal would require upper-income people on Medicare and new beneficiaries to pay higher premiums, deductibles and co-payments than they now do and would save $33 billion over its first ten years. That amount of deficit reduction seems small, but the principle of stricter means-testing is important -- and it’s one that most liberal Democrats adamantly oppose. “This is a slippery slope… a dangerous path for us to go down,” warned Sen. Ben Cardin, D- Md., weeks ago when a House-Senate conference committee considered the Obama proposal.
Ryan’s approach would convert Medicare into a system in which future retirees would shop among private insurance plans and in which the sicker and poorer retirees would get bigger federal subsidies than the healthier and wealthier retirees.
Under the Ryan plan, Medicare spending would keep increasing, but the rate of increase would be slower than under current law.
Average Medicare spending for a 65-year old last year was $5,500. Under the most plausible Congressional Budget Office forecast, average Medicare spending for a 66-year old recipient in 2030 will be $9,600 in inflation-adjusted dollars; under Ryan’s plan it would $7,400.
While Ryan’s plan is only a proposal so far, Obama has already signed the Affordable Care Act which requires upper-income people to pay higher Medicare taxes: a tax increase of $210 billion over its first eight years, starting on Jan 1. 2013.
Medicare and Social Security are a social contract between current taxpayers and future ones: you work today, paying 5.65 percent of your income in Medicare and Social Security taxes, in the expectation that workers in 2040 will pay the taxes that will pay for your Medicare and Social Security benefits.
The social contract can be altered, as Ryan and Obama, each in their own way, are now trying to do. President Reagan and House Speaker Tip O’Neill did that in 1983 by leading Congress to raise Social Security taxes, cut benefits, and increase the age of eligibility for benefits.
Medicare involves a fiscally riskier social contract or, as Democrats call it, a “guarantee” – and one that will be harder to change than the 1983 accord. Taxpayers have pledged to pay unknown future costs of medical procedures not yet invented for people who are living longer and longer lives.
Ryan said after Thursday’s House vote that his plan has in it “the seeds of a bipartisan consensus,” adding that “there is a consensus to be had in 2013.” That seems unlikely right now, but may be turn out to be true. But the first step might be for Ryan and Obama to remind voters of the basics on which they agree.
