The first time Rep. Paul Ryan presented his budget, it was supposed to be fatal for the GOP. Ryan, after all, was not only touching the entitlement third rail but also licking it. Even to some ideological allies, it seemed like a dangerous dare.
Now he has dared again. And the absence of an apocalypse is a victory of sorts. Americans are not suddenly enthusiastic about Medicare reform. But Ryan has made a sophisticated case for its necessity. His proposals have been generally embraced by congressional Republicans and the GOP’s likely presidential candidate. If Mitt Romney manages to win, the presentation of Ryan’s budget in 2013 would kick off a momentous national debate on the size and role of government.
Ryan, pulled to the phone from the House floor, is typically upbeat. “I believe this will turn in our favor,” he says. Ryan is all Wisconsin cheerful earnestness — the Boy Scout earning his federal budget badge. But this manner masks considerable ideological ambition. “We knew we were defining the movement,” he tells me. By setting out the case against unsustainable entitlement commitments, Ryan forced his GOP colleagues to pick a side, often against their will. The whole Republican Party will now defend and advance Ryan’s budget views — or suffer from their repudiation.
Ryan has no second thoughts. “It is morally right,” he says, “legally right, politically right.” And he is armed with more than confidence. Despite the criticisms of Ryan’s budget, it is simply correct on the biggest matter. By the 2030s, federal health-care commitments, along with interest on the debt, will consume just about all government revenue. Federal health spending is expected to grow from 5.6 percent of the gross domestic product (GDP) to nearly 20 percent — about the modern average for the whole federal government. Maintaining “Medicare as we know it” and other unreformed health entitlements will make every other function of government as we know it impossible.
Ryan’s proposals to move toward a premium-support system in Medicare and a block-grant system in Medicaid are controversial, and he has modified them in response to criticism. But their seriousness stands alone. “President Obama has given us four budgets,” Ryan says, “and four times he has punted on the debt problem.” The Democratic strategy has been “to wait for Republicans to propose solutions, then attack them.”
Ryan bristles at the notion that he is unraveling the social safety net. He sees it unraveling of its own accord. “The poor would be hurt worst in a debt crisis,” he says, when spending cutbacks would be sudden, drastic and indiscriminate. Reform is required to “make the safety net work, to make it sustainable.” And Ryan’s budget has taken some fire from the Tea Party right, because it rejects an arbitrary 10-year target to balance the budget — which would demand unrealistic, draconian cuts.
But Ryan’s approach to discretionary spending is also vulnerable to criticism. By decreasing some tax rates, restoring defense spending and protecting current retirees from sudden entitlement changes, his budget puts tremendous strain on the rest of the budget. Critics have said that this would “savage the poor,” undermine essential government functions and leave Americans vulnerable to “food poisoning and killer diseases.”
The real response is impossible for Ryan to make — or even, at this point, to contemplate. A budget proposal is an initial negotiating position — and increased tax revenue will be part of any final deal. Ryan’s budget already makes some revenue concessions. Currently, federal revenue stands at about 15 percent of GDP. Ryan’s 10-year plan would eventually push this figure up to an average of 18.5 percent, in line with precedent. If an eventual budget agreement were to include serious entitlement reform, I suspect that most Republicans would reluctantly accept federal revenue at 20 percent of GDP, or even 21 percent — provided these taxes were designed to minimize the drag on economic growth. This would dramatically soften the short- and medium-term effects on discretionary spending.
Any current Republican concession on this point would do nothing but divide the Republican coalition. But a final deal along these lines would vindicate Ryan’s approach. The priority is not to cut discretionary spending or even to quickly balance the budget. It is to avert a fiscal calamity that would bring an economic catastrophe. This requires health entitlement reform — the real measure of budgetary seriousness and the irreplaceable contribution of Paul Ryan.