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Paul Ryan’s Magic Asterisks

Mr. Ryan basically proposes three big things: slashing Medicaid, cutting taxes on corporations and high-income people, and replacing Medicare with a drastically less well funded voucher system.

Republican vice presidential candidate Paul Ryan attends a campaign event in Raleigh, North Carolina, August 22, 2012. (Photo: Eric Thayer / The New York Times Syndicate)

The other day I picked up on something in an op-ed in Slate titled “Why I Love Paul Ryan” by the commentator William Saletan that illustrates the conventional wisdom that has let the essentially ridiculous Paul Ryan rise so far. Today let me pick on William Galston — not a household name, but a good representative of the Beltway gone bad.

In an op-ed in The New Republic, Mr. Galston, a contributing editor, urges Democrats not to “demagogue” Mr. Ryan, but despairs: “Here’s what I fear will happen instead. The Obama campaign will not take the other side in a high-minded debate. Instead, it will relentlessly attack Romney–Ryan for plotting to ‘end Medicare as we know it,’ and for leaving the poor to go hungry without food stamps and suffer, even die, without health insurance.”

What’s wrong with this lament?

How about the fact that the Romney–Ryan plan actually is a plan to end Medicare as we know it? (And why the quotation marks? That’s what it is — replacing the system with fixed-value vouchers.) It is also a plan for drastic cuts in food stamps and Medicaid, not to mention canceling the expansion of coverage under the Affordable Care Act, which would mean lost insurance for tens of millions of Americans — thousands of whom would, in fact, die as a result.

Yet pointing out these truths is, in the eyes of Very Serious People, “demagoguery.”

What’s in the Ryan Plan?

A number of commenters have asked for a summary of what’s actually in the Ryan budget plan.

The first thing you should know is that there are a couple of different vintages of the plan, with some changes in detail, but not in general thrust. The best nonpartisan analysis, in my judgment, is the Congressional Budget Office’s report on the first vintage (at; as I said, details change, but the general idea remains the same.

So, what’s in the plan? You need to distinguish between the first decade, before the phasing out of Medicare as we know it begins, and after.

The First Decade

In the first decade, the big things are (i) conversion of Medicaid into a block grant program (in which the federal government delivers lump sums to states), with much lower funding than projected under current law and (ii) sharp cuts in top tax rates and corporate taxes.

Is this a deficit-reduction program? Not on the face of it: it’s basically a tradeoff of reduced aid to the poor for reduced taxes on the rich, with the net effect of the specific proposals being to increase,not reduce, the deficit. Yet Mr. Ryan claims a big deficit reduction, via two big magic asterisks.

First, he insists that the tax cuts won’t reduce revenue, because they’ll be offset with unspecified “base-broadening.” Here’s the C.B.O. explanation: “The path for revenues as a percentage of (gross domestic product) was specified by Chairman Ryan’s staff,” according to the report’s authors. “The path rises steadily from about 15 percent of G.D.P. in 2010 to 19 percent in 2028 and remains at that level thereafter. There were no specifications of particular revenue provisions that would generate that path.”

Howard Gleckman of the Tax Policy Center earlier this year called these unspecified sources of revenue “mystery meat,” on the policy center’s blog and strongly suggests that nothing like this would actually happen.

Second, there are large assumed cuts in discretionary spending relative to current policy. Again, according to the C.B.O. report: “That combination of other mandatory and discretionary spending was specified to decline from 12 percent of G.D.P. in 2010 to about 6 percent in 2021 and then move in line with the G.D.P. price deflator beginning in 2022, which would generate a further decline relative to G.D.P. No proposals were specified that would generate that path.”

So, whenever you hear people talking about Mr. Ryan’s deficit reductions, bear in mind that over the first decade all of the alleged deficit reduction comes from revenue and spending numbers that are simply asserted, not the result of any policies actually described in the “plan.”

After the First Decade

After the first decade, Medicare is gradually transformed into a voucher scheme, with the value of the vouchers lagging well behind projected health care costs. Even so, however, much of the supposed deficit reduction comes not from Medicare but from further cuts in discretionary spending relative to G.D.P., with the number eventually falling to 3.5 percent of G.D.P. There is, once again, no specification of how this is to be accomplished.

Is this a plan?

Mr. Ryan basically proposes three big things: slashing Medicaid, cutting taxes on corporations and high-income people, and replacing Medicare with a drastically less well funded voucher system. These concrete proposals would, taken together, actually increase the deficit for the first decade and beyond.

All the claims of major deficit reduction therefore rest on the magic asterisks.

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