The problem with the Paul Ryan plan: It's not nearly radical enough

Paul Ryan's budget plan is not radical. In fact, it adds 5 to 6 trillion dollars to US debt. More important, it doesn’t get to the root of the problem bankrupting America: government redistribution of wealth. Unless we make fundamental changes to government, we'll stay on the road to ruin.

Opinion

By Mark W. Hendrickson

May 12, 2011

Grove City, Pa.

Here’s a question for those of you concerned about the size of federal debts and deficits: Would you endorse a plan that would add another five or six trillion dollars to the federal debt over the next decade while also increasing Uncle Sam’s annual expenditures by $1.1 trillion? If so, you’re in luck. House Budget Committee Chairman Paul Ryan (R) of Wisconsin has put forth just such a plan.

Initially, Democrats denounced Mr. Ryan’s plan as “radical.” From their perspective, adding “only” 5 or 6 trillion dollars of new debt is radically stingy. From a conservative perspective, adding that much debt seems radically irresponsible, if not dangerous.

More recently, perhaps recognizing that more and more voters understand that an ever-ballooning national debt is unviable, Democrats have floated an embryonic plan to increase the federal debt over the next decade by $4 trillion less than is currently planned. They plan to do this through a combination of tax increases and different spending cuts than what Republicans envision. Call it Gridlock 3.0.

The fact that Ryan’s plan to add multi-trillion dollars to the national debt is the most fiscally “conservative” deficit and debt-reducing proposal on the table today shows just how far the goalposts have been moved in American politics. How would you like your government debt, Mr. or Ms. Citizen – gargantuan or astronomical?

What about the 'war on the young?'

The Ryan Plan, if implemented, would cut $179 billion from President Obama’s planned spending in 2012 and another $241 billion in 2013. Why is it “radical” to propose a decrease of $179 billion but it was not “radical” to raise spending by $787 billion like Mr. Obama did with his stimulus package in 2009?

Ryan’s plan is bold in comparison to the status quo in Washington, but it isn’t radical. You want “radical?” How about getting government out of the medical field entirely? Since the creation of Medicare and Medicaid in the 1960s, medical costs have soared far beyond the rate of inflation. More than that, market competition has diminished and fraud and inefficiency have increased in lockstep with the growth of these two medical bureaucracies.

Ryan proposes to reform Medicare and Medicaid so that the programs don’t bankrupt the country. Why is that demonized as a “war on the elderly and poor” (the phraseology of Illinois Democrat Jan Schakowsky), but nobody talks about waging a “war on the young” by saddling the rising generation with trillions of dollars of debt?

Ryan’s plan leaves the mechanisms, rationale, and justification for ever-increasing government spending essentially unchallenged. His plan is statist to the core, promising seniors government subsidies with which to choose from a slate of government-regulated health care plans.

Ryan plan is dead in the water

At present, the Ryan plan is academic. Its combination of spending cuts, tax cuts, and devolution of administration of government programs from the federal to the state level – while a significant improvement over the fiscal insanity of recent years – is dead in the water until at least 2013.

If you doubt that, look at the recent “government shutdown” soap opera. That was the showdown between Democrats and Republicans that finally produced an official budget for fiscal year 2011 (which started last Oct. 1).

In a modest attempt to curb the flood of red ink, Republicans proposed a $60 billion spending cut – less than 2 percent of the total budget. That represented less than a 10 percent giveback of the emergency $787 billion Obama/Pelosi/Reid stimulus plan from two years ago – hardly a radical proposal now that the emergency has passed and the Fed is having to monetize today’s huge deficits.

Yet Obama made the Republicans back down and accept a $38 billion cut (some say far less, due to accounting trickery) by insisting that there would be no deal, hence a government shutdown, unless the GOP accepted an even smaller reduction of spending.

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Will Republicans buckle under voter discontent?

It will be interesting to see how long Ryan’s fellow Republicans in the House stand by his proposals. Many of them already have taken a lot of heat from citizens angry or frightened about Ryan’s proposed cuts and reforms. The big test will come next year. That is when Republicans have to face the voters. A majority of Americans may say that they favor reduced federal spending and smaller deficits, but when push comes to shove, how many will vote for a legislator who actually shrinks programs from which voters benefit?

Even if Ryan’s plan, by some miracle, were to be enacted, I doubt future Congresses will be able to adhere to it. We are stuck in a system that incentivizes politicians to increase spending and reduce taxation. In the democratic scramble for votes, politicians gain friends from spending increases and enemies from tax increases. Put yourself in their shoes. What would you do?

The root of the problem is ethical, not political

Ryan is engaged in a futile attempt to square the circle. He is trying to find a way to preserve an inherently flawed system – a democratic transfer society – whereby government somehow takes care of all of us without eventually spending itself into bankruptcy.

The Ryan plan is not radical; that is, it doesn’t get to the root of the problem. It never questions the legitimacy of government redistribution of wealth. Though Ryan’s plan moves us in the right direction, with less federal spending, it is ultimately not a cure for what ails us.

Our problem, and therefore our solution, is not primarily political, but ethical. We have lost our respect for the principle of private property. Through intellectual sophistries, we have convinced ourselves that we are entitled to some of what our neighbors have. We believe that the source of our supply is government (i.e., our fellow citizens) rather than our own contributions in the economic marketplace.

Instead of wanting a government that is limited to protecting our God-given rights, we seem to want a government that gives us things that it has, in effect, taken from others. Unless and until we divest ourselves of the notion that A has a “right” to B’s property, we will continue to lurch toward bankruptcy.

The democratic welfare state is unsustainable

The federal debt problem likely will get a lot worse and cause a lot of economic dislocation and pain before a majority of Americans are ready to admit that it is an activist, “progressive” government engaged in the problematic practice of redistributing wealth that has brought us to the brink of national bankruptcy.

Herman de Rompuy, President of the European Council, bluntly stated last year, “We can’t finance our social model any more.” The democratic welfare state is inherently unsustainable. In every area where the government has intervened to take care of us – retirement, healthcare, education – the price tag keeps soaring, as does the nagging feeling that things are getting worse instead of better.

In theory, the solution is simple: Get government out of the business of trying to deliver goods and services that the private sector can provide better and more efficiently. In practice, though, so many people are already counting on government promises to meet those needs that they will resist any attempt to privatize them and thereby shrink government.

Consequently, unless we make a fundamental change in what we expect from government, we are likely to stay on the road to bankruptcy. And our politics will grow even more strident as desperate politicians resort to extraordinary measures to come up with the funds needed to delay the day when everyone finally sees that it is impossible for Uncle Sam to make good on all his promised benefits.

Mark W. Hendrickson is an adjunct faculty member, economist, and fellow for economic and social policy with The Center for Vision & Values at Grove City College, which first published a version of this piece.