House Budget Committee Chairman Paul Ryan released his budget proposal yesterday, his last as committee chairman. This budget differs greatly from the budget request submitted by President Obama last month. Ryan would “cut” federal spending by $5.1 trillion over the next 10 years and calls upon Congress to pass pro-growth tax reform. However, Ryan’s budget is still a mixed bag from a small-government perspective.
Positive Reforms in Ryan’s budget:
- Medicaid Block Grants: Ryan suggests block granting Medicaid to institute some fiscal sanity to this ever-growing program. This reform would reduce state government incentives to overspend and would allow them greater flexibility to innovate and cut costs. Federal spending would be reduced by $732 billion compared to baseline by this simple reform.
- SNAP Block Grants: The Supplemental Nutrition Assistance Program (“food stamps”) would also be block granted, saving $125 billion over 10 years compared to baseline. SNAP and Medicaid block grant reforms would copy the successful approach of welfare reforms in the 1990s.
- Medicare Premium Support: Repeating a proposal from his last several budgets, Ryan suggests changing Medicare to a premium-support model. Rather than federal spending going to health care providers, it would be directed toward health care consumers. That would hopefully generate incentives to reduce costs and improve quality. It would also allow seniors to pick the health plan that most closely matches their needs.
- Repeals ObamaCare Spending: Ryan’s budget repeals ObamaCare’s spending components. This is his largest reduction, which would save taxpayers $2 trillion over the next ten years.
Downsides to Ryan’s budget:
- Social Security Reform: Ryan’s budget does not tackle Social Security reform, leaving almost one quarter of the federal budget unchanged. He calls on the president and Congress to submit recommendations to reform the program, but does not submit any suggestions of his own.
- Higher Revenue Baseline: Chairman Ryan calls for pro-growth tax reform within his budget; however, he adopts the Congressional Budget Office’s current revenue baseline. This would keep the extra revenues generated from the numerous tax hikes enacted over the last several years.
- Delayed Reforms: Perhaps due to political concerns, many of Ryan’s reforms would not start for several years. His SNAP block grant would not begin for five years, and his Medicare premium support model would not start until 2024.
- Keeps Higher Spending: In December, Ryan and Senate Budget Chairman Patty Murray agreed to increase discretionary spending levels for fiscal year 2014 and fiscal year 2015. This partly gutted the bipartisan Budget Control Act from 2011. Ryan’s budget retains the higher spending levels.
In sum, Ryan’s budget would not solve the government’s overspending problem. But it would be a good first step to reforming the federal behemoth.
Nicole Kaeding is a budget analyst for the Cato Institute focused on federal and state spending policy. Previously, she was the state policy manager for Americans for Prosperity Foundation, where she oversaw the organization’s activities in 34 states. Before that, Nicole was a manager and bank officer at Fifth Third Bancorp for six years and a financial advisor at American Express. She graduated from Miami University with bachelors degrees in finance and political science and holds a masters degree in economics from DePaul University.