The moment we have been anticipating has finally arrived. House Budget Committee Chairman has released his budget for FY 2012, along with his blueprint for tax and entitlement reform over the next decade. This budget proposal, which would cut $5.8 trillion from the CBO baseline over the next decade, is a mature and well balanced plan emanating from a city full of fatuous demagoguery.
It is important to note that this is just the preliminary proposal of the very first step of the congressional budget process; the Concurrent Budget Resolution. There will be ample time to sort through all of the components of this plan and provide the appropriate changes as needed. Nonetheless, it is a laudable first step that has come to fruition through the assiduous work of Paul Ryan and his Republican colleagues on the Budget Committee. It is a fresh breath of moderation and seriousness amidst the extremism that is so endemic in Washington among the Democrats. Here is a cursory breakdown of some of the major provisions of the Ryan plan, categorized by the excellent, the good, and the need for improvement.
- Medicaid: The budget proposes a transformational change to Medicaid by converting it to a block grant program which would give states more flexibility in how to spend their Medicaid dollars. There would also be an overall cap placed on the block grants. This would encourage states to innovate and formulate the best ideas for reducing dependency, instead of exacerbating it through an open ended entitlement program. The plan would trim the cost of Medicaid by $771 billion from the CBO baseline over the next decade.
- Corporate Welfare/Ethanol/Farm Subsidies: Ryan’s proposal repeals the odious ethanol subsidies lock, stock and barrel. It also reforms farm subsidies by trimming farm/corporate welfare from its current level of $25 billion. This is especially prescient given the record high food prices that have been spurred in part by these market-distorting subsidies. To address the record high energy prices, the proposal calls for an end to tax cuts for the rich – no more green subsidies!
- Obamacare: It defunds Obamacare lock, stock and barrel. While much of the budget is driven by choices between several evils in order to reform existing Democrat entitlement programs, this proposal prevents ObamaCare from becoming another Medicare/Medicaid disaster.
- Taxes: The proposal reduces the highest corporate and personal income tax rates to 25%.
- Earmarks: The ban on earmarks is made permanent.
- Freddie Mac and Fannie Mae: The budget plan cancels these economic destructive government entities and calls for their privatization. The resolution also calls for an end to corporate bailouts that were enshrined in the Dodd-Frank financial takeover bill.
- Pell Grants: All of the exorbitant increases in Pell Grants that were a part of the stimulus bill would be defunded. This will help slow rising tuition inflation that has been generated as a result of these interventionist programs.
- Medicare: Ryan proposes a premium-support program to replace the current market-distorting, bankrupting, and open-ended subsidization of all health care for seniors. Under such a plan, the government would pay the premiums of Medicare enrollees’ so they can purchase an insurance plan of their choice in the free market. As with the Medicaid proposal, this plan would mandate an overall spending cap on the amount of the premium payments.
While this plan is a prudential first step to infusing the free market into an otherwise socialized sector of the economy, the changes will not take effect for another 10 years. Also, a more conservative approach would have called for the issuance of vouchers, thereby directly empowering the individual, as opposed to perpetuating the role of government through their payments to insurance companies. In addition, the plan calls for adjustable spending caps that can lead to means-testing based upon the needs of the individual. Those who contribute more into Medicare shouldn’t receive less because of their personal income status. The individual’s contribution to Medicare and Social Security is what sets apart those programs from welfare programs. As such, they should not be means tested. Nonetheless, Ryan’s Medicare plan is a decisive step in the right direction.
- Welfare Reform: Ryan proposes converting the Food Stamp program into a block grant to states that would be indexed to inflation and tailor made to each state’s own unique circumstances. He also wants to apply the 1996 welfare reform accountability mechanisms to other housing assistance programs. There are currently a staggering 44 million Americans on food stamps and the program is projected to cost $700 billion over the next 10 years. Ryan’s reforms offer a very good first step.
On the other hand, there are still over 70 other welfare programs that cost another trillion dollars, but are untouched in this proposal. Republicans should look to Jim Jordan’s Welfare Reform Act of 2011 to build upon Ryan’s reforms of the Food Stamp program. [Read more about Jordan’s plan here.]
