The GOP plan to cut spending by $5 trillion in 10 years includes cutting Medicare and making the Bush tax cuts permanent. Image: CC Ed Yourdon/Flickr

Rep Paul Ryan, R-Wis., has presented a budget proposal with severe long-term spending cuts that includes Medicare reform. Ryan’s plan would replace traditional Medicare with subsidies for seniors to buy private insurance. Republicans have tried to use the federal deficit to dismantle Medicare before but failed when opponents made clear that their purpose for defunding Medicare is to finance tax cuts for the rich.

GOP turns about face on Medicare reform

Republicans fought health care reform in 2010 by threatening seniors with dire warnings about slashed Medicare benefits. In 2011, a GOP budget proposal called “Path to Prosperity” purports to slash government spending by $5 trillion over the next decade. Ryan wants to dismantle Medicare, a $520 billion program that provides medical coverage to approximately 47 million older and disabled Americans. The GOP plan for Medicare reform calls for repealing the health care reform law that extends insurance coverage to 30 million Americans. For Americans currently 54 and younger, instead of Medicare they would get a federal payment to buy private insurance from a choice of government-regulated plans. It strips the poor and disabled from a right to health care under current federal law by converting Medicaid to a block grant for each state to design its own insurance plans. Retirees in the future would wait until age 67 to be eligible for Medicare.

GOP budget plan targets poor, disabled and retirees

If the health care law is repealed under the Republican plan for Medicare reform, some people without employer insurance may not be able to afford medical coverage or get insurance at any price if they have pre-existing conditions. States, which have gone broke during the economic downturn, will have their ability to offer vulnerable low-income people  protection further eroded. Analysis by the nonpartisan Congressional Budget Office said in the future retirees would pay more because benefits would be more expensive to deliver through private insurers. By 2030, the government payment used to buy health insurance would only cover about one-third of a person’s total health care costs.

Ryan downplays tax cuts for the rich

Dismantling the U.S. health care safety net has been a Republican goal for about 50 years. Ryan’s “Path to Prosperity” is an attempt to use deficit reduction as a means to achieve it. In addition to cutting spending, “Path to Prosperity” is a plan for more tax cuts. Cutting Medicare is part of Ryan’s strategy to offset lower corporate taxes and bring down the top individual tax bracket from 35 to 25 percent, essentially making the Bush tax cuts permanent. In a slick video presenting his budget proposal, Ryan doesn’t mention the tax cuts, but he says cutting Medicare is the only way to save it. It’s a familiar Republican strategy. In 1995 Republicans warned that the deficit was a threat to the survival of the nation. They proposed saving Medicare by privatizing it. President Clinton made clear to the public that the GOP plan cut Medicare in order to finance a regressive tax cut. Clinton prevailed 16 years ago because Medicare was more popular than tax cuts for the rich.

Sources

Washington Post

The New Republic

MSN Money

Salon

With the federal government in hock up to its eyeballs, the debt ceiling must be raised soon to prevent further economic catastrophe. Image: CC Sugar Pond/Flickr

Government spending will hit the federal debt ceiling soon if Congress doesn’t vote to raise it. A political fight lies ahead as newly-empowered Republicans vowing to cut spending threaten to vote against raising the debt ceiling. However, if the debt ceiling is hit, the U.S. government goes into default and the global economy could be crippled.

Inside the federal debt ceiling

The federal debt ceiling, the amount of money the government is legally permitted to borrow, is $14.3 trillion. Government debt has reached about $13.9 trillion and it’s growing every day. With the debt ceiling “only” $335 billion away, the Treasury Department estimates that limit will be reached somewhere between March 31 and May 16. The debt ceiling applies to debt owed the public in the form of U.S. bonds and debt owed to government trust funds such as those funding Social Security and Medicare.

Consequences of hitting the debt ceiling

Regardless of Republican rhetoric about spending cuts, raising the debt ceiling has nothing to do with spending more money. The debt ceiling needs to be raised now because of legislative decisions already made, primarily during the Bush administration. On Thursday Treasury Secretary Timothy F. Geithner warned lawmakers that if they would not raise the debt ceiling, borrowing costs would rise for federal, state and local governments, as well as for businesses and consumers. Millions of jobs would be lost and stock prices, home values and retirement savings would plummet.

A golden opportunity to score political points

House Speaker John Boehner said Congress can’t raise the debt ceiling without more spending cuts. House Republicans have said they would blackmail the Senate and the White House by only voting for a higher debt ceiling in exchange for returning the federal budget to 2008 levels. But refusing to raise the debt ceiling is like refusing to pay one’s bills. Most analysts expect House Republicans to experience a brief flash of common sense when its time to vote. An economist told Bloomberg that raising the debt ceiling, however painful the vote, is merely a chance to score political points.

Sources

Bloomberg

CNN

Fox News