Republicans announced last Friday that Rep. Paul Ryan (WI), chairman of the House Budget Committee, will deliver the GOP’s response to President Obama’s State of the Union address tomorrow. According to reports, GOP leaders chose Ryan because he is supposedly a “champion of slashing government spending.” The seven-term Wisconsin congressman gives Republicans a “chance to emphasize their core message: government spending must come down to reduce the nation’s annual deficit and long-term debt.” House Speaker John Boehner (R-OH) said Ryan — who has been given “stunning and unprecedented” power to shape the budget — is “uniquely qualified to address the state of our economy and the fiscal challenges that face our country.” Ryan is known as the GOP’s numbers guy in the House, and he laid out last year what he calls a “Roadmap” to fiscal health. But as the Washington Post’s Ezra Klein notes, “The more they elevate Ryan, the more they elevate Ryan’s Roadmap. And that document is a timebomb for them.”
Ryan’s Roadmap puts Americans on the path of privatizing entitlement programs, such as Social Security. The plan boasts about “the creation of personal investment accounts for future retirees” that are “the property of the individual.” (Emphasis in the original document). “Individuals will be able to join the investor class for the first time,” the Roadmap says. The Center on Budget and Policy Priorities (CBPP) notes that “the Ryan plan proposes large cuts in Social Security benefits — roughly 16 percent for the average new retiree in 2050 and 28 percent in 2080 from price indexing alone.” It “initially diverts most of these savings to help fund private accounts rather than to restore Social Security solvency.” CBPP also notes that the Roadmap “would eliminate traditional Medicare, most of Medicaid, and all of the Children’s Health Insurance Program” by creating a private voucher system that won’t keep up with the cost of health care.
By 2080, under Ryan’s plan, the Medicare program would be reduced by nearly 80 percent below its projected size under current policies. CBPP summed up Ryan’s plan: The Roadmap’s cuts “would be so severe that CBO estimates they would shrink total federal expenditures (other than on interest payments) from roughly 19 percent of GDP in recent years to just 13.8 percent of GDP by 2080. Federal spending has not equaled such a low level of GDP since 1950, when Medicare and Medicaid did not yet exist, Social Security failed to cover many workers, and close to half of the elderly people in the United States lived below the poverty line.”
MIDDLE CLASS TAX INCREASES
Citizens for Tax Justice found that Ryan’s Roadmap would raise taxes on 90 percent of taxpayers and drastically lower them for the richest Americans. The Economic Policy Institute (EPI) recently reported that the rates for the middle class would be higher than those for the rich under Ryan’s plan. “Middle-class families earning between $50,000 and $75,000 a year would see their average tax rate jump to 19.1% (from 17.7%) under this plan — an increase of $900 on average,” EPI says, while at the same time, “Millionaires would see their average tax rate drop to 12.8%, less than half of what they would pay relative to current policy.” As EPI’s Andrew Fieldhouse concluded, under the Roadmap, “a long tradition of progressive taxation would be abandoned; millionaires and Wall Street bankers would pay significantly lower tax rates than middle-class workers. … Income inequality would soar.”
In another giveaway to the rich, the Roadmap calls for a total repeal of the estate and corporate taxes and would introduce a national sales tax. Citizens for Tax Justice (CTJ) said this idea “would eat up a much larger percentage of total income for poor and middle-class families than wealthy families” because the former “spend most or all of their income on consumption,” while “high-income families are able to save much more of their income.” Ryan’s plan claims federal tax revenue will be 19 percent of GDP, but the Tax Policy Center found last year that his proposal would only bring in “approximately 16 percent of GDP, which amounts to a $4 trillion revenue shortfall over ten years.”
LESS REVENUE, MORE DEBT
Despite raising taxes on 90 percent of Americans, the federal government will lose $2 trillion in revenues over the next 10 years under Ryan’s plan, according to CTJ. “It’s difficult to design a tax plan that will lose $2 trillion over a decade even while requiring 90 percent of taxpayers to pay more. But Congressman Ryan has met that daunting challenge,” CTJ wrote. Looking at the most optimistic figures, the Roadmap won’t balance the budget until at least 2063 and it won’t reduce federal debt for decades, exceeding 100 percent of GDP before starting to come down. While proposing drastic cuts to entitlement programs, Ryan said he wants to reduce discretionary spending — which includes such expenditures as education, homeland security and other defense spending — but he has no idea what programs to cut. “I can’t tell you the answer to that,” he said earlier this month.
However, anticipating the plan’s unpopularity, GOP leadership isn’t publicly embracing Ryan’s plan but at the same time, it appears willing to allow it to go forward. During the midterm election campaign, the GOP dropped Ryan’s Roadmap from its “Pledge to America” scheme and as the conservative National Review noted last week, “praise for the Wisconsin Republican comes easy and often, full-scale endorsement of the roadmap less so.” But while Majority Leader Eric Cantor (R-VA) said last week that he supports only “elements” of the plan, he said yesterday on NBC’s Meet the Press that “we need to embrace” its direction. And last year, Boehner wouldn’t endorse the Roadmap, but at the same time couldn’t name any specific part he disagreed with. But if Boehner dislikes Ryan’s plan so much, it’s unclear why he made him chairman of the House Budget Committee and gave him new and unprecedented powers to unilaterally set spending limits instead of subjecting those limits to a vote on the House floor.
Speaking of Ryan’s new power, Doug Thornell, a spokesperson for Budget Committee Ranking Member Chris Van Hollen (D-MD) said, “Unfortunately, the House GOP is reverting back to the same arrogant governing style they implemented when they last held the majority and turned a surplus into a huge deficit.”
This post first appeared on the Progress Report at the Center for American Progress.
by Faiz Shakir, Benjamin Armbruster, George Zornick, Zaid Jilani, Alex Seitz-Wald, and Tanya Somanader