Slash and Privatize: How House GOP’s Shadow Budget Eliminates Deficit … In About 50 Years

February 4, 2010 4:26 a.m.

President Obama has read it, and the detailed plan is the only thing the Republicans have so far, but it seems like Rep. Paul Ryan is out there on his own with a budget blueprint that cuts the deficit by slashing Social Security and Medicare benefits and by creating private accounts and a voucher system.

The talk about Social Security changes that would essentially amount to privatization of the entitlement plan raised eyebrows earlier this week – and even prompted some in the GOP to back away – but it’s right there in black-and-white in Ryan’s formal budget plan released last week.

The official line from House Republican leadership is that Ryan’s budget is not the GOP alternative. Leadership aides pointed TPMDC to last year’s far less specific budget proposal and stressed their plan will be presented during floor debate that is likely to happen this spring. Ryan, the ranking Republican on the House Budget Committee, will write that plan too.The current Ryan plan includes a disclaimer: “This document was prepared with the assistance of the Republican staff, Committee on the Budget, U.S. House of Representatives. It has not been approved by the full committee and therefore may not reflect the view of individual committee members.”

And we’ve yet to find leadership offices embracing the Social Security and Medicare cuts. Notably the package of proposals House Republicans formally presented to Obama last week at their retreat didn’t include Ryan’s budget proposal or any detailed budget blueprint, but rather referred him back to last year’s much-mocked skeletal budget outline.

That 2009 budget that leadership aides referred us to offers vague plans to make “small adjustments in the benefits for higher-income beneficiaries if the Social Security Administration determines the program’s Trust Fund cannot meet its obligations” but not starting until 2036.

Last year it was voted down in April when Democrats passed the Obama budget.

Ryan (R-WI) says his current plan “rescues and strengthens Medicare, Medicaid, and Social Security – allowing them to fulfill their missions and making them permanently solvent.”

Translation – Social Security benefits will be reduced for those younger than 55, and the retirement age will be increased.

The budget plan states, “All other workers will have a choice to stay in the current system or begin contributing to personal accounts. Those who choose the personal account option will have the opportunity to begin investing a significant portion of their payroll taxes into a series of funds managed by the U.S. government.”

It’s similar to the Thrift Savings Plan used by members of Congress and federal workers, Ryan contends.

Another big cut is to Medicare – starting in 2021, new enrollees would be given vouchers to purchase private health insurance.

In all the Ryan budget plan dubbed the “Roadmap for America’s Future” would take the deficit from 11 percent of gross domestic product in 2009 to 4.8 percent in 2030 and 2.6 percent in 2050. The Congressional Budget Office shows the GOP plan would end the deficit around 2060 and they would produce a surplus of 6 percent of gross domestic product by 2083.

“The Roadmap would put the federal budget on a sustainable path, generating an annual budget surplus of about 5 percent of GDP by 2080,” the CBO wrote in its analysis.

I spent most of Wednesday scouring the Ryan budget proposal to try and understand how he manages to cut the deficit and ultimately end it – in 50 or so years.

The plan – highly unlikely to ever see the light of day beyond a perfunctory party-line vote as a substitute to the Democrats’ budget – offers a mix of tax cuts as well as changes to Social Security and Medicare.

It also eliminates income and payroll tax exclusions for employment-based health insurance starting next year.

Other money-saving bits in the Ryan plan would be limiting malpractice award settlements and rescinding the unspent funds from the 2009 $787 billion economic stimulus plan.

It also includes the same discretionary spending freeze (for 10 years) that Republicans mocked President Obama for proposing last week.

Yesterday Ryan defended the Social Security changes in an op-ed at the National Review.

Ryan wrote:

On Social Security, the Roadmap provides seniors with the option either to stay in the traditional government-run system or to enter a system of guaranteed personal accounts. Neither option is privatized. In the personal-accounts system, the accounts are managed and overseen by a government board — not a stockbroker or private investment firm. People choosing the reformed system select from a handful of low-risk, government-regulated options — just as members of Congress and federal employees do.

The CBO analysis did not offer hard numbers but instead the plan as a percentage of gross domestic product. The 50-page report shows the Republican plan would indeed lower the deficit, and details how Social Security cuts would save the federal government money.

Check out the CBO’s detailed analysis here.

OMB Director Peter Orszag last week said the Ryan budget provides a “contrast” to the White House plan and criticized the Social Security and Medicare elements.

“[I]ndividuals are on their own in the health care market. And the voucher does not keep pace with health care costs over time,” Orszag said of the Medicare portion of the plan.

“There are many aspects of that that are worthy of further discussion and debate, but it is a dramatically different approach in which much more risk is loaded onto individuals and in which the Medicare program in particular is dramatically changed from its current structure,” Orszag said.

President Obama also disagreed with the plan, though he called it a “serious proposal” that includes a “lot of detail.”

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