Republican Congressman Paul Ryan unveiled a new plan to reform America’s most costly entitlement programs: Social Security, Medicare and Medicaid. You can analyze the details here. The summery in bullet points looks like this:
- $5,700 refundable tax credit for families to purchase insurance
- If you are on Medicare and Social security now, you will see no changes.
- If you are under 55 years of age you will be introduced to new reformed rules under which you will plan for your retirement.
- New tax code that has just two rates and no special tax deductions, credits, or exclusions (except the health care tax credit) must take effect.
The conservative wave in the American political life makes it seem like this kind of reforms will be welcomed. But there are few things that will make this road-map hit a dead end in the public opinion if the plan ever has a real chance to be implemented.
It is one thing for the electorate to talk the talk at rallies. It is a different thing to walk the walk. The fresh example is Obama’s presidential failure. It was easy to rally the folks under “let’s give everybody health care” banner. The same folks drifted away their support for the president when he asked them to pay for it.
Congressman Ryan may find himself in the same situation when people who are drinking tea now realize they are not getting the same deal as grandma when they retire. President Bush knows best how that feels – his Social Security Reform did not happen, because people did not want to take risks and responsibility for their retirement. In speeches they do. In fact they don’t.
The blame goes to everybody who created the social programs in the first place. It is like giving a lollypop to a kid. It is impossible to take it back without a tantrum. If you don’t like screaming you need to consider just cutting the rest of the sugar for the day from the kid’s menu.
And this is why the only chance to stop the entitlement programs to drag the USA into defaulting on its Chinese credit cards is freeze on new entitlement and reforming the tax-code so it provides the necessary revenues.
It is important to kill bills like Obama’s health care that are trying to sneak in new entitlement. No more extra money for education. We already pay reasonable amount of money for it. The education system should increase its productivity and get improvements with the money they already receive. And so should every other bureaucracy in America. The private sector is producing more with fewer employees after the recession. Government should follow the lead and work hard on improving its efficiency, cutting the fraud and abuse and functioning without extra sugar from new taxes.
Congressman Ryan proposes a tax-code reform. It looks fantastic and it is scored great by the CBO. But at the moment the low-income folks realize that their Earned-Income Credit welfare tax-check will be gone and the middle class realize the tax-deductions will no longer be an option the screaming will begin and democratic rallies will flood the country. Paul Ryan calls it fair tax reform, but there are two rates in his proposal. Fair tax should have one rate for everybody. Ryan says no more deductions or credits, but proposes health care credit. Exceptions are what turned our current tax-code into unfair monstrosity. There should be no exceptions in a fair tax code.
I suggest republicans keep working on their proposals. With continuous improvement, no new entitlements, making the federal government lean again and a new fair tax code that does not pick winners and losers we all have a chance to succeed.