For most of the past half-century, federal expenditures have been kept around 20 percent of GDP. The cost of existing commitments, however, is projected to grow that number to 30 percent of GDP by 2050—largely because of increased expenditures on health care and Social Security.

In 2008, Paul Ryan, the ranking Republican on the House Budget Committee, estimated that income-tax rates would need to double to fund existing spending commitments. He proposed a “Roadmap for America’s Future” to avert the problem. This propelled him to the forefront of the GOP; he would become Mitt Romney’s running mate in 2012 and later Speaker of the House. But only three years into his speakership, Ryan retired from Congress, seemingly yesterday’s man at just 48, and his program has vanished into the mists.

In the years since, few have proposed alternative paths to Ryan’s, even though staying on the current course is not an option. The Congressional Budget Office estimated that the absence of sweeping reforms would cause GDP per capita to decline from 2050 onward and noted that “beyond 2058, projected deficits . . . become so large and unsustainable that CBO’s model cannot calculate their effects.”

Where did Ryan’s plan succeed? Where did it go wrong? And how can we do better?

An aging population means more retirees living longer and fewer new workers. In 1960, there were five workers per Social Security beneficiary; by 2040, that ratio will be down to 2.1 workers per beneficiary, requiring higher payroll taxes to fund equivalent benefits. Improvements in medical science mean that the cost of health-care entitlements is also steadily rising as people live longer—into old age and disease.

The centerpiece of Ryan’s proposal was a sweeping reform to Medicare, the primary driver of growth in entitlement costs. It had several principal elements: gradually raising the age of eligibility for the program from 65 to 69.5; requiring enrollees to receive Medicare coverage from private insurers; reducing the annual rate of increase in the subsidy for seniors to purchase these plans; and further cutting the subsidy that wealthier seniors would receive. CBO estimated that Ryan’s proposal would have kept the cost of Medicare at around 4 percent of GDP from 2020 to 2060, instead of rising to 11 percent, as was projected.

Ryan’s 2008 roadmap argued that Americans would be better off if they, rather than the government or their employers, controlled the purchase of health insurance. It proposed turning Medicaid from matching aid for states into a direct federal subsidy for households to purchase their own health coverage, with states contributing half the cost. Federal funds for long-term care would become a block grant. As a result, CBO estimated that federal Medicaid spending would decline from 1.4 percent of GDP in 2008 to 1.1 percent in 2060, rather than increasing to 3.8 percent, as projected under current law. Ryan further proposed eliminating the full exclusion of employer-purchased health insurance from income and payroll taxes, while establishing a uniform refundable tax credit for the purchase of health insurance, costing 0.6 percent of GDP.

On Social Security, Ryan proposed allowing individuals to invest a third of their FICA payroll-tax funds in privately owned accounts for the purchase of approved mutual funds, with the federal government guaranteeing a rate of return at the level of inflation. His reform also promised to slow the rate of benefit growth for wealthier seniors and would have gradually increased the retirement age from 67 in 2026 to 70 in 2098. Due to the cost of establishing fully funded private accounts for future generations while paying benefits under the existing pay-as-you-go system, Ryan’s proposal would have slightly increased federal spending on Social Security from 2020 to 2060.

Though Ryan proposed to keep overall federal revenues at about 19 percent of GDP, his roadmap included sweeping changes to the structure of the tax code. It proposed eliminating all tax deductions, exclusions, and special provisions, with the exception of the newly established health-insurance credit. Having broadened the tax base, this reform would allow the establishment of a $12,000 standard deduction, reduction of income taxes to two marginal rates of 10 percent and 25 percent, and elimination of inheritance, capital gains, dividend, and alternative-minimum taxes, while replacing the corporate income tax with a lower business-consumption tax.

Ryan bitterly resisted Donald Trump’s takeover of the Republican Party. Nevertheless, the 45th president eagerly signed the 2017 Tax Cuts and Jobs Act into law, moving the tax code substantially in the direction envisaged by the Ryan Roadmap. The administration’s “HRA rule” also succeeded in broadening the tax exemption of employer-sponsored health insurance to plans that individuals purchased for themselves.

