A Critique of Representative Paul Ryan’s “Path to Prosperity”

Paul Ryan—U.S. Republican representative for Wisconsin’s First District and current chairman of the House Budget Committee—rose to nationwide prominence in April 2011 when he proposed a long-term budget plan called “The Path to Prosperity.” With overwhelming Republican support, Ryan’s plan passed the House on April 15, 2011.1 The Democrat-controlled Senate, however, voted down Ryan’s plan on May 25, 2011.

Despite its defeat in the Senate,2 Ryan’s plan remains influential on and the ideal for many in the Republican party. For this reason, it is worth examining.

What follows is a critique of key components of Ryan’s Path to Prosperity plan, using the principle of individual rights as a standard of reference. Specific provisions, and the plan as a whole, will be graded from A+ to F according to how much they promote or corrode rights-respecting government.

Repeal of ObamaCare

Perhaps the best element of the Ryan plan is its commitment to repealing President Obama’s “Patient Protection and Affordable Care Act,” more popularly known as ObamaCare. In particular, the individual mandate in ObamaCare is an egregious violation of rights. The mandate forces people to buy a government-approved health-insurance plan from a private company or to face a fine.3

The president’s health-care law is described in the Path to Prosperity as taking the United States “one step closer to [a] fully government-run system.”4

The country needs to move away from this centralized system, not towards it. This budget starts by repealing the costly new government-run health care law . . . making sure that not a penny goes toward implementing the new law.5

Ryan’s plan often mentions the goal of repealing ObamaCare. On the subject of taxes, Ryan notes that ObamaCare contains “roughly $800 billion in new taxes and tax increases—the result of dozens of changes to tax law that added complexity and unfairness to the code.”6 These include a “0.9 percent surtax on wages and a 3.8 percent surtax on interest, dividends, and capital gains” that would “apply to filers in the top two income brackets” and a Cadillac tax that would, “starting in 2018, impose a new tax on high-cost, employer-provided health plans.”7

This aspect of Ryan’s plan, which would reverse America’s movement toward full-blown socialized medicine, gets a well-deserved A+.

Security and the “Global War on Terror”

In Ryan’s plan, security spending sees no significant change over the course of ten years. During that time, this year’s budget of $711 billion will only increase or decrease by $90 billion.8

Spending on the “Global War on Terror,” which is $76 billion in 2011, increases to $118 billion in 2012 and then steadily decreases until 2017, from which point the budget stays at $50 billion until 2021.9

Recognizing that the first job of government is to secure the safety and liberty of its citizens from threats at home and abroad, this budget rejects proposals to make deep, across-the-board cuts in funding for national defense. Instead, it reflects the $178 billion in savings identified by Defense Secretary Robert Gates, $100 billion of which would be reinvested in higher military priorities. American men and women in uniform are presently engaged with a fierce enemy and dealing with emerging threats around the world. This budget achieves savings in the category of national defense without jeopardizing preparedness or critical missions.10

The subject of defense funding is extremely involved and there may be better alternatives to Ryan’s proposal. But for its commitment to adequately funding a strong military to protect the individual rights of Americans, given the host of clear threats to those rights, this aspect of the Ryan plan gets an A.

Simpler and Lower Taxation

The Ryan plan calls for tax reform that simplifies and lowers rates across the board. His plan lowers the top rates for individuals and corporations from 35 percent to 25 percent.11 Even better, he states that these “reforms are meant to be permanent changes in law, not temporary booster shots or short-term cuts with built-in expiration dates.”12 By lowering tax rates, the Ryan plan enables more Americans to keep more of what they’ve produced.

Although the tax cuts proposed should be even greater, this component is a step in the right direction. B.

Privatizing Fannie Mae and Freddie Mac

Recognizing Fannie Mae and Freddie Mac’s culpability in the economic crisis of 2008, Ryan holds the privatization of these two entities as an important goal. “Fannie Mae, Freddie Mac, and another government housing agency, Ginnie Mae, now own or insure 95 percent of the entire U.S. housing market. On their current course, the [government-sponsored enterprises] represent a failed experiment in corporate welfare and the largest bailout of financial institutions in recent history.”13 Ryan’s budget “proposes eventual elimination of Fannie Mae and Freddie Mac, winding down their government guarantee and ending taxpayer subsidies.”14

The housing-finance system of the future will allow private-market secondary lenders to fairly, freely and transparently compete, with the knowledge that they will ultimately bear appropriate risk for the loans they guarantee. Their viability and profitability will be determined by the soundness of their practices and the value of their services.15

Although the vague time frame of “eventual” might mean this reform will be too long in coming, this feature intends to privatize government-controlled institutions that harm rather than protect individual rights. B.

