This Is Now the Most Important Election Since 1980

Aug. 11 (Bloomberg) -- The Obama campaign wasted no time blasting Mitt Romney’s selection of Representative Paul Ryan as a running mate.

Ryan, a Wisconsin Republican, had not finished his acceptance speech when President Barack Obama’s campaign manager, Jim Messina, released a statement blasting him for favoring “new budget-busting tax cuts for the wealthy, while placing greater burdens on the middle class and seniors.” Ryan’s “radical” budget plan, Messina added, “would end Medicare as we know it by turning it into a voucher system, shifting thousands of dollars in health-care costs to seniors.”

Romney could have run away from this fight. Plenty of Republicans have been telling him not to distract voters from their unhappiness about the economy by presenting far-reaching plans of his own -- and especially not to elevate the issue of Medicare, on which Democrats traditionally have an advantage.

With Ryan’s selection, Romney has rejected this advice. As Messina’s statement shows, this campaign will now be about something big: the future of the welfare state.

The Democratic attack on Ryan and his budget plan is, at best, ignorant. “Budget-busting” tax cuts? The Ryan budget plan envisions taxes running at a higher level of GDP than the average of the last few decades. It brings the budget to long-term balance -- something that Obama has never proposed. (As his Treasury Secretary Tim Geithner admitted to Ryan in February: “We’re not coming before you to say we have a definitive solution to our long-term problem. What we do know is we don’t like yours.”)

Ryan’s Medicare plan doesn’t put greater burdens on seniors or shift health-care costs to them, either. The Democrats’ criticism was arguably true of Ryan’s 2011 plan. The 2012 version of the plan -- the one Romney endorsed -- includes changes to meet that criticism. That’s how it won the support of Democratic Senator Ron Wyden of Oregon.

Under the original Ryan plan, retirees would have chosen a private health plan and the government would have contributed money toward the cost. The amount of money would have depended on the beneficiary’s age and health status. Over time the average amount of money would have risen with inflation.

Critics pointed out that health-care costs have risen faster than inflation for a long time. If competition failed to change this trend, senior citizens would indeed have been left paying more.

The new version of the plan cleverly fixes the problem. Insurers would submit competitive bids to see who could cover Medicare’s traditional benefits for the lowest premium. The average amount of financial assistance would be equal to the second-lowest bid. So seniors will always have an option that leaves them with no higher costs than now. If they pick something even cheaper, they will come out ahead.

Ryan’s budget includes a failsafe to make sure the plan saves money even if competition doesn’t lead to restraint in premium growth: Total spending on Medicare would be limited to the growth of the economy plus inflation plus 0.5 percent.

That failsafe doesn’t rescue the Democratic attack, however, because the Obama administration caps Medicare spending at the same level. There is no scenario under which Medicare recipients have to pay more under the Romney-Ryan plan than they have to pay under the Democratic plan. The Obama campaign is, in short, responding to new thinking with stale talking points.

The Ryan budget isn’t perfect. The better criticism of it, though, is that it doesn’t go far enough on entitlements. Although Ryan has endorsed reforms to restrain the growth of Social Security, the budget he got House Republicans to support does not include those reforms. Too large a share of the budget restraint therefore comes from domestic programs other than entitlements. This isn’t, unfortunately, a criticism that the Democrats have any interest or credibility in making.

Beneath Messina’s distortions lies a real and important debate. Is our welfare state basically healthy, just in need of a few tweaks to restore its fiscal health? Democrats believe, or claim to believe, that if we just raised taxes on the rich and let experts redirect Medicare spending, we could keep the open-ended entitlement programs on which we have come to rely.

Republicans, on the other hand, tend to think that our entitlement programs are structurally flawed in a way that neither tax increases nor better management can solve. Republicans do not want to abolish these entitlements. Their view is that they should be limited, and made to work with rather than against markets.

The Democratic view has a strong base of support among voters. Even those who share the Republican view, as I do, cannot be sure it will win in the court of public opinion. If Romney and Ryan do prevail in November, it will mean that voters accept the need to modernize the welfare state -- and this election will end up having been the most important one since 1980.

(Ramesh Ponnuru is a Bloomberg View columnist and a senior editor at National Review. The opinions expressed are his own.)

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