Very interested to see how Paul Ryan’s 10-year balanced budget plan comes out. As I muddily explained yesterday, I view Ryan’s previous plans more, ultimately, as fiscal education modules than actual budget blueprints. They highlight good ideas, such as Medicaid block granting and Medicare premium support, and suggest how those ideas might affect budgeting.
The Ryan plans also quietly highlight challenges: Slow economic growth + (roughly) historical levels of tax revenues + a promise to spare retirees and near-retirees from Medicare changes = a long-road road to debt reduction + severe Medicaid cuts + severe discretionary spending cuts. My conclusion is that a) tax revenues and spending levels will in the future probably need to be above historical levels and the levels Ryan targets, b) we cannot settle for the level of GDP growth CBO forecasts, c) entitlement reform ASAP. Ryan has the right ideas — and certainly knows the need for faster growth — but implementation poses major political challenges.
House Republican leaders, faced with the daunting task of writing a budget that would eliminate deficits within 10 years, are backing away from a proposal to revamp Medicare for more Americans than previously suggested.
House Budget Committee Chairman Paul Ryan (R., Wis.) has in recent weeks floated the idea of rolling back the GOP promise that people 55 and older would be exempt from his signature plan to offer future retirees a subsidy to buy private health insurance as an alternative to traditional Medicare.
Budget Chairman Paul Ryan, right, promised a balanced budget within 10 years to win GOP backing for a short-term increase in the debt ceiling.
House GOP centrists are balking at the idea, and in a meeting with them Tuesday, Mr. Ryan said he would leave it to his party colleagues to decide whether to raise the age cutoff to 56—or even higher—in the budget for the fiscal year that starts Oct. 1 that he is unveiling next week, according to a GOP aide familiar with the meeting.
Once more: The key measure of fiscal health is a nation’s debt-to-GDP ratio. And you can lower that ratio without actually balancing the budget or running a surplus. The original Ryan “Roadmap” plan lowered debt-to-GDP by 30 points over two decades without a single year in the black. Accelerating Medicare reform helps that process.
And instead of shooting for balanced budgets, how about instead shifting the debt-to-GDP ratio off the stabilization path and over the next two decades getting it back to where it was, on average, from 1957-2007–about 37%.