Paul Ryan’s presence on the Republican ticket confirms what we already knew: A Mitt Romney presidency would gut what remains of the social safety net.
The evidence is in the budget Ryan twice proposed and that the House of Representatives has endorsed. It would slash taxes for the wealthy while shredding programs for the poor and shifting the tax burden to the middle class. It not only leaves in place the corporate-military alliance, it would expand it drastically, while both Ryan and Romney would remove the limited roadblocks put in place by the Obama administration to control the banks. It is a truly radical plan. As Michael Hiltzik put it in the LA Times: “the middle class would be destroyed.”
Ryan advocates cutting the top income tax rate to 25% (from 39.6%, the pre-Bush top marginal rate scheduled to take effect Jan. 1).
The only way to do so while keeping overall tax revenues at 19% of gross domestic product, Ryan’s stated goal, is to eliminate a wide range of tax breaks. On the surface, this might look palatable to a middle-class taxpayer convinced that the fat cats get all the breaks anyway. In fact, the most popular breaks save billions for the middle class.
More than 70% of the mortgage interest payments claimed as deductions ($240 billion) appear on returns filed by people in the income range of $60,000 to $200,000, according to the IRS. Many of these middle-class homeowners base their annual financial planning on tax breaks such as the mortgage deduction. Only about 1.4% of the total is claimed by taxpayers earning $1 million or more.
Ouch. On the other side of the ledger — expenditures — the Ryan plan would do a lot worse:
Ryan would replace the existing Medicare system of guaranteed treatment (with a nominal individual premium) with one providing vouchers for service through private commercial insurance plans. By design, the vouchers wouldn’t cover all costs, and because their value would rise in accordance with a standard inflation measure, not with medical inflation, the gap would widen over time.
The Kaiser Family Foundation calculated that in 2022, the out-of-pocket medical expenses of the typical 65-year-old would come to half his or her Social Security income — double the level under traditional Medicare. There are two reasons. First, private insurers would deliver benefits at a higher administrative cost, and second, the vouchers would low-ball the retirees’ real costs.
As a device to reduce the growth in healthcare costs, which is the principal component in government spending going forward, this is pure sleight of hand. Costs will keep rising, and at a faster rate than before (Ryan would also repeal the healthcare reform act, including its cost-reducing provisions). Less of the increase would show up on the government’s ledgers only because more would show up in family budgets. The average American would be poorer for it.
Why? The “economic status” of Medicare beneficiaries
tracks that of America’s elderly as a whole (as it should, as the program is open to almost all Americans over 65). Some 60% get sizable portions of their income from private pensions, more than a third get at least 10% from investment income. On average they get 39% of their income from Social Security.
What happens if medical costs start taking up half their Social Security? Much of the burden might shift to their children and grandchildren. Keeping in mind that Social Security and Medicare always have aimed to remove this burden from the next generation, that’s a real leap backward.
And what of Medicaid — which pays for health care for the poor, but is paid for jointly by the federal and state governments. Cutting federal funding for Medicaid will result in two things, both of which will hurt the poor and middle class. The poor will have less comprehensive care and state budgets will be squeezed to the point of bursting, creating a “tsunami of pain for the middle class,” Hiltzik says.
Ryan would push more of the expense of Medicaid onto the states. Repealing the Affordable Care Act would remove funding for a Medicaid expansion that would have covered 17 million people. It would also replace the current open-ended federal subsidy to states with block grants keyed to population growth and standard inflation. In other words, completely unconnected to the real drivers of healthcare costs, which are the aging of the population and medical inflation.
States will be able to relieve the resulting pressure on their budgets only by cutting Medicaid enrollments, providing enrollees with fewer services, raising taxes or covering the shortfall out of budgets straining to keep up with road repair, K-12 education and public safety.
The Ryan budget won’t do much to help states with those other items; his insistence on reducing non-defense federal spending outside the health programs and Social Security by more than one-fifth starting in 2014 implies unprecedented cuts for state and local governments, which today get one-third of those dollars. That’s money spent today on education, law enforcement, roads, clean air and water programs, and disaster response.
When payment for those services is demanded at the point of sale, as in a post-Ryan world, it’s the middle class that will pay. They’ve reached into their pockets to pay for school arts and enrichment programs lopped out of state budgets and carried the burden of tuition hikes at state universities. Teachers of middle- class students — stalwart members of the middle class themselves — will lose their jobs by the thousands. Under Ryan’s budget, they’ll pay higher federal taxes for the privilege.
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