Editor’s note: This is the first of a five part series that compares and contrasts the Romney-Ryan plan with the Obama-Biden plan on entitlements, spending/debt, taxes, jobs and health care.
Presumptive Republican presidential nominee Mitt Romney has selected Rep. Paul Ryan (R-Wisc.) to be his running mate on the 2012 ticket. In selecting Ryan, Romney shows how serious he is about tackling head on the colossal issues that are crippling the American economy: unemployment, debt, and persistent uncertainty.
Romney defied the conventional wisdom inside the Washington beltway and New York news media that predicted he would pick a “safe, boring” vice presidential candidate. America stands at an historic crossroads today facing record debt, record deficits, a record long +8% unemployment rate, record entitlement spending as a percentage of GDP, and record low labor force participation rate. These exceptional problems require bold, meaningful solutions – not “safe, boring” rhetorical answers that do nothing to solve the problems and only kick the can down the road indefinitely.
Below is the first and biggest key issue in which the Romney-Ryan ticket presents fresh, bold solutions and how they stand out from the status quo that the Obama-Biden ticket seeks to maintain:
According to the trustees who oversee Social Security, Medicare, and Medicaid, the nation’s entitlement programs are going bankrupt even faster than predicted.
The trust funds that support Social Security will run dry by 2033. Medicare’s hospital insurance fund is projected to run out of money by 2024. The federal government will spend more than $668 billion on anti-poverty programs this year, an increase of 41%, or more than $193 billion, since President Barack Obama took office. State and local government expenditures will amount to another $284 billion, bringing the total to nearly $1 trillion in 2012.
More than 55 million retirees, disabled workers, spouses, and children receive Social Security. In 2011, Social Security paid $596.2 billion in retirement benefits to 44.8 million Americans and $128.9 billion in disability benefits to 10.6 million recipients. About 50 million people are covered by Medicare, which spent another $572 billion in 2011. The largest welfare program is Medicaid, which provides benefits to 49 million Americans and cost more than $228 billion last year. The second runner up is the food stamp program, with 41 million participants and a cost of nearly $72 billion.
That’s a total of over 150 million Americans – nearly half the entire population (48.5%) – receiving Social Security, Medicare, Medicaid, or welfare, at a price tag of about $1.6 trillion in 2011. The federal budget deficit in 2011 alone was $1.6 trillion. Entitlements now eat up 65.1% of our tax dollars, skyrocketing up from 25.4% just 50 years ago, while only 50.5% of Americans are supporting the entire system through income taxes, according to the IRS.
Source: Office of Management and Budget
Obama-Biden Plan: The Obama-Biden plan for addressing the 800-pound economic gorilla in the room is – there is no plan.
All Obama has conceded is that the retirement age needs to be bumped up to 67 – a common sense solution. The average life expectancy for Americans, when Social Security was enacted in 1935, was 62. Today it’s 80, while the eligibility age (65) has remained unchanged for the last 77 years.
Obama’s own bipartisan debt commission presented serious attempts to fundamentally restructure entitlements in order extend their sustainability for future generations, which included: raising the retirement age, increasing premiums that beneficiaries pay for Medicare doctors’ coverage so they cover 35% of the program’s costs instead of 25% under current law, adjusting the annual cost-of-living formula in Social Security benefits, and incentivizing employers and employees to select more cost-effective health plans by capping the tax exclusion of employer-provided health benefits in 2018 – all of which Obama ignored.
Instead, Obama and Biden have taken a hands off approach to addressing any entitlement reform. They’ve made promises to seniors and welfare recipients which are mathematically impossible to keep in order to win the next election – effectively leaving the baby boomer generation to soak all the benefits dry and leave the next generation with no social safety nets for us but plenty of leftover debt.
Romney-Ryan Plan: On Social Security, Romney has fully supported raising the retirement age to account for longevity, a reform that’s long overdue and also supported by Obama. He also proposes that benefits should be means-tested and should continue to grow at a lower rate for individuals with higher incomes.
On welfare, Ryan’s plan would give power back to the states, turn Medicaid and food stamps into block grants and make recipients work for certain benefits. As Ryan put it, “We don’t want to turn the safety net into a hammock that lulls able-bodied people into lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.”
The federal government would give states a set amount of funds to cover their Medicaid recipients in the form of a block grant. States would also be given more flexibility to tailor the program’s requirements and enrollment criteria. Currently, federal spending on Medicaid is open-ended, meaning the more people that states sign up, the more the federal government pays. In other words, there’s no local accountability, which drives up overall costs of Medicaid.
Food stamps would also become a block grant program under Ryan’s plan. In addition, starting in 2016, recipients would be required to work or enroll in a job training program.
And on Medicare, both Ryan and Romney advocate a premium-support system that puts more power and decision-making responsibilities in the hands of the consumer instead of government bureaucrats. Existing spending would be repackaged as a fixed-amount benefit to each senior that he or she can use to purchase an insurance plan, while competition among plans to provide high quality service and charge low premiums will hold costs down while also improving the quality of coverage enjoyed by seniors.
None of these changes would affect any seniors currently 55 years of age or older. But if the next generation is to even have any social safety nets 20 years from now, these solutions are the only options on the table that make it possible.
The Obama-Biden plan simply passes the buck.
The next installment of this series will explore both tickets’ plans on spending and the federal debt.