March 6, 2010

THE DRAMATIC DIFFERENCE:

Obama's new adversary ( Shawn Tully, senior editor at largeMarch 4, 2010, MSNBC)

His prescription for health care is radical: Ryan would eliminate the exclusion allowing companies to lavish on employees tax-free benefits and give the tax breaks to the workers themselves through a rebate of $5,700 a family, or a check for that amount if they don't pay taxes.

"The problem with both Medicare and private plans is the third-party-payer system," says Ryan. "Consumers, spending their own money, will drive down prices." Ryan proposes a classic flat-tax solution: Americans could choose between using today's byzantine rules and a simplified, post-card model with two rates, 10% and 25%. Believe it or not, the simplified system would disallow mortgage and other deductions.

In February the Congressional Budget Office analyzed Ryan's road map -- and confirmed that it produced the falling deficits and balanced budgets that Ryan promises. "By proposing cuts in benefits, Paul Ryan is demonstrating the nature of the solution that must occur," former Fed chief Alan Greenspan told Fortune. "You can't close the gap with tax increases alone, and if you try to do it, you slow growth and reduce future tax receipts."

Ryan's fan base cuts across party lines. "We both want to inject competition into the marketplace," says Sen. Ron Wyden (D-Ore.), who is co-sponsoring another bill that would hand consumers tax breaks for health care they now get only from employers. "We need ideas and policy, not political points, and that's what Paul is all about."

Despite some bipartisan support, Ryan's ideas are a hard sell, politically speaking. The idea of indexing Social Security to inflation caused an angry backlash under President George W. Bush. On both Medicare and his health-care tax credit, Ryan would restrain expenditures by raising benefits for high earners and most of the middle class at a pace slower than the rate of medical inflation. As a result, Americans would be forced to spend more and more of their own dollars on insurance. Even though Ryan promises to leave today's Medicare benefits in place for people 55 and older, his proposal is bound to raise the ire of the lobbies for senior citizens.

Ryan's proposals contradict the Obama administration's philosophy, which calls for the government to take on more responsibility for citizens' well-being. Budget director Orszag conceded that Ryan "succeeds in addressing our long-term fiscal problem," but takes "a dramatically different approach in which more risk is unloaded onto individuals."


Posted by Orrin Judd at March 6, 2010 6:34 AM
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