Who’s Serious Now?

April 21, 2011 by · Leave a Comment 

By Paul Krugman

2011-04-05T160723Z_1858491697_GM1E74600HJ01_RTRMADP_3_USA-BUDGET

House Budget Committee Chairman Paul Ryan (R-WI) speaks at a news conference held to unveil the House Republican budget blueprint in the Capitol in Washington April 5, 2011. The plan calls for sweeping changes to government health programs as it slashes taxes for corporations and individuals. 

REUTERS/Kevin Lamarque

Paul Ryan, the chairman of the House Budget Committee, sounds upset.

And you can see why: President Obama, to the great relief of progressives, has called his bluff.

Last week, Mr. Ryan unveiled his budget proposal, and the initial reaction of much of the punditocracy was best summed up (sarcastically) by the blogger John Cole: “The plan is bold! It is serious! It took courage! It re-frames the debate! The ball is in Obama’s court! Very wonky! It is a game-changer! Did I mention it is serious?”

Then people who actually understand budget numbers went to work, and it became clear that the proposal wasn’t serious at all. In fact, it was a sick joke. The only real things in it were savage cuts in aid to the needy and the uninsured, huge tax cuts for corporations and the rich, and Medicare privatization. All the alleged cost savings were pure fantasy.

On Wednesday, as I said, the president called Mr. Ryan’s bluff: after offering a spirited (and reassuring) defense of social insurance, he declared, “There’s nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires. And I don’t think there’s anything courageous about asking for sacrifice from those who can least afford it and don’t have any clout on Capitol Hill.” Actually, the Ryan plan calls for $2.9 trillion in tax cuts, but who’s counting?

And then Mr. Obama laid out a budget plan that really is serious.

The president’s proposal isn’t perfect, by a long shot. My own view is that while the spending controls on Medicare he proposed are exactly the right way to go, he’s probably expecting too much payoff in the near term. And over the longer run, I believe that we’ll need modestly higher taxes on the middle class as well as the rich to pay for the kind of society we want. But the vision was right, and the numbers were far more credible than anything in the Ryan sales pitch.

And the hissy fit — I mean, criticism — the Obama plan provoked from Mr. Ryan was deeply revealing, as the man who proposes using budget deficits as an excuse to cut taxes on the rich accused the president of being “partisan.” Mr. Ryan also accused the president of being “dramatically inaccurate” — this from someone whose plan included a $200 billion error in its calculation of interest costs and appears to have made an even bigger error on Medicaid costs. He didn’t say what the inaccuracies were.

And now for something completely wonkish: Can we talk, briefly, about politicians talking about drugs?

For the contrast between Mr. Ryan last week and Mr. Obama on Wednesday wasn’t just about visions of society. There was also a difference in visions of how the world works. And nowhere was that clearer than in the issue of how Medicare should pay for drugs.

Mr. Obama declared, “We will cut spending on prescription drugs by using Medicare’s purchasing power to drive greater efficiency.”

Meanwhile, Mr. Ryan held up the existing Medicare drug benefit — a program run through private insurance companies, under legislation that specifically prohibits Medicare from using its bargaining power — as an example of the efficiencies that could be gained from privatizing the whole system.

Mr. Obama has it right. Medicare Part D has been less expensive than expected, at least so far, but that’s because overall prescription drug spending has fallen short of expectations, largely thanks to a dearth of new drugs and the growing use of generics. The right way to assess Part D is by comparing it with programs where the government is allowed to use its purchasing power. And such comparisons suggest that if there’s any magic in privatization, it’s the magical way it makes drug companies richer and taxpayers poorer. For example, the Department of Veterans Affairs pays about 40 percent less for drugs than the private plans in Part D.

Did I mention that Medicare Advantage, which closely resembles the privatized system that Republicans want to impose on all seniors, currently costs taxpayers 12 percent more per recipient than traditional Medicare?

But back to the president’s speech. His plan isn’t about to become law; neither is Mr. Ryan’s. And given the hysterical Republican reaction, it doesn’t look likely that we’ll see negotiations trying to narrow the difference. That’s a good thing because Mr. Obama’s plan already relies more on spending cuts than it should, and moving it significantly in the G.O.P.’s direction would produce something unworkable and unacceptable.

What happened over the past two weeks, then, was more about staking out positions than about enacting policies. On one side you had a combination of mean-spiritedness and fantasy; on the other you had a reaffirmation of American compassion and community, coupled with fairly realistic numbers. Which would you choose?

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