Hope You Like Donut Holes!

I took the time yesterday to read (gag) through version 2 of Rep. Paul Ryan’s Path to Poverty strategy which would ask low-income and middle-class Americans to give up the American Dream altogether and bow down to the demands of the richest 1% and the multi-national corporations.  Nowhere in the plan is even a hint of “job creation” and everywhere in the plan are cuts to vital social safety-net programs, education, infrastructure, and environmental programs.  And Ryan’s coup de grace would be a complete repeal of the Patient Protection and Affordable Care Act, the law Republicans fondly call Obamacare.

Representative Ryan touts how his “Path” will promote “economic freedom” (just exactly what is that?) but fails to mention anywhere in his “Path” is how badly his budget plan will impact employment.  He’s pretty much talking about gutting a huge chunk of government.  Now, that’s not just some huge monolith sitting in Washington DC.  That’s people’s livelihoods.  Like Republican Governors across this nation, the Republican’s in Congress intend to cut hundreds of thousands of jobs, drug test you when you show up to apply for benefits, and ensure that you perform public service work for any benefits you do qualify to receive.  Oh, and should you test positive, they’ll just give you the boot.  Where’s the “economic freedom” in all of that?

Rep. Ryan had a whole lot of pretty little charts inserted in his “Path” with which he hopes to scare Americans into submission.  The one at the left is a very good example, but it has some curious anomalies.   For one, Rep. Ryan pretty much assumes that from now until eternity freezes over, apparently our government revenue will remain flat as a pancake at around 17-18% of GDP.  In the history of our nation, that just simply never has occurred.  For example, check out the curve from1970-2010.  Does that look flat to you?   They claim that Social Security is going to consume most if not all of the Federal Government’s revenues within the next few years.  UH … does that spending curve (in blue) look like it’s rising at exponential rates consuming ever more of our government’s revenue stream?  Or, does it look fairly stable  through 2080?  Even the CBO, in their analysis to Rep. Ryan clearly stated that “Social Security would … be relatively stable as a share of GDP from 2030 forward.”

Similarly, check out the “Medicaid and other Health” curve (in olive).  Does that curve look like it’s rising at exponential rates and about to consume our entire revenue stream?  Nope, like the Social Security curve, it’s relatively flat through 2080 as well.  Then there’s the Medicare curve, which is rising.  I agree that costs are rising and that with the baby boomers approaching retirement age, and thus medicare age, more people will be applying for and being covered under that plan, but I’m not sure Ryan’s projection is even close to accurate.  Instead of converting the program to an ever-declining value, voucher-based program — a voucher that would be given directly to a for-profit insurance company that would find every possible excuse they can use to deny seniors access to effective treatments — we have to look for a better means to contain the escalating costs within the health care sector.

Here are the key features of Ryan’s proposed changes to Health Care, Medicare and Medicaid:


Starting in 2022, the proposal would convert the current Medicare system to a system of premium support payments and would increase the age of eligibility for Medicare:

