TRB From Washington: Medicare and Brimstone

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AUGUST 24, 2012

TRB From Washington: Medicare and Brimstone

Democrats and Republicans always claim that if their presidential candidate loses then the country will suffer. But this year, the GOP’s rhetoric has become apocalyptic. Mitt Romney says that he is running for president because “this country we love is in peril.” He wants to “save the soul of America.” Romney’s running mate, Representative Paul Ryan, has a name for this looming Democrat catastrophe: the “tipping point.”

In a 2010 speech, Ryan carried on like Kevin McCarthy in Invasion of the Body Snatchers. (“They’re here already! You’re next!”) Once we pass the tipping point, Ryan warned, Americans’ sturdy tradition of self-reliance will be “transformed into a soft despotism,” keeping “everyone in a happy state of childhood.” The following year, Ryan foretold of a post-tipping-point “hammock, which lulls able-bodied people into lives of complacency and dependency.” Ryan also contributed a chapter titled “The Tipping Point” to a book he co-authored with Representative Eric Cantor, the House majority leader, and Representative Kevin McCarthy, the House majority whip (not the Body Snatchers actor).

There are actually two tipping points. T.P. I is uncontrolled growth in both the size and indebtedness of government. Ryan conflates these separate issues in order to link a fake problem (the federal government’s share of GDP) to a real one (the deficit). In theory, sure, government spending’s share of GDP could grow so large that it would drag down the economy. But there is no real risk that will happen. During the past four decades, according to the Congressional Budget Office (CBO), federal outlays averaged less than 19 percent of GDP. In 2009, outlays rose to 24 percent, thanks to the Great Recession and Washington’s attempts to prevent it from becoming another Great Depression; 24 percent represented a post–World War II high. Since then, however, federal outlays have been falling relative to GDP.

Perhaps Ryan frets that an aging population and rising health costs will eventually make government “too big” again. CBO does project that, 25 years from now, federal outlays will be higher as a percentage of GDP. But they still aren’t projected to rise as high as the 2009 peak—unless, ironically, Ryan and his party succeed in extending all the Bush tax cuts. If that happens, according to CBO, outlays will rise to 26 percent of GDP, a new post–World War II record.

Ryan is correct that the federal deficit threatens the economy. But his professed urgency about solving the debt problem is undermined by his (and Romney’s) even greater determination to lower taxes on the rich. I won’t dwell on this point because not even Fox News takes Ryan seriously as a deficit hawk. Brit Hume recently tortured him into admitting that his own budget plan didn’t eliminate the deficit until the 2030s.

If T.P. I (to extend the Body Snatchers analogy) will devour our bodies, then T.P. II will consume our souls. In a speech to the American Enterprise Institute (AEI), Ryan spoke of “a more insidious moral tipping point.” That’s the moment when “we become a nation of net takers versus makers.” Ryan recently renounced Ayn Rand (having previously credited her with inspiring his entry into politics), but his takers/makers dichotomy owes a debt to Atlas Shrugged, wherein “producers” (rich people) resist enslavement by “looters” (the government) to benefit “moochers” (the lazy and altogether inferior masses). Ryan’s more proximate source, though, is a 2007 study by the Tax Foundation, a conservative Washington nonprofit, on something called “fiscal incidence,” which measures the totality of government redistribution, taking into account both taxation and government spending.

“Twenty percent of Americans get seventy percent of their income from the federal government, so they’re dependent,” Ryan said in his speech. “An additional twenty percent get forty percent of their income from the federal government, so they’re reliant.” This is very misleading, as PolitiFact noted when it dinged him for using these same statistics two years earlier. Ryan was counting as “income” the Tax Foundation’s very rough calculation of the two bottom quintiles’ benefits from all federal spending, including national defense, public parks, airports, and so on. When you counted only direct benefits like Medicaid, Medicare, and Social Security, the “dependent” share of 70 percent (actually 75) dropped to 56 percent, and the “reliant” share of 40 percent (actually 39) dropped to 27 percent. And even these calculations were inflated because the Tax Foundation study had no way to account for what retirees had previously contributed to Medicare and Social Security during their working lives.

“A full seventy percent of Americans,” Ryan said at AEI, “get more benefits in dollar value from the federal government than they pay back in taxes.” Actually, it’s 60 percent—the bottom three quintiles in the income distribution. To Ryan, this shows that “people [are] growing up in America and seeing that they’re not going to be independent but dependent on the government.” But what it really shows is that baby-boomers are starting to retire. Old-age retirement is not malingering, and an elderly demographic bulge is not a sign that younger Americans have lost their work ethic. Something else that 60 percent figure probably shows is that Americans—the rich and also the middle class—need to pay more in taxes. Ryan is scandalized that many lower-income Americans don’t pay any income tax—the result of a conscious, once-conservative policy to reward the working poor. But the real problem lies with the many more non-poor Americans who do pay taxes, but not enough to cover federal spending. Mitt Romney is one of them.

Listen to Ryan, or just peruse the Tax Foundation study, and you’re liable to conclude that the federal government has gotten steadily more redistributive during the past 33 years as incomes have grown more unequal. But that turns out to be untrue. A 2011 fiscal incidence study by CBO weighed direct federal benefits against federal taxes and found that Uncle Sam redistributes a quarter less than he did in 1979. Which is exactly what you’d expect when conservative politicians like Ryan rise to prominence by spreading panic about the death of self-reliance. The GOP doomsayers are the ones who seem to have been body-snatched.  

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posted in: washington, washington, eric cantor, kevin mccarthy, paul ryan, medicare, republican party, republican party

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