Weakening Dodd-Frank

The Ryan plan targets a key component of the Dodd–Frank Wall Street Reform and Consumer Protection Act, which Ryan identifies as expanding and centralizing

power in Washington, doubling down on the root causes of the 2008 crisis. It contains layer-upon-layer of new bureaucracy sewn together by complex regulations, yet it fails to address key problems, such as Fannie Mae and Freddie Mac, that led to the worst financial meltdown in recent history. Although the bill is dubbed “Wall Street Reform,” it actually intensifies the problem of too-big-to-fail by giving large, interconnected financial institutions advantages that small firms will not enjoy.16

Dodd-Frank opens the door to more bailouts by giving the Federal Deposit Insurance Corporation (FDIC) the authority to “access taxpayer dollars in order to bail out the creditors of large, ‘systemically significant’ financial institutions.”17 Ryan says that the Path to Prosperity “would end the regime now enshrined into law that paves the way for future bailouts.”18

The specific provision in the Dodd-Frank act that is being targeted is the provision that enables easier bailouts. However, repealing the act, not weakening it, should be the goal. C+.

Energy Deregulation

Removing barriers from domestic energy production is one of Ryan’s goals. His budget “removes moratoriums on safe, responsible energy exploration in the United States,” unlocking them from “bureaucratic barriers and red tape.”19

Regulations have extracted some $1.75 trillion per year from the economy, according to a recent report from the Small Business Administration, including $281 billion for environmental regulations that disproportionately hit small businesses. . . .

The results are plain to see: Gas prices have more than doubled since the President took office. Burdensome and ineffective regulations on businesses in the service of dubious environmental goals have driven up the prices of many products and services, while creating barriers for needed capital investment and job creation. . . .20

This budget would roll back federal intervention and expensive corporate-welfare funding directed to the president’s allied industries. Instead, it would promote policies aimed at reliable energy, lower energy prices, greater revenue generation through prosperity, and market-based solutions to the goal of sustainable energy.21

Despite advocating a freer energy sector, Ryan’s plan still calls for some government involvement. Although this may be a matter of poor word choice, it is not, as Ryan says, the government’s job to “promote” anything. And the plan does not call for a complete end, as it should, to the government’s regulatory shackles on the energy industry. C+.

The Social Safety Net

Many Christians and leftists hoping to scare people away from supporting Ryan’s Path to Prosperity have been portraying his plan as a radical move toward capitalism, calling his plan the “Ayn Rand Budget.”22 This is a compliment that Ryan’s plan does not deserve.

The Path to Prosperity contains no plan for privatizing or eventually eliminating Social Security, Medicare, and Medicaid. Rather, it affirms their legitimacy and expresses a desire to “strengthen the social safety net.”23 In the plan’s worst statement, Ryan accepts the propriety of expanding the state during FDR’s time:

When the unprecedented miseries of the Great Depression destroyed the savings and jobs of millions, America responded to the need of working families for a basic level of economic security. The nation formed a social contract to provide this security for workers in retirement or in unemployment.24

Ryan then says that the “legacy envisioned by President Roosevelt must be upheld.”25 In other words: Costly programs that have no relation to the government’s proper role in protecting individual rights must be upheld.

Social Security

Ryan attributes the problems inherent in Social Security to demographic changes, lower retirement ages, and longevity increases. But none of these address the injustice of forcing Americans to fund this program. Further, he indicates that he supports the altruistic policy proposed by the president’s Fiscal Commission that calls for America to adopt “a more progressive benefit structure, with benefits for higher-income workers growing more slowly than those of workers with lower incomes who are more vulnerable to economic shocks in retirement.”26

[T]here is bipartisan consensus that Social Security reform should provide more help to those who fall below the poverty line after retirement. . . . Lower-income seniors should receive more targeted assistance than those who have had ample opportunity to save for retirement.27

This proposed increase in the wealth redistributive aspects of Social Security would expand an already massive rights violation and evokes the ideas not of Ayn Rand, but of Karl Marx. F.