  • Starting in 2022, the age of eligibility for Medicare would increase by two months per year until it reached 67 in 2033.
  • People who turn 65 in 2022 or later years and Disability Insurance beneficiaries who become eligible for Medicare in 2022 or later would not enroll in the current Medicare program but instead would be entitled to a premium support payment to help them purchase private health insurance.
  • Beneficiaries of the premium support payments would choose among competing private insurance plans operating in a newly established Medicare exchange. Those plans would have to comply with a standard for benefits set by the Office of Personnel Management. Plans would have to issue insurance to all people eligible for Medicare who applied and would have to charge the same premiums for all enrollees of the same age. The premium support payments would go directly from the government to the plans that people selected.
  • The premium support payments would vary with the health status of the beneficiary. In addition, the Centers for Medicare and Medicaid Services would collect fees from plans with healthier enrollees, on average, and convey the proceeds to plans with less healthy enrollees, on average, with the goal of appropriately compensating plans for the health risks of their insured population. This risk adjustment mechanism would be known as the risk review audit and would be budget-neutral.
  • The payment for 65-year-olds in 2022 is specified to be $8,000, on average, which is approximately the same dollar amount as projected net federal spending per capita for 65-year-olds in traditional Medicare (that is, the program’s outlays minus receipts from the premiums enrollees pay for Part B and Part D, expressed on a per capita basis) under current law in that year. People who become eligible for Medicare in 2023 and subsequent years would receive a payment that was larger than $8,000 by an amount that reflected the increase in the consumer price index for all urban consumers (CPI-U) and the age of the enrollee. The premium support payments would increase in each year after initial eligibility by an amount that reflected both the increase in the CPI-U and the fact that enrollees in Medicare tend to be less healthy and require more costly health care as they age. (For example, projected net federal spending per capita for all people age 65 and older in traditional Medicare would be about $15,000 in 2022, CBO estimates, in comparison with about $8,000 for 65-year-olds.
  • The premium support payments would also vary with the income of the beneficiary. People in the top 2 percent of the annual income distribution of the Medicare-eligible population would receive 30 percent of the premium support amount described above; people in the next 6 percent of the distribution would receive 50 percent of the amount described above; and people in the remaining 92 % of the distribution would receive the full premium support amount described above.
  • Beginning in 2022, the federal government would establish a medical savings account (MSA) for certain beneficiaries with low income. (An MSA is an account that holds deposits that can be used for medical expenses.) Eligibility for MSA payments would be determined annually by the federal government on the basis of income relative to the federal poverty thresholds. The amount of the contribution in 2022 would be $7,800, and the annual amounts in subsequent years would grow with the CPI-U.
  • Eligibility for the traditional Medicare program would not change for people who are age 55 or older by the end of 2011 or for people who receive Medicare benefits through the Disability Insurance program prior to 2022. As a result, the average age and average costs of enrollees remaining in the traditional Medicare program would increase over time. However, enrollees’ premiums under traditional Medicare would be adjusted to equal what they would be under current law—a so-called hold harmless provision. People covered under traditional Medicare would, beginning in 2022, have the option of switching to the premium support system.

The proposal would modify Medicaid as follows:

  • Starting in 2013, the federal share of all Medicaid payments would be converted into block grants to be allocated to the states. The total dollar amount of the block grants would increase annually with population growth and with growth in the CPI-U.
  • Starting in 2022, Medicaid block grant payments would be reduced to exclude projected spending for acute care services for elderly Medicaid beneficiaries. (emphasis added)
  • States would have additional flexibility in designing their program.

2010 Health Care Legislation
The proposal would make several changes to the Patient Protection and Affordable Care Act (or PPACA, Public Law 111-148) and the health care provisions of the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). In general, it would repeal the provisions of those laws that deal with insurance coverage, including:

  • The requirement that most legal U.S. residents obtain health insurance;
  • The establishment of health insurance exchanges and the provision of subsidies for certain individuals and families who purchase coverage through the exchanges;
  • The expansion of Medicaid coverage to include most nonelderly people with income below 138 percent of the federal poverty level;
  • The penalties on certain employers if any of their workers obtain subsidized coverage through the exchanges; and
  • The tax credits for small employers that offer health insurance.

The proposal would also change some other provisions of PPACA and the Reconciliation Act:

  • It would repeal the Community Living Assistance Services and Supports (CLASS) program for long-term care insurance, as well as a number of mandatory grant programs including funds for so-called high-risk pools, reinsurance for early retirees, and prevention and public health activities.
  • The proposal would repeal the provisions that created the Independent Payment Advisory Board and that expanded subsidies for the “coverage gap” in Part D (a range of spending in which many enrollees have to pay all of their drug costs, sometimes called the doughnut hole).

Most of the other changes that PPACA and the Reconciliation Act made to the Medicare program would be retained.

Tort Reform
Several changes would be made to laws governing medical malpractice, including putting in place limits on noneconomic and punitive damages.

