Tyler Cowen on the Paul Ryan Plan

With apologies* to Tyler, I am including his entire post. It is worth your time to read this.

The Paul Ryan budget plan — Marginal Revolution

I’ve now read it and here are a few comments:

1. The macro projections are very weak, not worth the time of criticism (more here).

2. Ryan nails our dysfunctional, “who is really responsible for paying for Medicaid?” structure. That said, I’ve long preferred the federalization of Medicaid. Block grants to the states may be better than the status quo, however (the size of those grants is a logically distinct question). Within state budgets, police and education are often the alternative to Medicaid costs. Are we so sure that Medicaid produces the maximum benefit for the money? Low-quality moralizing about the poor is not an answer to this question.

3. That said, Medicaid should be one of the last parts of the health care budget to cut. More of our health care aid should be like Medicaid, which is relatively cheap and also targeted at those who really need the assistance. The correct Medicaid decisions depend on other budget choices, but ideally Medicaid is low on the list of recommended cuts, even if it may require some cuts.

4. With either the block grants or the Medicare vouchers, I would urge maximum transparency. Health care costs are increasing by about five percent a year. That means a fixed value voucher loses about half its real value, in terms of command over health care resources, within fourteen years. (It’s a bit more complicated than that, since not all health care costs are proportional price increases to currently available services.) If that is the decision we are going to make, let us understand it as such. I would add that Ryan’s opponents don’t avoid this kind of dilemma nearly as much as they think they do.

5. It would be nice to have a scientific estimate of how much fixed value vouchers would lower the rate of growth of health care costs. I’m not convinced the effect here is large, but I’d like to see it studied more closely.

6. Ryan’s budget repeals ACA and thus in the semi-short run it could considerably increase Medicare costs. There is no reason why Ryan’s plan shouldn’t keep the most fiscally responsible aspects of ACA. Ryan exempts the current elderly from any Medicare cuts at all, see David Leonhardt’s remarks.

7. Over a ten-year time horizon, the Ryan plan increases the debt rather than decreasing it. Take that as a sign of how hard fiscal reform is going to be.

8. As I’ve already blogged, the vouchers idea won’t help cut health care costs. Let’s create some multiple public options within Medicare, some of which would allow people to trade health care benefits for cash. Democrats are supposed to be “pro-choice,” right? Or is that only for abortion?

9. I’m all for cutting the corporate income tax, but 35 to 25 percent isn’t impressive. Let’s eliminate it altogether.

10. There’s not nearly enough on reforming the dysfunctional supply-side of our health care institutions. Nor does science or basic research receive much discussion.

11. The plan does some strange things, such as repeal Dodd-Frank resolution authority, which most people, even Dodd-Frank critics, think is a good idea. Ezra summarizes the entire list of budget changes.

12. The more the Democrats criticize this plan, the more it helps Ryan and the more it hurts the Democrats. It reframes sticker shock, and the entire debate, simply to argue about $6 trillion in budget cuts.

13. #12 is the bottom line here, since the plan is not intended to be enacted into law. Points #1-11 pale in comparison to #12-13.

*Given the relative prominence of our two blogs, I think it is fair to say that I am not stealing any of Tyler's traffic. If anything I may be expanding his audience, at least marginally.