Ryan's Folly

               Since Paul Ryan’s “deficit reduction” plan was approved by House Republicans last week, several well deserved denunciations have appeared on the web and in print.   Alan Blinder, (Princeton economist, former Federal Reserve Vice-chairman) writing in April 19 Wall Street Journal calls it a “Reverse Robin Hood Budget.”   Dean Baker, (economist, Co-Director of the Center for Economic Policy Research) writing in Huffington Post, 04/18/11, says that such a budget, if approved, would simply transfer trillions of dollars from ordinary working people to the insurance industry, the pharmaceutical industry, and to the very rich.  Baker says that the Ryan plan would radically increase the country’s Medical costs.  It would replace the current Medicare system with a voucher system, and the vouchers would be held to the general inflation rate. But medical costs are going up faster than the general rate, and privatizing the system, absent any meaningful price controls, would certainly accelerate this inflation. So seniors would soon be priced out of the market, since the vouchers they would receive would no longer pay the premiums for private insurance. We know that privatization in health care does not rein in costs, but allows them to skyrocket. We know this because we’ve tried it twice; once when the Gingrich Congress passed the Medicare Plus Choice plan, and once when the Bush administration pushed through the Medicare Advantage program.  Both of these plans raised costs—that’s why the non-partisan CBO projects that costs would increase under this plan.

             Ryan claims that tax cuts for very wealthy individuals would spur the economy.  This has also been tried twice, first with the Reagan tax cuts, beginning in 1981.  (The 80s had the worst growth of any decade since the Great Depression, but even the 80s were not as bad as the 00s, which followed the Bush cuts.)

              Richard Eskow, (writer, consultant, and former insurance/finance executive) writing in the Huffington Post back in February, reminded us that our present deficit is caused by three things:  The wars in Iraq and Afghanistan, the economic collapse caused by Wall Street greed and corruption, and the Bush tax cuts.  Remember that at the end of the Clinton administration, we did not have a deficit—we had a surplus.  That surplus changed to deficit when Bush cut taxes, (mostly for the very rich) and then proceeded to fight two wars without ending those cuts.   Eskow feels that saying that government spending causes deficits is like saying that empty gas tanks are caused by driving.   True, if everyone totally stopped driving forever, then no one’s gas tank would ever run dry.  But that might not be very practical.  Most people would rather drive when necessary--and then stop at a filling station from time to time.