Take my fiscal-policy ideas, please.

Photographer: Andrew Harrer/Bloomberg

Stealing Paul Ryan's Ideas

Paula Dwyer writes editorials on economics, finance and politics for Bloomberg View. She was London bureau chief for Businessweek and Washington economics editor for the New York Times, and is a co-author of “Take on the Street: How to Fight for Your Financial Future.”
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If a Republican in Wednesday's presidential debate wins the 2016 election, he or she will need to partner with Paul Ryan, as of today the new House speaker, to adopt a national budget. That shouldn't be a problem -- most of the party's candidates have borrowed ideas from one of the Wisconsin representative's annual blueprints. 

His proposal to reduce the top income-tax rate to 25 percent from 35 percent? Donald Trump and Bobby Jindal would do the same. His suggestion to scrunch six tax brackets down to two? Marco Rubio likes that idea, too. His plan to cut corporate taxes to 25 percent from 35 percent? Rubio again. His plan to raise the retirement age and means-test entitlements? Jeb Bush endorsed both this week. Ben Carson, Ted Cruz and Chris Christie also recommend an increase in the retirement age now. 

So what can we glean from Ryan's budgets, which go by such confident names as "Roadmap for America's Future" (from 2010) and "Path to Prosperity" (2015). The best clues can be seen in two major areas of the U.S. budget -- anti-poverty programs and Medicare -- both of which he would change substantially.   

Without a doubt, Ryan's fiscal plans are classically conservative. He wants to seriously cut spending on domestic programs (such as food stamps, farm programs, education). He wants to overhaul Medicare and Social Security (proving that tackling entitlements isn't always career-ending). And he wants to use the savings to cut taxes. 

Ryan's first grand plan, which would have turned Medicare into a voucher program and partially privatized Social Security, made even some of his peers in the House nervous. When he warned in 2012 that the government safety net had become a hammock "lulling able-bodied people into lives of complacency and dependency," Democrats portrayed Republicans as the party of the rich

After losing the 2012 election as Mitt Romney's running mate, he showed an ability to listen, and his budgets evolved. For example, Ryan adjusted his view of anti-poverty programs. Instead of deep cuts, he favored increasing wage subsidies by enhancing the earned-income tax credit. He came around to believe, as most economists already did, that the tax credit, aimed at the working poor, could better target low-income workers than a higher minimum wage could. He even embraced Obama's idea of increasing the tax credit for childless workers, as Bush now does. 

He also came up with Opportunity Grants, which went beyond the typical Republican block-grant idea. He wanted to package federal social-welfare programs into state grants, but this time he didn't propose to cut federal funds. States would be free to innovate and had to measure results and report to Washington on what works -- and what doesn't.

The catch was that states had to customize services to meet the needs of individuals, who would enter into contracts with caseworkers and face consequences if the contract was broken, to help them escape poverty. Ryan's approach would lean heavily on ideas developed by "social entrepreneurs," which are local caseworkers or groups that use business techniques to determine which programs work best in the neighborhoods they serve.      

Another example of Ryan's evolution can be seen in his 2010 plan to convert Medicare to a so-called premium-support plan. In essence, he would give the elderly subsidies with which to buy private plans comparable to the current package of Medicare benefits. Anything beyond that would cost extra, giving seniors incentives to shop for economical plans and to keep their doctor visits down. But because the subsidies wouldn’t have grown along with health-care inflation, the beneficiaries would have had little choice but to cut back on health care in subsequent years. 

The Congressional Budget Office also found that his idea would raise costs substantially by removing Medicare's negotiating leverage with hospitals and doctors. Turns out, seniors' premiums and other out-of-pocket costs would have soared, too, because private plans have higher administrative overheads, not to mention they need to make a profit. In short, Ryan was selling a rationing plan in disguise.

Since then, he has modified his ideas several times. He no longer wants to privatize Social Security. He is sticking to the premium-support concept for Medicare, but in its latest iteration, the elderly would have the option of buying subsidized plans on a new Medicare exchange (sound familiar?) or staying with Medicare. 

Ryan's latest budget would also means-test Medicare so that low-income seniors get a bigger subsidy and the well-off smaller ones. This time, the CBO says a program in which the premium-support payment is based on the average bid of participating insurance plans, as Ryan would have it, could result in savings for beneficiaries as well as the federal government. 

For five years, Ryan has been hailed within his party as a fiscal policy visionary. Until now, though, his influence was largely among his House Republican peers, who dutifully voted for his annual budgets, knowing the Senate and Obama wouldn't follow suit. Now, Ryan's brand of fiscal discipline, anti-poverty reforms and entitlement overhauls are about to get a true road test.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Paula Dwyer at pdwyer11@bloomberg.net

To contact the editor responsible for this story:
Katy Roberts at kroberts29@bloomberg.net