The Ryan Plan is a Shell Game

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The Ryan Plan is a Shell Game

by Ken Ralidis on Monday, May 2, 2011 at 9:52am
GOP Rationale for Ryan Medicare Plan Totally False

The most insistent GOP rationale and analogy for drumming up public support for its purported deficit-reduction plan, relying prominently on overhauling the federal Medicare program, is that “seniors will be getting exactly what members of Congress get”. The reference is to the Federal Employees Health Benefits Program, in which most members of Congress are themselves enrolled.

Under the Ryan plan, new retirees would be enrolled in the proposed new program, under which Medicare would “subsidize” health care premiums under a voucher system. The vouchers could be used to purchase private insurance.

The problem is that the analogy to the Federal Employees Health Benefits Program (“FEHBP”) is simply untrue – very true. Under FEHBP, the federal government pays 3/4 of the premium for the most modest health plans and about 2/3 of the premium for plans costing over the national average. Under this formula, the federal government maintains a payment that is a consistent, fixed percentage of the costs of the premiums; and the contribution keeps pace with rising premiums.

But under the Ryan voucher program, the federal government, starting in 2022, will start paying about $8,000/year, which is about what it pays currently. And although as seniors age, the contribution is increased to reflect inflation (tied to the Consumer Price Index, or CPI), the well-known fact is that both health care costs themselves and health insurance premiums, under private health care plans, have far exceeded the rise in the CPI. As a result, seniors will be forced to pay an ever-increasing share of both health care costs and premiums as the years go on. By a non-partisan Congressional Budget Office estimate, the average 65-year-old enrollee would be paying more than twice what that senior would be paying under current law. More than twice as much.

Further, although the federal government would save money, obviously that “savings” would be transferred to the backs of seniors, and, of course, to the taxpayer in other ways. Also, these costs would be shifted to states, which are already increasingly struggling as budget cuts imposed by a GOP-dominated House in Congress have focused on social programs which used to be at least partially funded by the federal government, like Medicaid, and which now must be borne almost exclusively, or at least far more prominently, by states, whose budgets have all shrunk as well. Most of the budget cuts by states are also fueled by deep cuts in social programs, including Medicaid and other health care services and aids in paying premiums.

Thus, these “savings” are a illusory – the Ryan plan just “saves” by making states and seniors and US taxpayers take the hit that the federal government will be dodging. Sounds like a great soundbite for GOP and Teabagger politicians to make false claims that they are “reigning in spending” or “cutting the deficit” – motivated purely by the need to improve their own re-election chances. The “deficit-reduction” moniker is a deception of the taxpayer.

Make no mistake about it, the Ryan plan is not a “deficit reduction” measure; rather, it is a shell for pushing the deficit onto the backs of the middle class, working poor, cash-strapped states and local governments. It is just a shell game.

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GOP Rationale for Tax Cuts for the Wealthiest Americans and Biggest Businesses Totally False

The other part of the Ryan plan is lowering taxes on Big Business and the very wealthiest Americans, even though almost every prominent economist agrees that cutting taxes on the wealthiest Americans has NEVER actually simulated the economy or created jobs; yes, that’s NEVER, every time the GOP has tried it.

The wealthiest 1.5% of Americans and the biggest corporations are not paying taxes at rates or percentages of income like the other 98.5% of Americans and the smaller businesses do. Not to mention the unnecessary taxpayer subsidies for huge corporations, which the Ryan plan refuses to eliminate or even to meaningfully cut. A prime example is the $4 billion in annual tax subsidies for oil and gas companies, and hundreds of billions of dollars in tax subsidies that huge corporations get. Companies like G.E., which received $3.8 billion in tax subsidies for their foreign business operations, paid zero in corporate taxes on over $14 billion in income. Yes, zero. The Ryan plan simply makes the middle class and working poor absorb the tax cuts instead of those wealthiest Americans and businesses who have the political clout to fund the political campaigns of the GOP and other Congressmen of both parties who are beholden to Big Business campaign contributions.

Many will point out that between 40% and 57% of Americans pay no taxes at all. But this, again, is a political issue, tied to Congress selling themselves for reelection, rather than doing what’s right for the future of the country. Tax cuts and credits exceed the total revenue brought in from income taxes. That can’t continue. A recent New York Times article shows that while paper corporate tax rates in the US are high, the effective, paid tax rate is average as compared to other countries, and many huge corporations pay no income taxes at all. In fact, the percentage of revenues that comes from corporate taxes has steadily declined over the last 30 years; and individual taxes have had to make up the difference.

The tax credit situation is purely political. The government takes in less in revenues than it puts out in tax credits – to ALL income brackets. So it’s true that the problem is not just tax credits to the very, very wealthy. But the fact is that as a percentage of income the richest 1.5% of Americans have increased their share of US GDP from 30% 35 years ago to 75% today. Yet their primary source of income, capital gains, is taxed at an historically low rate of 15%, just one third of the rate paid by average Americans (35%-50% on wages), and they qualify for a helluva lot more tax credits than the middle class. Even income tax rates for wages on the highest income Americans are near historic lows. We can’t afford to lower their taxes even further to what the GOP proposes under the Ryan plan – 25%. Many of the richest Americans, more than 60 of them now, agree. They agree they should pay a much larger percentage of their income in taxes.

Every way you look at the Ryan plan, it seems like a shell game. The average American is never going to find that marker under any of those shells.

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