A number of commenters have asked for a summary of what’s actually in the Ryan plan. So this is a utility post.
The first thing you should know is that there are a couple of vintages of the plan, with some changes in detail, but not in general thrust. As it happens, the best nonpartisan analysis, in my judgment, is the CBO report on the first vintage (pdf); 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, 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 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 CBO explanation:
The path for revenues as a percentage of GDP was specified by Chairman Ryan’s staff. The path rises steadily from about 15 percent of GDP 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 calls these unspecified sources of revenue “mystery meat”, and strongly suggests that nothing like this would actually happen.
Second, there are large assumed cuts in discretionary spending relative to current policy — again, CBO:
That combination of other mandatory and discretionary spending was specified to decline from 12 percent of GDP in 2010 to about 6 percent in 2021 and then move in line with the GDP price deflator beginning in 2022, which would generate a further decline relative to GDP. No proposals were specified that would generate that path.
So, whenever you hear people talking about 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 GDP, with the number eventually falling to 3.5 percent of GDP (see Table 2 in the CBO report). There is, once again, no specification of how this is to be accomplished; bear in mind that this number includes defense, which is currently around 4 percent of GDP.
Is this a plan?
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. In that sense, this isn’t even a plan, it’s just a set of assertions.