Need for Improvement
- Social Security: The most glaring omission of Ryan’s budget plan is a fix to Social Security. It is understandable why Ryan would shy away from touching the most sacrosanct program in the federal arsenal, especially as he is bravely striking out at virtually all of the other major programs. However it must be reformed.
Many good conservatives are so concerned about solvency that they are calling for a raise in the retirement age and means-testing of benefits. While those proposals might succeed in making SS more solvent, they are an anathema to the ideals of free market capitalism and individual liberty. It is inconceivable that a hard working 30 year-old should be forced to work until 70 (maybe longer) and then awarded his retirement at the whims of a means-tested regime, all the while having no property rights over his retirement security.
The objective of entitlement reform is not to make a Democrat-run program solvent. Our objective vis-à-vis entitlement reform should be focused on returning the wealth to the American worker and taxpayer by promoting more liberty and prosperity. It is fair to propose much needed innovative changes such as benefit cuts and retirement age adjustments for those who optionally enroll in such a program. However, there can be no discussion of raising the retirement age without offering young workers private accounts or an option to opt out.
- Taxes: Repeal Death Tax– One of the more egregious components of the grand tax deal last year was the reinstating of the immoral Death Tax at 35%. The Death Tax needs to be abolished. Period.
- Non-defense discretionary spending: The proposal only cuts $1.7 trillion from domestic discretionary programs over 10 years. That adds up to roughly $170 billion in discretionary spending cuts per year. This is accomplished by bringing non-security discretionary spending back below 2008 levels and then freezing it for five years. Spending levels for most agencies should be reduced to 2006 levels. Furthermore, Republicans should take a closer look at Rand Paul’s proposal to cut up to $500 billion a year by eliminating such impotent departments as HUD, Education, and Energy. His plan would also seriously reduce the funding, size, and scope of the Departments of Agriculture, Commerce, HHS, Interior, and Labor.
Keep in mind that when we fund these agencies, we are not merely losing the billions or tens of billions of dollars in wasted expenditures. These superfluous agencies use that funding to impose onerous market-distorting regulations and mandates on job creation, income growth, energy productivity, and consumer purchasing power. Such a cost to our economy is incalculable.
- Debt and Deficit: Due in part to the previous point, the proposal would take too long to balance the budget. For FY 2012, the government would spend $3.529 trillion and collect $2.533 trillion, still resulting in a gargantuan deficit of $995 billion. It would take another 26 years to fully balance the budget.
The Democrats have worked indefatigably for a century to destroy the fabric of our free market, liberty seeking society. We will not restore our republic overnight. As such, Paul Ryan’s proposal provides us with the building blocks from which to bring about the restoration of our constitutional government. More importantly, it has spurred a much needed sagacious debate about the best way to fulfill those ideals-a debate that has been suppressed by the Democrat extremists in Washington.
The Democrats can no longer hide the fact that they have no desire to cut one red-cent from their sacrosanct $3.8 trillion annual plunder of the American worker and their $14.2 trillion foreclosure on the next generation. They will fight vociferously to keep every last poverty inducing, market-distorting, and price-hiking program. After all, the future dependency and impending poverty of the American worker is the mother’s milk of Democrats’ perennial power.
Republicans should stick to their guns and build upon Ryan’s innovations. A new poll shows that Americans align with the Tea Party against Congress on all major issues by a 48%-22% margin. There is nothing to fear, as the Tea Party agenda is good politics, and more importantly, good policy. Quite the contrary, it is the Democrats who should fear electoral reprisal. Their extremist policies have killed jobs; reduced income, raised the cost of food, energy, and vital needs; perpetuated poverty and corporate cronyism; depredated our energy productivity; and spawned a virtually immutable debt crisis.
Paul Ryan’s budget resolution is the starting point for our efforts to reverse all of these statist ills. The only question from here is how quickly we desire to return to a path of prosperity and individual freedom.
Cross-posted to Red Meat Conservative