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Paul Ryan's budget spin

GOP budget chairman throws some curves while supposedly 'setting the record straight'

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Rep. Paul Ryan spreads some false and misleading information in a series of "Setting The Record Straight" web posts, in which he criticizes the president's proposed budget and promotes his own. Among the claims:

  • Ryan says his plan would not increase the debt. In fact, under his plan the public debt would increase from $10 trillion in 2011 to $16 trillion in 2021, by his own figures. That's a slower increase than under President Barack Obama's budget, but the debt would still rise substantially.
  • He says his plan would "bring deficits below $1 trillion immediately, ending the era of trillion-dollar deficits." True — but just barely. The 2012 deficit in his plan would be $995 billion, just shy of $1 trillion. It would drop to about $700 billion by 2013 — but that's what the president's budget projects, too.
  • A GOP document defending Ryan's plan wrongly claims that the budget "does not cut Medicaid" and that it "spends more on Medicaid each year than it does the previous year." That's false. Ryan's own projections call for slashing Medicaid below this year's spending level for years to come.
  • That GOP document says Democrats in Congress and Obama increased the deficit 259 percent since 2008, when it was $458 billion. That ignores the fact that President George Bush was in office in 2008. Obama inherited a $1.2 trillion deficit largely caused by declining revenues and Bush's response to the economic crisis.
  • Ryan says Obama's proposed budget "commits seniors to bureaucratically rationed health care." In fact, the new health care law states that the advisory board to which Ryan refers "shall not include any recommendation to ration health care." Furthermore, the board members are to be primarily doctors, economists and other outside experts, not Washington bureaucrats.
  • He says the "principles of tax reform" in his plan are "identical" to those in the bipartisan fiscal commission. That's misleading. Both would close loopholes and reduce tax rates, but the commission would raise $785 billion in new tax revenue from 2012 to 2020 for debt reduction. Ryan's plan is revenue neutral.
  • He says Obama's budget "imposes $1.5 trillion in tax increases on job creators and American families." But, as we written before, about half of that total would come from increases scheduled under current law.
  • He says that closing the Medicare prescription drug coverage gap would "increase prescription-drug prices for everyone." But the Congressional Budget Office says out-of-pocket costs would be unaffected or lower for many.
  • He claims the health care law doesn't improve Medicare's finances. Not true. It does, but experts worry some cost controls won't be fully implemented. Furthermore, Ryan's budget keeps in place some of those same cost controls.

This is not to say that everything Ryan claims on his website is inaccurate. But it's our job to "set the record straight" when he doesn't.

Analysis

The Wisconsin Republican, who chairs the House Budget Committee, has come under some criticism from the right and left for his budget plan, which he calls the "Path to Prosperity." Some conservative Republicans, such as Sen. Rand Paul of Kentucky, don't think it goes far enough to cut spending and balance the budget. Most Democrats, including Sen. Chuck Schumer of New York, say it cuts spending too much and in the wrong places.

His most high-profile critic is President Barack Obama, who gave a speech April 13 attacking Ryan's plan and setting out his own vision for reducing the deficit. The president made his own misstatements and exaggerations, which we wrote about in "FactChecking Obama's Budget Speech."

A week after the president's speech, Ryan issued a statement that carried the headline, "Paul Ryan Sets the Record Straight." It's one of several postings on a website he calls "Setting The Record Straight," where Ryan counters "myths" about his plan with the "facts." He provides Q&As on the debt, Medicare, Medicaid and taxes, as well as a 15-page brochure from the House Republican Conference that covers much of the same ground.

Debt, deficits and Ryan's plan

In the "Debt Q&A," Ryan's website asks: "I heard that this budget actually increases deficits and debts. Is that true?" He answers it by saying, "No." In fact, the debt still rises substantially. Furthermore, Ryan's claim in the same Q&A that his plan will "bring deficits below $1 trillion immediately" is just barely true, even by his own projections.

Let's take the debt first. Table S-1 in Ryan's plan shows that the debt held by the public would increase from $10 trillion to $16 trillion from 2011 to 2021. That's less than the increase projected under Obama's budget. But the fact is the debt still increases under Ryan's plan, though at a slower rate.

