The Ryan Reaction
How Paul Ryan's flawed budget plan has improved the debate over our fiscal future.
In the past two weeks, American political debate has improved considerably. Thanks to Paul Ryan's flawed budget plan, a real discussion about long-term entitlement spending has begun. That, in turn, has opened up a deeper conversation about the size and role of the federal government. Where once there was a shared denial of impending fiscal doom, there is now a growing consensus that, one way or the other, the federal government is going to have to bring revenues and expenditures into alignment. It could all end in stalemate and tears. But, for the moment, both sides are taking more seriously the fundamental questions of what government should do and how we should pay for it.
After my last column, I got pummeled in the liberal blogosphere for asserting that the Ryan budget represented a big step in the direction of conservative honesty. I deserved some of the abuse. Though I criticized Ryan for his unsupported rosy assumptions (shame on you, Heritage Foundation hacks), I reacted too quickly and didn't sort out just how laughable Ryan's long-term spending projections were. His plan projects an absurd future, according to the Congressional Budget Office, in which all discretionary spending, now around 12 percent of GDP, shrinks to 3 percent of GDP by 2050. Defense spending alone was 4.7 percent of GDP in 2009. With numbers like that, Ryan is more an anarchist-libertarian than honest conservative.
Yet I think I was right in crediting Ryan with owning up to what other Republicans won't: that the party's demand for ever-lower taxes would basically end Medicaid and Medicare as entitlement programs. To be clear, this is not how I would go about cutting long-term spending. But something has to be done to stop Medicare from eating the American economy, and I admire Ryan for putting his cards on the table in a way that is likely to hurt him and his fellow Republicans in the 2012 election.
Ryan's plan was also useful in part because it prompted President Obama to show some cards of his own. Obama's big deficit speech last week was a meaningful step in the direction of liberalfiscal honesty and represented a breakthrough for him in two big ways. It was the first time the president has seriously confronted our long-term fiscal problem with meaningful specifics. And it was the first time he has put forth a coherent vision of government's role. Obama matched Ryan's $4 trillion in projected deficit reduction over the next decade, relying less on implausible spending cuts and more on increased revenues. It takes at least as much courage for a Democrat to embrace higher taxes and a cap on the popular mortgage interest deduction as it does for a Republican to support Medicare vouchers.
Obama outclassed Ryan both by painting an optimistic vision of America's future and by using plausible numbers. In contrast to Ryan's minimalist state, the president described a future that allows for investments in education, job training infrastructure, clean energy technology, and medical research without abdicating the country's fundamental commitments to the elderly and poor. The specifics in the speech were largely drawn from the bipartisan Bowles-Simpson Commission, which the president had previously shunned like the carrier of a disfiguring disease. Where Obama fudged—though not on Ryan's epic scale—was by assuming that raising taxes on the wealthy will be enough, by positing as yet unachieved health care costs savings, and by avoiding specifics on where budget savings would come from.
The bigger problem with Obama's approach is his failure to address—at least so far—the reform of Medicare and Social Security. Without big reductions in spending on these programs, the kinds of investments in the future prosperity that Obama envisions won't be possible. We'll continue to evolve toward a government whose primary function is transferring income from working people to retirees. You don't have to frame this dynamic in racial terms, as Ross Douthat does, to see it as a recipe for social misery. The simple generational unfairness, as well as the drain on economic vitality, is going to become increasingly apparent. If Obama wants to offer a convincing vision of the federal government's role, he will need to recognize the growing imbalance between generosity for the old and investment in future generations. Preserving our biggest entitlement programs in their current form because they have a powerful constituency is hardly a progressive stance. It's the definition of reactionary liberalism.
The alternative is to preserve the universality and core functions of Social Security and Medicare while controlling their exploding future costs. That means big changes, such as means-testing benefits, bringing managed care to Medicare, and indexing the retirement age to life expectancy. You can't win the future with a government defined by the past.