Wednesday, August 15, 2012

Congressman Paul Ryan as VP pick

When I heard of Mitt Romney's choice of Wisconsin Congressman Paul Ryan as his VP running mate, I was a bit surprised.  My understanding of this very close presidential race is that the winner will be the team that is able to convince the middle ground voter to swing to their particular vision while energizing the base to actually go to the polls and vote.

From that basis of understanding, the choice of Paul Ryan seems to satisfy only the latter requirement, and, in fact, may provide as much motivation for the Democratic base as the Republican if the Obama campaign can successfully portray Ryan as a threat to Social Security, Medicare, Medicaid, and other assistance programs such as food stamps, student loans, and tax breaks for the middle class.  As for swaying those 10-20% of the voters still on the fence, it appears to be a wash, at best.  I would imagine that as many people who agree that we need to strive towards a more balanced budget and reduced deficit, will disagree with a plan that fundamentally shifts the burden of costs from the wealthy to the middle class; from the government to individual households.

As important as perception, perhaps the bigger issue is whether the American electorate will actually investigate the Ryan budget plan rather than listening to an opinion that reflects an agenda.  Towards that goal, I googled the Ryan budget plan and read both pro and con opinions, as well as portions of the plan.  Here are my impressions, and a few questions I would ask Rep Ryan if given the opportunity.

First and foremost, the Ryan plan would reduce the long term deficit and create a balanced budget.  Estimates vary, and factors that effect the economy of the United States that are out of our control, such as a continued European economic slowdown, potential military actions, natural disasters, etc, cannot be quantified, but most  non-partisan analyses of Ryan's budget show that his plan would provide slightly lower yearly deficits at first, with bigger federal savings achieved in the 2020 decade, and the potential for a balanced budget in the 2030 decade. 

This is true despite lowering the tax rates for the wealthy, and for corporations. 

Of course, similar results can be attained through the adoption of the Bowles-Simpson plan, but that plan has, so far, been rejected by both Democrats and Republicans as it requires some tax hikes, and no one calls for tax hikes in an election year, especially a presidential election year.

So the question is, how brilliant must this tax plan be, if it can reduce deficits, eventually create a balanced budget, and reduce taxes. 

A big part of the answer is contained in the health care proposal portion of the plan.  In it, the federal government slowly removes itself from the burden of rising health care costs. 

The problem is, if the federal government can no longer foot the bill for our aging population, then to whom will the burden shift?   It is clear that in our rush to believe that as Americans we need to be independent to the end, we may be missing the point that it will be up to each individual and their family to shoulder the difference between what the government will provide in a voucher and what it will actually cost for health care insurance and out of pocket health care costs. 

Here is the first big question though.  If Americans, especially older Americans, will now have to buy health care insurance, who will be selling it?  Currently, the health care insurance industry has a free pass on insuring the elderly and chronically sick.  Will they now be forced to cover any and all Americans who apply?  The fact is, our health care insurance providers can make the huge profits they earn, because they are not saddled with paying the health care costs for those currently on Medicare and Medicaid. 

And, if they are forced to sell insurance to all that apply, how will they price it?  In a way that the voucher accounts for at least 75-80% of the cost so Americans are only absorbing 20-25% more costs?  Or, at a cost they need to maintain profit, a cost which might make the voucher amount irrelevant?

Secondly, at what reimbursement rate will the health care industry pay for all those health care providers who are treating the elderly and sick?  My understanding of the current rates are that they do not always provide enough money for doctors, hospitals, etc. to cover their costs.  Will this still be the case?  Somehow, I would think it would be even worse if the health insurance industry plans to continue their enormous profits.

Third, what mechanism will exist which will provide an increase in the voucher over time.  Remember, people who retire at age 68 and live to 80, will be responsible for 12 years of health care costs.  Will the insurance industry maintain rates, which means less profit or will the voucher and allowance for higher out of pocket costs increase over time.  I couldn't find details on this in the plan.

I have two children, one about to begin his 3rd year of college, and one who will be a senior in high school this year.  I recently read that it costs the average family $275,000 to raise a child today.  That seems high to me, so lets say I have spent $300,000 on my kids so far.  While I don't have huge debts, I still have some, and I would guess that I would have less if my wife and I hadn't chosen to start a family.  But I accept these debts as a consequence of my decision to have children.  It seems that Rep Ryan's plan is geared to ignoring the problems of an aging population and ignoring the investments necessary for a strong country.  It seems to ask less from those with the most, while pretending that we, the people, in the form of the United States government, have no obligation in providing a secure time of life once we reach an age when our ability to pay for ourselves is reduced. 

While I may be choosing to evaluate Rep Ryan's cuts differently than those who advocate for him, the cuts are real.  Less federal money for food stamps and student loans.  Sort of like abandoning your kids.  And less money for the elderly as Medicare and Medicaid are phased out.  Sort of like abandoning your parents.

If that is the only way to prosperity, the only way for the greatest country on earth to deal with its budget problems, then we have much bigger problems than we think.




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