As for the deficit "immediately" dropping below $1 trillion. That may be true, but only barely. The 2012 deficit, according to his plan, would be $995 billion. That could easily go over $1 trillion if Ryan's projections are even slightly off. The deficit would drop to $698 billion by fiscal year 2013, under Ryan's projections. But that's what the president's budget projects, too. In fact, the president projects a slightly smaller deficit in fiscal year 2013 ($692 billion). It's true that Obama's projections are optimistic: The nonpartisan Congressional Budget Office last month released an analysis of the president's budget that found his deficit would actually be $901 billion in 2013, not $692 billion. But Ryan's projections may also be too optimistic. CBO has not done a similar analysis for his plan.

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The deficit blame game

The 15-page brochure, which is called "Charges and Responses," blames "Democrats in Congress" and Obama for a 259 percent increase in the deficit. That's misleading.

House GOP: While our nation's deficit crisis was not created overnight, Democrats in Washington have slammed on the spending accelerator and made our deficit problem drastically worse. Democrats in Congress and President Obama have increased deficits from $458 billion in 2008 to an estimated $1.6 trillion in 2011 — a 259 percent deficit increase in just three years.

It's true that Democrats had a majority in Congress when the fiscal 2009 budget was approved, but President Bush signed those spending bills into law and blocked any hope Democrats had of reducing the deficit with tax increases. As for Obama, he did not become president until January 2009, when the fiscal year was already nearly four months old. As we have written before, the nonpartisan Congressional Budget Office projected in January 2009 — two weeks before Obama took office — that the deficit for that year would be $1.2 trillion. The deficit continued to increase under Obama, and the budget year ended with a $1.4 trillion deficit, about $960 billion more than 2008.

Who's to blame for the $1.4 trillion deficit? The financial crisis and the subsequent recession. Revenues declined $419 billion in fiscal year 2009, and at the same time three major programs instituted by Bush and Obama to address the economic crisis added $353 billion in spending, the CBO reported in November 2009 at the close of the fiscal year. The CBO said the growth in spending was driven by the bailout of the banks and mortgage financial giants Fannie Mae and Freddie Mac under Bush ($245 billion) and the stimulus ($108 billion) under Obama.

Ryan is also slightly off on his estimate for the 2011 deficit. Last month, the CBO projected the deficit at $1.425 tillion. Using that figure, the deficit has gone up less than 19 percent since Obama took office — not 259 percent.

Medicaid cuts

In the 15-page brochure, Ryan makes the false claim that his budget "does not cut Medicaid" and that it "spends more on Medicaid each year than it does the previous year." His own budget shows that's simply not true. His budget would slash Medicaid spending below current levels for years to come.

House GOP: This budget does not cut Medicaid. In fact, it spends more on Medicaid each year than it does the previous year, but does so in a fiscally responsible manner that will lower the cost curve and ensure the long-term sustainability of the programs. Only Washington politicians would call that a cut.

That's wrong. Ryan's own "Path to Prosperity" proposal shows (on table S-3) that he would cut Medicaid spending from $275 billion in 2011 to $259 billion in 2012. And his Medicaid budget doesn't rise above the current year's spending until 2019. Even if we look at year-to-year spending, the Medicaid budget goes down in 2012, 2014 and 2015.

Ryan's projected 10-year Medicaid spending is $771 billion less that projected under current law, and $735 billion less than projected under the president's budget. To accomplish that, Ryan goes much further than simply holding down the future growth of Medicaid spending. He would shrink it, and the claim that he wouldn't is an outright falsehood.

Rationing Health Care?

In his April 20 statement, Ryan also falsely asserted that health care for seniors would be rationed to reduce Medicare costs.

Ryan, April 20: His budget commits seniors to bureaucratically rationed health care, burdens families with ever-higher taxes, and consigns our children and grandchildren to a diminished future.

It's a matter of opinion whether any budget will help or hurt "our children or grandchildren," so we won't address that. But let's look at the claims about "ever-higher taxes" and "bureaucratically rationed health care."

