It’s Time for Representative Ryan to Man Up Print
Dean Baker
Truthout, April 4, 2011

See article on original website

Congressman Paul Ryan is the new darling of both the Republican Party and the major media outlets. He has put forward bold plans for dismantling Medicare, Medicaid and Social Security. In Washington policy circles this passes for courage. Congressman Ryan is prepared to tell tens of millions of workers that they can no longer count on a secure retirement and decent health care in their old age. In Washington policy circles this passes for courage.

Outside of Washington people have a different conception of bravery. After all, over the last three decades the policies crafted in Washington have led to the most massive upward redistribution in the history of the world. The richest 1 percent of the population has seen its share of national income increase by close to 10 percentage points. This comes to $1.5 trillion a year, or as Representative Ryan might say, $90 trillion over the next 75 years. That’s almost $300,000 for every man, woman, and child in the United States.

This upward redistribution creates the real possibility that many of our children will be poorer than we are. If Representative Ryan and his followers really cared about future generations then we might expect him to push for policies that reverse some of this upward redistribution.

For example, we could break up the large banks (e.g. Goldman Sachs and J.P. Morgan) that operate with implicit government protection. This allows them to borrow money at below market interest rates and undercut their smaller competitors. By my calculations the size of this subsidy to the largest banks is close to $35 billion a year, almost half the size of the long-term Social Security shortfall that concerns Mr. Ryan so much. If Mr. Ryan could man up a little maybe he would have the courage to tell the big Wall Street banks that they will have to compete in a free market without this subsidy from the government.

It’s not only the big banks that make Representative Ryan cower. He’s also scared of the pharmaceutical industry. As a result of government enforced patent monopolies we spend close to $300 billion a year on drugs that would cost us around $30 billion a year. The potential savings of $270 billion a year is about three times the size of the projected Social Security shortfall.

Representative Ryan is a big fan of Medicare vouchers; however, his voucher system does nothing to address our broken health care system while virtually guaranteeing that most seniors will not be able to afford decent health care. How about a voucher system that gives Medicare beneficiaries the option to buy into the more efficient in health care systems in Europe and Canada, with the taxpayer and beneficiary splitting the savings? Well that one could hurt profits of the insurance industry and major health care providers, so Mr. Ryan is against it.

We also could have freer trade in physicians’ services. If we paid the same wages to our doctors as countries in Europe and Canada, it would save us close to $90 billion a year. While our trade pacts ensure that our manufacturing workers have to compete with the lowest-paid workers anywhere in the world, our doctors are still largely protected. If autoworkers enjoyed the same protection as doctors, they would all make $150,000 a year and we would still be buying all our cars from GM, Ford, and Chrysler. But the doctors’ lobbies are powerful, so Mr. Ryan is not interested in this one.

How about reining in the excess pay of top executives at U.S. corporations. Our top executives not only get paid far more than ordinary workers, they also get paid far more than top executives at large successful corporations in Europe and Japan. The government sets the rules for corporate governance just like it sets the rules for union governance. While Mr. Ryan’s friends have been anxious to use the heavy hand of government to weaken the power of unions to push on behalf of workers, they become timid when it comes to preventing corporate abuses. Suppose that the compensation of top executives had to be approved at regular intervals by shareholders, where only shares directly voted counted. (This means that mutual fund managers could not support big pay packages for their CEO friends in the name of the people for whom they are investing.)

How about reducing military spending to the same share of GDP as it was in 2000? The savings of 1.6 percent of GDP (at $240 billion a year) is more than two and a half the size of the projected long-term Social Security shortfall. But this would hurt the defense industry, so again Mr. Ryan is not interested.

The basic economic reality is very simple, and everyone in Washington knows it. There is no way that future generations of workers will be poorer than the current one due to benefits like Social Security and Medicare. They could end up poorer if we continue to see the benefits of growth shifted to the top. The latter is the result of the corruption of politics in Washington. And at the moment, Mr. Ryan is the poster boy for that corruption. If he gets his way, your children and grandchildren can count on a very bleak future.