But the 2010 Affordable Care Act (ACA) had more than doubled premiums on the individual market, making this option unappealing without further insurance-market reform. In 2016, the GOP’s attempt to “repeal and replace” the ACA failed, as Republicans were eight seats short of the filibuster-proof Senate majority needed to restructure the legislation’s core insurance-market regulations.

Ryan’s proposal to reduce federal funding for Medicaid to 50 percent of spending on individual benefits would have slashed assistance to the poorest states, which currently spend the least on the program, while doing little to constrain the growth of expenditures by states with the most over-extended benefits. In a revised 2012 blueprint for policy reform, Ryan backed off the idea of turning Medicaid into an individual subsidy in favor of traditional Republican proposals to cap allocations for states. Yet in 2017, Congress rejected even extremely modest proposals to cap the growth of funding for the highest-spending states. To control Medicaid costs while allaying concerns about cuts to core services, it would be better if federal policymakers assumed full responsibility for Medicaid.

Ryan’s Medicare proposals evoked the most angst. Many Republicans, as well as Democrats, sought to distance themselves from these ideas. Even Newt Gingrich, campaigning for the presidency in 2011, assailed it as “right-wing social engineering.” But Congress has moved a fair distance toward Ryan’s position on Medicare over the years—largely because the growth of expenditures currently allocated to the program is so enormous that politicians of all stripes would prefer to use them for other purposes.

The 2003 Medicare Modernization Act had already made affluent retirees pay a higher share of Medicare Part B benefit costs as premiums. The 2010 ACA did much the same for Part D. The 2015 MACRA legislation further increased the premiums that wealthier enrollees paid and slowed the growth of physician reimbursement. The ACA also included steep cuts in Medicare benefits—worth more than $70 billion per year. Whereas in 2008, the CBO had projected the Ryan plan would reduce the estimated cost of Medicare in 2020 from 4.2 percent to 3.7 percent of GDP, in 2021, Medicare’s actual cost added up to only 3.1 percent of GDP. Meantime, the majority of Medicare beneficiaries are projected voluntarily to have opted for private plans before the end of the decade. In 2030, Medicare will look more like the program sketched in Ryan’s Roadmap than the one that existed in 2008.

The problem with Paul Ryan’s vision was that it involved a misunderstanding about who bears the cost of bloating entitlements—and this misunderstanding led the GOP astray. Ryan expressed concern that “America will increasingly resemble a European welfare-state—a society in which the majority of the people pay little or no taxes but grow dependent on government benefits; where tax reduction is impossible because more people have a stake in the welfare state than in free enterprise.” But there is a limit to the revenue that government can extract from any person’s income in taxes. The richest 1 percent pay little more of it in Europe (35 percent of income) than in the U.S. (33 percent). Additional increases in the cost of entitlement programs therefore tend to put a heavier tax burden on relatively poorer households. As a result, average tax rates on the poor in Europe (28 percent of income) are far higher than in the United States (16 percent). Mitt Romney shared this misconception, famously remarking in his 2012 presidential campaign that “forty-seven percent of Americans pay no income tax. So our message of low taxes doesn’t connect.”

The costliest and most over-extended entitlements are funded mostly through payroll taxes, to which poorer Americans pay a higher proportion of their incomes. To pledge reductions in entitlement spending while ignoring the burden of payroll taxes supporting those ever-swelling benefits is to contemplate only political pain and ignore potential gain.

Ryan’s Roadmap struggled because it confused two opposing impulses. On the one hand, it sought to claw back expenditures to benefit a core needy group whose members cannot provide for themselves. On the other, it tried to strengthen the relationship between contributions and benefits—most notably by adding prefunded private accounts to Social Security. The second impulse undermined the first, making it harder for Republicans to communicate to ordinary voters how they would benefit from an entitlement-reform-and-tax-cut package. Voters might be inclined to support increases to the retirement age if they get lower payroll taxes in return. Otherwise, they’ll pass.

Photo By Tom Williams/CQ Roll Call

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