What happens to Health Care under President Obama’s Budget Proposal:

Now, contrast that with the $360B in Medicare  and Medicaid and other health program savings detailed in his budget (click the graphic at the left to view a larger copy).  The President does not turn Medicare into a voucher program nor does he propose to turn Medicaid into a Block Grant program that could all to easily be diverted for funding other pet projects, but it does adopt several Republican-backed ideas that would increase means testing for higher-income seniors and discourage overuse of care.

Under Obama’s approach, for instance, higher-income seniors would pay more for doctors visits and prescription coverage beginning in 2017 and all new enrollees will pay a $25 deductible as part of their Part B premiums. But for the most part, the budget is similar to the administration’s September 2011 deficit reduction plan and recoups the greatest savings from drug rebates and modernizing provider payments to achieve greater efficiency.

Ryan’s Medicare savings don’t kick in until 2022, so it’s hard to make a direct comparison with Obama’s proposal. But suffice it to say, Ryan would cut about 1.4 trillion from Medicaid alone and another $30 billion in net Medicare savings using last year’s 10-year budget window, and those numbers rely on an analysis made by the CBO last April … it remains to be seen whether those numbers might be higher if that same analysis were to be conducted now.

What About Tax Reform?

Rep. Ryan’s budget outline makes it distinctly clear that the House Republicans’ idea of “tax reform” has nothing to do with making the tax code fairer or raising revenues to contribute to deficit reduction. If Rep. Ryan was serious about tax reform, his budget would propose specific ways to broaden the tax base. Stunningly, however, the House budget fails to identify a single tax break or tax loophole in the entire Internal Revenue Code that he would close. Not one.  Instead, he proposes to identify those via “reconciliation” in an open debate on the floor of the House.  Yeah right … and if you believe that’s going to yield anything productive, I have some land ….

Here are four things you should know about Rep. Ryan’s tax proposals:

  • They give a massive tax cut to the wealthy on top of the Bush tax cuts.
  • The “tax reform” plan fails to identify a single tax break or tax loophole to eliminate, making its rhetoric about “broadening the tax base” ring hollow.
  • The House budget would inevitably result in a major middle-class tax increase, though it attempts to hide that fact
  • Even with middle-class tax increases, the revenue side of their budget doesn’t add up.

The utter lack of specificity on tax breaks and tax expenditures contrasts sharply with President Barack Obama’s budget, which zeroes in on dozens of specific, unjustified tax breaks benefiting high-income households and special interests.

  • Ends wasteful tax subsidies for oil and gas companies
  • Closes “carried interest” loophole for hedge fund and private equity fund managers
  • Reforms major tax exclusions and deductions so that the wealthy do not receive a greater benefit than the middle class (Buffet rule)
  • Sunsets the Bush-era tax cuts for capital gains and dividends
  • Eliminates several specific tax subsidies for investment overseas to level the playing field for domestic job creation
  • Eliminates special write-off for corporate jets
  • Shuts down questionable “charitable deductions” for golf courses
  • Shuts down certain legal and accounting strategies used by the wealthy to avoid estate taxes
  • Closes many other unjustified loopholes for inventories, corporate-owned life insurance, the coal industry and others.

And then there’s the centerpiece of his “Path” — tax rates

In reading Ryan’s “Path,” it was impossible to determine whether the taxes I would be expected to pay under his “Path” would be higher or lower than what I’m currently paying.  He heralds that there would only be two rates — 10% and 25% — but where’s the breakpoint?  Are you paying 25% in taxes today?  Would you be paying 25% under Ryan’s Path?  Oh, and then let’s not forget that he’s going to dump some of those egregious loopholes so he can “broaden the tax base.”  Excuse me?

  • Would there still be personal and dependent exemptions?
  • What about the standard deduction or itemized deductions, like those for home mortgage interest? 
  • Will the child tax credit be eliminated?
  • How about the earned income tax credit?
  • Will employee health benefits or Social Security benefits be taxed?
  • Will it impose a new consumption tax, as Rep. Ryan has proposed in the past?
  • Will Unemployment Compensation be taxed?
  • Will the State & Local Tax exclusions be eliminated?  
  • Will the Sales Tax in lieu of State Tax deduction be eliminated?

