April 5, 2011

It's a good start, but Ryan's plan has three big problems

Veronique de Rugy

Senior Research Fellow

Mercatus Scholar Veronique de Rugy analyzed Chairman Ryan's "Path to Prosperity," and although the bill could be better, it is a welcome sight to see a serious plan about getting our books in order, she says. Highlights are below, but if you're interested, you can read the op-ed at the Mercatus newsroom.

“While it’s a good start, there are three major problems with the plan,” said economist Veronique de Rugy. “First, it continues the Washington tradition of extending open-ended promises on Medicare, Medicaid, and Social Security to millions of people without paying for them. Second, Medicare will continue to provide health care support to everyone including the richest Americans. Third, the plan introduces some competition between providers but consumers may still be bound to a list of guaranteed coverage options chosen by the government.”

“The real question is whether the plan will live up to its name ‘path to prosperity’,” said de Rugy. “Under Ryan’s plan tax revenue will consume 17.1 percent of the wealth created by American families, a number that is still too high but more in line with the government’s abilities to collect money.”

“The plan is cutting spending the first three years and then slowing down the rate of spending,” she said. “Spending increases from $3.6 trillion in 2011 to $4.7 trillion in 2021, which is a $1.1 trillion increase over 10 years.”

“This is an improvement over the deficit commission’s proposal that increased spending by $1.6 trillion over 10 years and a big improvement over the president’s budget which increases spending by $1.9 trillion over the same period,” said Rugy.

"As for Medicare and Medicaid, under the plan the growth of these programs would be much slower, and would reduce the deficit to $385 billion in 2021 as opposed to the projected $774 billion," she said. "Maybe more importantly, it would reduce the debt held by the public down to 67.5 percent of GDP as opposed to the projected 90 percent."