Ryan twice warns of Obama's plan to "ration" health care for the elderly. He also says, "The greatest threat to the health security of America's seniors is the President's plan to deeply and systematically ration Medicare."

Ryan spokesman Conor Sweeney told us in an e-mail that the claim of rationing refers to funding for the Independent Payment Advisory Board created by the federal health care law. But it's wrong to say that the advisory board will ration care or that it will be run by bureaucrats, as we wrote when Sarah Palin made a similar claim.

The Patient Protection and Affordable Care Act says the advisory board "shall not include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums." Also, the board isn't made up of Washington bureaucrats. The 15 voting members will be appointed by the president in consultation with congressional leaders; they must include doctors and other health care professionals, economists and health care finance experts, and representatives of consumers and seniors, as the American Medical Association explains. There will also be three non-voting members: the Health and Human Services secretary, and the administrators of the Centers for Medicare and Medicaid Services and the Health Resources and Services Administration.

'Ever-higher taxes' for whom?

Ryan's claim that Obama's plan "burdens families with ever-higher taxes" begs the question: for whom? Not most families. It depends how much the family earns.

Under current law, the Bush tax cuts implemented in 2001 and 2003 will expire at the end of 2012. The sunset was part of a deal struck between the Republicans and the White House to extend the Bush tax cuts for all taxpayers for two more years rather than let them expire at the end of 2010. Obama's budget proposal would extend the tax cuts for individuals earning less than $200,000 and couples earning less than $250,000. The IRS says that 138 million of the 142.4 million tax returns in 2008 had a gross adjusted income of under $200,000, so the vast majority of taxpayers would not see their income taxes go up.

Similarly, Ryan also claims Obama's "budget imposes $1.5 trillion in tax increases on job creators and American families," a claim we found to misleading when he first made it in February. That figure is a 10-year estimate and nearly half of it would come from making no change in current law — that is, current law would allow the Bush tax cuts to expire for upper-income earners, as we just described.

Ryan's reform not 'identical' to fiscal commission

In the "Tax Q&A," Ryan says the "principles of tax reform" in his plan are "identical" to those recommended by the National Commission on Fiscal Responsibility and Reform — a bipartisan panel formed by Obama. That's misleading.

Tax Q&A: The principles of tax reform guiding The Path to Prosperity are identical to the principles that guided the tax proposals put forward by the President's bipartisan Fiscal Commission.

It is true that both plans would close loopholes and reduce tax rates, but the commission would raise $785 billion in new tax revenue from 2012 to 2020 for debt reduction. Ryan's plan is revenue neutral.

The fiscal commission estimated that there is $1.1 trillion a year in "tax expenditures," such as tax credits, deductions and exemptions. The commission recommended closing loopholes, limiting deductions, ending certain tax credits and making other tax changes to broaden the tax base and lower the tax rates. But the commission also said:

Fiscal commission, December 2010: To escape our nation's crushing debt and deficit problem, we must have shared sacrifice — and that means a portion of the savings from cutting tax expenditures must be dedicated to deficit reduction.

So, while Ryan and the commission would both close loopholes and lower rates, he differs entirely from the commission's principle of "shared sacrifice" to reduce the deficit.

Holes in 'doughnut hole' explanation

Ryan's site also includes a Q&A page on Medicare that dodges one of its own questions. It asks, "Does this budget reinstate the so-called Medicare 'donut hole'?" But Ryan skips the correct answer, which is "Yes," and instead misleadingly claims that the health care law's provisions "increase prescription-drug prices for everyone."

Medicare Q&A: This budget repeals the Democrats' health-care law, including provisions that increase prescription-drug prices for everyone. In fact, the CBO confirmed that the law's new requirements will drive up health-care costs, at odds with claims made by its proponents. In a letter to Chairman Ryan last fall, CBO stated that "[The] increase in prices would make federal costs for Medicare's drug benefit and the costs faced by some beneficiaries higher than they would be in the absence of those provisions," and that "the premiums of drug plans will increase along with the increase in net drug prices, so the premiums paid by beneficiaries will increase slightly." Like the rest of this costly new entitlement, provisions that increase prescription-drug prices should be repealed.