Without knowing the answers to these questions, there’s no way of knowing how you might be affected by Ryan’s “Path” and whether you should vehemently oppose it with every breath of your body, or embrace it as a road to opportunity.  If you ask me or a large vocal majority that are beginning to speak out, Ryan’s “Path” is nothing more than a massive shift in tax burden from the rich and multi-national corporations to the middle-class and the poor.  His previous “Roadmap” released in 2010, proposed to raise taxes on the bottom 95% of Americans while cutting them so dramatically for those at the top that the proposal actually lost huge amounts of revenue overall.  This “Path” merely doubles down on his previous attempts.

What about Military Spending?

The bright side in Ryan’s “Path” appears to be focused on expanding the military and cut-rate taxes for multinational corporations.  You might ask, just exactly how are those two related.  Well, military spending under Ryan’s “Path” would NOT be cut and might even get a boost.  Thus, a whole range of multinational corporations would see a reduction in their max-tax rate to only 25%  (fat chance they’ll ever pay that)  and they wouldn’t see any reduction in US military protection of their interests both at home and abroad.

There are a massive number of US military bases strewn across the globe, not necessarily to assure OUR safety as Americans, but more to protect the interests of the multinational corporations.  Why else would we not have closed a large number of them after the Cold War ended during Reagan’s term.  Click on the graphic at the left and you’ll see how disproportionately we spend on our military and weapons of destruction.  Ryan  has said that he wants to see the military spend more than the Obama administration has proposed and has reversed the sequestered cuts to the military in his “Path.”

Defense spending has never fallen below 3 percent of GDP in the modern era, and Mitt Romney’s campaign is calling for 4 percent of GDP to be spent on the military. It’s also worth noting that in addition to what’s detailed in the Dept of Defense budget, there’s a full array of military spending related to nuclear weapons stashed in the Department of Energy’s budget as well.  The upshot is that to meet the spending caps consistent with Ryan’s views on the appropriate level of military spending would require us to pretty much have to completely dismantle the rest of the federal government.

I’m sorry, but if the multinational corporations think their tax rates are overly burdensome and want to pay less in taxes, then it’s time for us to start closing a large number of overseas bases protecting their interests.  Let them fund their own protection out of their budgets instead.  Oh, and while we’re at it … maybe we should charge them to use the roads that we pay for through our taxes, those taxes they don’t want to pay.

So What Does It All Mean and What are the Differences between Ryan’s “Path” and the President’s Proposal?

CBO estimates spending at 24.4 percent of GDP in 2022. Obama’s budget would hold it to 22.8 percent. And Ryan’s budget would keep it at 20.25 percent.  CBO projects public debt will rise to 94.2 percent of GDP by 2022. Obama’s budget would hold it to 76.5 percent. Ryan’s budget, according to CBO, would hold it to 70 percent. So Obama and Ryan’s budgets are fairly close on debt over the next decade.

Despite all of Ryan’s pessimistic negativity in his “Path for Prosperity” the bottom-line differences in dollars spent and dollars received aren’t all that great over the long run.  Yes, Ryan’s numbers are lower but, consider that the CBO analyzed Ryan’s budget last April, and the CBO’s economic outlook has worsened since then. Thus, if the CBO ran the numbers on his proposal today, the dimmer economic outlook they’re projecting would likely lead to, at the least, more debt than he’s acknowledging.  Plus, given that he’s going to be cutting the crap out of “government” — translated to “firing” a whole lot of worthless government workers and bureaucrats (Romney would love that) — my guess would be that his projected “revenue” will be far less than anticipated, given that those folks he intends to fire aren’t going to be paying all that much in taxes anytime soon.

Come November, will you choose a future in which a middle class can thrive again in America like it did for 50 years after the New Deal, up until Ronald Reagan blew everything up?  If you really want the American Dream back — to be able to go to college without incurring grievous amounts of debt, to be able to have a good job and reliable healthcare, to live life knowing that an accident or illness won’t wipe you out — then we need to work as hard as we can to kick these radical, reactionary Republicans out of government!


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