Medicare

Ryan notes, “Today, Medicare spending is growing at a rate of 7.2 percent every year . . . more than twice as fast as this nation’s economy,”28 and “[c]ontrolling costs without limiting access or sacrificing quality has proved to be an impossible task for government bureaucrats.”29 But rather than calling for privatizing or phasing out this unstable and rights-violating program, he calls for tweaking it. His proposed major change to the system is a “premium support” program whereby, starting in 2022, Medicare recipients

will be able to choose from a list of guaranteed coverage options, and they will be given the ability to choose a plan that works best for them. This is not a voucher program, but rather a premium-support model. A Medicare premium-support payment would be paid, by Medicare, to the plan chosen by the beneficiary, subsidizing its cost.30

The premium-support model would operate similar to the way the Medicare prescription-drug benefit program works today. The Medicare premium-support payment would be adjusted so that wealthier beneficiaries would receive a lower subsidy, the sick would receive a higher payment if their conditions worsened, and lower-income seniors would receive additional assistance to cover out-of-pocket costs.31

Ryan claims that this approach ensures security “by setting up a tightly regulated exchange for Medicare plans. Health plans that choose to participate in the Medicare exchange must agree to offer insurance to all Medicare beneficiaries, to avoid cherry-picking and ensure that Medicare’s sickest and highest-cost beneficiaries receive coverage.”32

Again, the Ryan plan does not identify the rights-violating nature of this program, the fact that Americans are forced to provide other Americans with goods and services, or the fact the government has no moral right to do any of this. One of the worst things about this proposed “reform” is that Ryan characterizes it as a “market” solution when it is no such thing. D-.

Medicaid

As government increases subsidies and control over the price and delivery of health care, it saps the system of innovation and efficiency, and it pushes quality health care out of reach for those who are not eligible for federal programs. This results in more demands to increase federal subsidies and control.33

This is Ryan’s spot-on analysis of the destructiveness of Medicaid. One wonders then why he so desperately wants to save the program and others like it.

Ryan’s planned reform for Medicaid is to turn it into a block-grant program.

States will no longer be shackled by federally determined program requirements and enrollment criteria. Instead, they will have the freedom and flexibility to tailor a Medicaid program that fits the needs of their unique populations.34

But taxpayers will still be shackled to the program. Still, although it upholds a rights-violating program, this portion of Ryan’s plan stands a chance of decreasing federal involvement in Medicaid, opening it up to easier elimination in the future. D+.

Spending Policy

Ryan’s Path to Prosperity would spend just a little less than $40 trillion in the next ten years.35 Under the plan, Social Security would increase from $727 billion in 2011 to more than $1.2 trillion in 2021, Medicare would increase from $563 billion in 2011 to $953 billion in 2021, and Medicaid would decrease briefly from $275 billion in 2011 to $243 billion in 2015 before steadily rising again to $305 billion in 2021.36 So, despite the structural reforms Ryan proposes, spending on the three biggest entitlements would be increased.

The proper course of action would be to begin phasing out the big three entitlement programs. Trillions of hard-earned taxpayer dollars are being spent on these programs, which violate rather than protect individual rights.

As mentioned earlier, the Ryan plan does repeal ObamaCare, meaning it allocates zero dollars to that rights-violating program. This repeal would eliminate $1.4 trillion in government spending over the next ten years. This positive element earns Ryan’s general spending policy a D rather than the F it would otherwise deserve.

Debt and Deficit

Under the Ryan plan, debt would grow steadily from $10 trillion plus in 2011 to a little more than $16 trillion in 2021. The deficit projections, however, would steadily fall, from more than $1 trillion in 2011 to $699 billion in 2013, and would drop to $385 billion by 2021.37

This reduction earns this aspect of the plan a D-.

Conclusion

In his plan, Paul Ryan correctly states: “Ultimately, a budget is much more than a series of numbers. It also serves as an expression of Congress’s principles, vision and philosophy of governing.”38 His budget, he claims, “not only seeks to limit the size of government, but also reestablish the proper purpose of government.”39 Unfortunately, his budget falls far short in this regard.

A government’s sole proper purpose is protecting individual rights. It is immoral for government to take money by force from its citizens and use it to fund entitlement programs. The vision presented in the Path to Prosperity still contains and attempts to justify substantial government intrusion into people’s lives, but it does hold promise for a freer America. “This budget charts a path forward for a limited, effective government to get out of the business of picking winners and losers in the economy.”40 The reforms in his plan would, on the whole, lead the country in that direction.

America is drawing perilously close to a tipping point that has the potential to curtail free enterprise, transform its government, and weaken its national identity in ways that may not be reversible.

It might not be the “Ayn Rand Budget,” but with the repeal of ObamaCare, the weakening of Dodd-Frank, the privatization of Fannie Mae and Freddie Mac, the lowering of tax rates, and other pro-freedom policies, the Ryan plan could bring America back from the tipping point of disaster and move it toward greater freedom. For this reason, despite its substantial flaws, Paul Ryan’s “Path to Prosperity” on the whole gets a C.

About Joshua Lipana

Joshua (John M.) Lipana was, until his death in 2013, an assistant editor of The Objective Standard Blog and a freelance writer based in the Philippines. His writings appeared in numerous print and online publications, including Free Enterprise,Capitalism Magazine, NewsReal Blog, and The American Thinker.

View all articles by Joshua Lipana →