First, Ryan's budget plan does indeed reinstate the so-called "doughnut hole," a gap in Medicare Part D prescription drug coverage. As the nonpartisan Congressional Budget Office said: "The proposal would repeal the provisions that created the Independent Payment Advisory Board and that expanded subsidies for the 'coverage gap' in Part D (a range of spending in which many enrollees have to pay all of their drug costs, sometimes called the doughnut hole)."

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The gap in coverage occurs when a beneficiary's drug costs (both Medicare and out-of-pocket spending) reach a certain point — $2,840 in 2011. After that, a beneficiary would — before the health care law, at least — have to pay all costs until his or her out-of-pocket costs reach $4,550 and drug coverage picks up again. The health care law provides a 50 percent discount on brand-name drugs in the gap and calls for slowly closing the gap until it's gone in 2020. Ryan's plan would repeal this provision of the health care law, and, beginning with 65-year-olds in 2022, create a new version of Medicare in which seniors get government subsidies to help pay for private coverage.

Second, Ryan selectively quotes the CBO, which said the health care law's impact on drug prices would be "small, on average." CBO does say, as Ryan notes, that "[t]he premiums paid by beneficiaries will increase slightly." But the report goes on to say that many beneficiaries' out-of-pocket costs would be largely unaffected or would be lower. Others would pay "slightly" or "only a little" more.

CBO said those in a low-income subsidy program would be "largely unaffected"; those not in the low-income program who have spending below the "doughnut hole" limit would "pay slightly more toward their deductibles, coinsurance, and copayments." Those who hit the coverage gap "will probably pay less for their drugs overall." And those who go beyond the gap "will generally pay only a little more for those drugs because their cost sharing is about 5 percent." Of the 27.7 million seniors with Part D coverage, about 10 million have low-income subsidies and about 4 million reach the gap without the benefit of subsidies.

Medicare solvency

Ryan's Q&A page also claims that the health care law didn't improve Medicare's solvency. That's not true. If the law is implemented as written — and we'll get to that "if" in a moment — the law "improves the financial outlook for Medicare substantially," according to the Medicare Board of Trustees 2010 report. Medicare's chief actuary, Richard Foster, said the law would extend Part A — the hospital insurance trust fund — by 12 years.

But that's IF the law is implemented as written, and both Foster and the trustees have their doubts. It's unknown how well some provisions of the law will work in lowering costs, and it's unclear whether reductions in the growth of payments to hospitals and other providers will actually take place. As the trustees' report said: "Many experts doubt the feasibility of such sustained improvements and anticipate that over time the Medicare price constraints would become unworkable and that Congress would likely override them, much as they have done to prevent the reductions in physician payment rates otherwise required by the sustainable growth rate formula in current law." Ryan's budget, by the way, would keep in place many of these same Medicare cost controls.

Ryan claims that the law doesn't improve Medicare's finances because Foster "testified before the House Budget Committee that the Medicare savings had been double-counted." It's true that Foster said that the trust fund could only be extended if Medicare savings were used for that, and not used for expanding insurance coverage. "In practice, the improved HI financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions," Foster said. But that's not the same as saying the law doesn't help Medicare's solvency. The truth is that we don't know what will happen yet; it remains to be seen whether the cost controls called for in the law will be fully, and successfully, implemented.

Ryan also repeats the misleading claim that "Medicare will go bankrupt in 2021 unless we do something to save it." As we've written, this claim pertains to one part of Medicare — Part A — which is expected to be depleted in 2020, according to the CBO, or 2029, according to the Social Security and Medicare Boards of Trustees. But that doesn't mean Medicare is going out of business. The trustees have been predicting a Part A depletion "almost from its inception," says the Congressional Research Service. Yet politicians have found ways to extend it.

By Eugene Kiely and Lori Robertson, with Lauren Hitt


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Rep. Paul Ryan in April.

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