Posted by: Patrick | February 5, 2010

AmericanSpectator.com: Rep Paul Ryan’s Plan for Entitlement Spending

House Dem Claims Ryan Plan Would Send Economy Into Ditch, CBO Disagrees

By on 2.5.10 @ 12:08PM

Ever since his back and forth with President Obama during last week’s question time at the Republican retreat, Rep. Paul Ryan’s “Roadmap for America’s Future” has been gaining attention as a plan that the Congressional Budget Office has projected would actually solve our nation’s long-term entitlement crisis.  As a result, Democrats are seeing it as a new opportunity to attack Republicans for trying to destroy the nation’s safety net.

Ryan’s ambitious proposal would represent a comprehensive overhaul of our nation’s finances. While preserving Medicare for those over 55, everybody else would get a voucher upon retirement, which would have a higher value for sicker and poorer retirees. The Social Security system would allow younger workers the option of investing a portion of their payroll taxes in personal accounts.  The health care system would move to a consumer-based one by ending the tax exclusion for employer-based health insurance and giving individuals a tax credit instead. The proposal would also change the tax system, giving Americans the option of choosing a new simplified tax code with just two brackets and no deductions (other than the individual health care tax credit). It also eliminates the corporate tax and replaces it with a lower business consumption tax.

After a year of portraying Republicans as the party of “no,” Democrats are now seizing on the Ryan plan as a way to reframe November’s election along traditional lines – with Democrats as the party that will protect entitlements from being cut by Republicans.

“That’s their budget plan,” Rep. Chris Van Hollen told Talking Points Memo of the Ryan proposal. “He’s the ranking Republican member on the Budget Committee. That is their so-called roadmap. And it’s a roadmap right into the economic ditch that we got ourselves to begin with.”

I plan to write more about Ryan’s “Roadmap” and the broader debate, but I thought I’d quickly point out that far from leading us into the ditch, the CBO projects that the proposal would dramatically improve our nation’s economic outlook relative to current trends (known as CBO’s “alternative fiscal scenario”).

“The lower budget deficits under your proposal would result in much less federal debt than under the alternative fiscal scenario and thereby a much more favorable macroeconomic outlook,” CBO writes in page 14 of its analysis of the Ryan plan.

CBO projects “real gross national product per person would be about 70 percent higher in 2058 under the proposal.” But after 2058, the CBO’s model completely breaks down when trying to project current trends, “because deficits become so large and unsustainable that the model cannot calculate their effects.” By contrast, the model shows the Ryan plan continuing to achieve economic growth in the decades that follow. This is demonstrated by the CBO chart below.

The one thing that’s certain to drive our economy into the ditch is continuing policies that shield entitlements from any meaningful reform.

Philip Klein is The American Spectator‘s Washington correspondent.

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