Ryan budget would hurt poor and elderly, experts say

McClatchy NewspapersAugust 16, 2012 

— Republican vice presidential hopeful Paul Ryan will leave sizable footprints on the 2012 presidential race.

His controversial plan to overhaul the federal budget has been the chief talking point of the campaign since Mitt Romney put him on the GOP ticket last weekend.

Conservatives praise his blueprint for its aggressive attack on federal spending. But Democrats call it draconian because they say it slashes social programs for vulnerable Americans to fund big tax cuts for the wealthy.

Dubbed the “Path to Prosperity,” Ryan’s plan was passed by the House of Representatives earlier this year, but it died in the Senate. Rightly or wrongly, its newfound gravitas as the presumed template for a Mitt Romney budget plan has made it a lightning rod yet again.

“I want to the country to have the choice," Ryan said in an interview with CNBC in April. "Do you want the president’s path of a government-centered society, a path to debt and decline? Or do you want to get back to the American idea, the opportunity society with a strong safety net that is wired to getting people back to work, onto lives of self-sufficiency?"

Ryan’s allies say he keeps the safety net intact through free enterprise and federalism. His critics say he shreds it.

A group critical of the plan says that 62 percent of the $5.3 trillion in non-defense budget reductions over 10 years that it calls for comes from programs to assist low-income Americans. According to the liberal Center on Budget and Policy Priorities, many of the programs targeted for $3.3 trillion in cuts, like Medicaid, food stamps, public housing and Medicare, anchor the nation’s safety net of public assistance programs for the poor, elderly and disabled.

Programs that assist middle-class families, like Pell Grants and job training, would likely face cuts as well, according to Ryan’s plan.

“This budget is actually a very extreme proposal,” said Paul Van de Water, a senior fellow at the center. “The extent to which it would scale back virtually all the basic functions of government, including programs that are highly important to middle-income people, like Medicare, is just something that is unparalleled.”

If enacted, Ryan’s budget would dramatically reshape Medicaid, the state- and federally-funded health plan for the poor. As enrollment swells with jobless adults and their families who lost health care, Medicaid has become a huge drain on state finances, and many governors have called for the very fixes the Ryan plan incorporates.

Rather than paying a fixed share of total Medicaid spending, Ryan’s plan gives states capped amounts of federal money, or block grants, to operate and restructure their Medicaid programs with little federal oversight. With the added flexibility, many state leaders envision greater program efficiency and less waste.

If federal grants don’t keep pace with rising medical costs and enrollment increases during economic downturns, states could end up with less federal funding over time. Federal Medicaid spending would likely drop by $810 billion – roughly 22 percent – from 2013 to 2022 under Ryan’s plan.

Funding in 2022 alone would be more than a third less under Ryan’s budget than states would get under the current funding formula, the Center on Budget and Policy Priorities estimates.

This shortfall would force states – most of which are already cash-strapped – to either pay a larger share of Medicaid program costs or to cut services.

According to a report by the nonpartisan Congressional Budget Office, “Cutbacks might involve reduced eligibility . . . coverage of fewer services, lower payments to providers, or increased cost-sharing by beneficiaries – all of which would reduce access to care.”

Those cuts and the Ryan plan’s calls to repeal the Affordable Care Act – the landmark health care law passed in 2010 – would add tens of millions of low-income Americans to the ranks of the uninsured. It also would raise taxpayers’ bill for emergency room indigent care and cause an increase in private insurance rates.

Over the next decade, Ryan’s plan would also turn the food stamp program, now known as the Supplemental Nutrition Assistance Program, into block grants. According to the Center for Budget and Policy Priorities, that would mean a $133.5 billion, or 17 percent, reduction in funding. The program currently enrolls more than 46 million low-income Americans, mainly families with children, seniors and the disabled.

Ryan has said cuts are needed to curb explosive program growth. But the 53 percent enrollment increase from 2007 to 2010 reflects a 110 percent growth in jobless Americans over the same period. As the economy improves, the CBO expects enrollment to fall back to pre-recession levels.

Patrick Louis Knudsen, a senior budget fellow at the conservative Heritage Foundation, served on the House Budget Committee for nearly five years with Ryan. In an April blog, he said Ryan’s reorganization of Medicaid and food stamps embraces the principles of federalism, while the Medicare reforms transform “a huge, government-run entitlement into a model of patient-centered reform.”

Ryan’s plans for Medicare have caused a stir. The national health care plan for the elderly covers 59 million people and is one of the biggest drivers of the federal deficit.

In order to slow spending in the national health plan for seniors, Ryan would replace Medicare’s guarantee of coverage for new beneficiaries in 2023 with a flat payment to seniors known as a “voucher” or “premium support.” They could use that to buy private insurance or traditional Medicare coverage.

Ryan’s planned tax cuts favor the affluent. Those who earn more than $1 million annually would see an average tax cut of $265,000 and a 12.5 percent increase in after-tax income under Ryan’s budget plan, according to an analysis by the Urban-Brookings Institute Tax Policy Center.

But at the lower end of the scale, people earning between $20,000 and $30,000 would get no tax cut under Ryan’s plan, the tax policy center found. And their after-tax income would rise 0.5 percent under the Ryan plan. Middle-income people earning between $50,000 and $70,000 annually would get an average tax cut of about $1,000, while their after-tax income would rise 2 percent.

Heritage’s Knudsen said that critics of the Ryan proposal make it sound as though the government is opening its checkbook to wealthy taxpayers.

“The government is not writing checks to people,” Knudsen said. “It’s allowing people to keep more of their earnings, and if you earn more, obviously you’re going to gain more from tax relief.”

Ryan’s tax-cut proposals include repealing the Alternative Minimum Tax, which disallows many deductions; limiting individual income tax rates to just 10 percent and 25 percent; repealing new taxes that finance the Affordable Care Act; and reducing the corporate tax rate from 35 percent to 25 percent.

All told, the Tax Policy Center said, Ryan’s tax plans would increase the deficit by $4.6 trillion over the next 10 years. His call to extend the Bush-era tax cuts for high-earning Americans would boost the deficit by an additional $5.4 trillion.

Ryan proposes to pay for the cuts by eliminating a variety of tax breaks and loopholes for individuals and corporations, but his budget proposal hasn’t specified which ones, said Roberton Williams, a senior fellow at the tax center. Ryan and Romney oppose raising taxes on savings and investment income, a popular tax break among the wealthy, Williams said.

That would leave tax breaks for the middle- and low-income households, like the mortgage interest deduction and deductions for state and local taxes to fill the gap, he said.

Email: tpugh@mcclatchydc.com; Twitter:@TonyPughDC

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