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Representative Paul Ryan Gets It Right On Entitlement Reform

Posted By Patrick OBrien On October 30, 2009 @ 1:47 pm In Economics | Comments Disabled

It is all too common for members of Congress to recognize the problem with entitlement spending, talk about it, but then decide to kick the can down the road, leaving the toughest choices for future generations to make. But Representative Paul Ryan (R-WI) has been a long-time advocate of paving a new road to ensure a sustainable fiscal future for the United States.

On Thursday, Congressman Ryan spoke about the comprehensive proposals in his bill, “A Roadmap for America’s Future [1],” at the Tax Policy Center [2].

Although the discussion centered primarily on the tax reforms in his proposal, Congressman Ryan made very clear to his audience Thursday what he sees as the primary challenge our country faces when he said “Entitlement reform is really the holy grail here.” He is right. Over the next few decades, the costs of Social Security, Medicare, and Medicaid will explode, causing debt to jump from 55 to 300 percent of GDP.

As Ryan emphasized, tax increases are not sufficient nor are they necessary to close the gap between revenues and expenditures [3], adding later:

“It is impossible, quite literally impossible, to chase that [expenditure] line. If we are going to try to tax our way out of our fiscal situation, tax our way out of our deficits and our debt, we will wreck the U.S. economy.”

Ryan pointed to Europe’s slower growth, higher unemployment, and lower standard of living relative to the United States as a warning for policy-makers who support raising revenues to meet prohibitively high expenditures.

Just how high would taxes have to go to pay for entitlements? The Congressional Budget Office sent Ryan a letter [4]last year in which the CBO estimated “individual marginal tax rates for every bracket and corporate tax rates must more than double [5],” resulting in levels that “would significantly reduce economic activity” and “would probably not be economically feasible.”

Instead of raising taxes, Congressman Ryan focuses on fundamentally restructuring entitlement programs, while maintaining the safety-net and the benefits of those enrolled in programs now, to bring federal expenditures down to historical average levels as a percentage of GDP. entitlements_05-580 [6]

As Heritage Fellow J.D. Foster points out [7], “It’s time for all sides to join with Congressman Ryan and get serious about entitlement reform.” Regrettably, many on Capitol Hill are busy trying to make the problem worse by adding an additional entitlement that is sure to explode in cost like the others [8]. It is not too late to address this problem, but every day that passes, the problem is getting worse [9]. Congress should begin action now.

Patrick O’Brien currently is a member of the Young Leaders Program at the Heritage Foundation. His views do not necessarily reflect the views of the Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm [10]


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URL to article: http://blog.heritage.org/2009/10/30/representative-paul-ryan-gets-it-right-on-entitlement-reform/

URLs in this post:

[1] A Roadmap for America’s Future: http://www.house.gov/ryan/roadmap/

[2] Tax Policy Center: http://www.taxpolicycenter.org/events/events_102909.cfm

[3] tax increases are not sufficient nor are they necessary to close the gap between revenues and expenditures : http://www.heritage.org/Research/Features/BudgetChartbook/Entitlement-Spending-Deficit-Problem-Could-Resolve-Without-Tax-Increases.aspx

[4] a letter : http://www.cbo.gov/ftpdocs/92xx/doc9216/05-19-LongtermBudget_Letter-to-Ryan.pdf

[5] individual marginal tax rates for every bracket and corporate tax rates must more than double: http://www.heritage.org/Research/Budget/bg2153.cfm

[6] Image: http://www.heritage.org/Research/Features/BudgetChartbook/Images/entitlements_05-580.jpg

[7] points out: http://www.heritage.org/Research/SocialSecurity/wm1958.cfm

[8] sure to explode in cost like the others: http://www.foundry.org/2009/08/04/health-care-reform-cost-estimates-what-is-the-track-record/

[9] the problem is getting worse: http://www.heritage.org/Research/Features/BudgetChartbook/Entitlement-Spending-Will-More-Than-Double-by-2050.aspx

[10] http://www.heritage.org/about/departments/ylp.cfm: http://www.heritage.org/about/departments/ylp.cfm

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