Representative Paul Ryan (R-WI) is concerned that the constant political bickering and backbiting in Congress could eventually bankrupt the economy, as the costs of Medicare, Medicaid, and Social Security are allowed continue upward unchecked. So he requested that the Congressional Budget Office (CBO) to do an analysis on how much the entitlements would impact us in the future. The results were scandalous:
“By CBO’s reckoning, federal debt under that scenario [of the costs of Medicare, Medicaid, and Social Security continuing their upward spiral] would climb from about 37 percent of GDP in fiscal year 2007 to more than 290 percent in 2050—a large figure by any standard. Since the founding of the United States, federal debt surpassed 100 percent of GDP only for a brief period during and just after World War II.”
There are three solutions, as pointed out by the Heritage Foundation: Finance these entitlements via massive deficit spending, raise taxes, or restrain spending growth. The first and second options would do much to destroy the economy, including causing per capita income growth to plateau – and then drop – and sending taxes to unsustainably high levels. There is one more option, however.
Legislation introduced on Wednesday by Congressman Ryan has introduced legislation that would completely reform Social Security, Medicare, and Medicaid, protecting the promises to seniors while simultaneously ensuring that future taxpayers will not be left with an undue burden.
Representative Ryan’s proposal includes moving towards privatization of Social Security by allowing up to 5 percent of the payroll tax to be put into private accounts. This would be optional, but would substantially cut back on federal spending for social security. Medicare would still be given to those over 55, while younger Americans would get a check of up to $9500 annually (once they reach retirement) to cover insurance, with special benefits to lower-income Americans. Medicaid funds would be directly given to the states, which could then use them as they saw most appropriate.
Additionally, his bill would enable taxpayers to pick which tax code they wished to follow: the current code, or a flat rate of 10 percent for single $50,000 earners ($100,000 married), or 25 percent for those above that. A family of four would have a substantial deduction, the AMT would be repealed, and it would be simple enough to be filled out on the back of a postcard and mailed in to the IRS.
Businesses would also benefit, as the US corporate tax would be eliminated and replaced with a business consumption tax lower than what the average industrialized state enforces – thus removing American businesses from having to bear the dubious distinction of paying the second highest corporate tax in the developed world.
Most importantly, the Ryan plan is not merely a passing political fancy; the CBO has examined the numbers, and concurs with Representative Ryan on his plan to end the looming financial crisis. They determined that, following his reduced spending plan, the federal debt would eventually cease to climb, ultimately ending up at 64% of the GNP (whereas no reform would put the federal debt at 859% of the GNP). Their analysis also concluded that, in 50 years, the GNP will be 85% higher per person than if the economy was left at current levels.
Mr. Ryan has taken a serious step in coming up with some bold proposals – representing a refreshing dose of limited government philosophy. Now, its time to see if the Democrats in Congress will take equally bold and serious action. Or whether they’ll continue bickering like scandalous school children while their regnant Lady Backbite puts political gain above the public trust.
