Ryan Proposal Would Take Savings From Medicare Cuts To Bring Millionaires’ Tax Rates To Lowest Level Since Herbert Hoover
Schumer: When It Comes To Tackling Rising Medicare Costs, President Did It First—And Did It Better—In Healthcare Law
Senator Says President’s Speech on Deficit Reduction Will Draw Important Contrast with House GOP
Washington, DC—Today, U.S. Senator Charles E. Schumer said the Senate would never pass the House Republicans’ budget proposal that cuts Medicare and urged the plan’s architect, Congressman Paul Ryan, to go back to the drawing board and pursue a fairer proposal.
“The Ryan budget puts the middle class last instead of first. As a result, it will never pass the Senate,” Schumer said.
Schumer said Medicare is better reformed by pursuing broader changes to the health care delivery system like the healthcare law signed by President Obama last year did.
“If we are serious about reining in Medicare spending, there is a far better starting place than the Ryan budget. It is the healthcare law passed by Congress last year,” Schumer said. “Republicans are patting themselves on the back lately for leading on entitlement reform. But when it comes to reining in the runaway costs of Medicare, the truth is, the President did it first and he did it better.”
Ryan’s budget plan, which is expected to receive a vote in the House this week, would end traditional Medicare and replace it with a voucher system that would force seniors to find private insurance. The savings from the plan would fund tax code changes that would reduce rates on millionaires and billionaires to the lowest level since Herbert Hoover’s presidency.
A full copy of Schumer’s remarks, as prepared for delivery, appears below.
U.S. Senator Charles E. Schumer
Senate Floor Remarks
April 12, 2011
As Prepared for Delivery
Madam President, I rise to discuss the issue of our budget.
Later this week, the House will vote on its FY2012 budget resolution. Congressman Paul Ryan, the author of that blueprint, calls it the “Path to Prosperity.”
Madam President, it may be a path to austerity, but it is hardly a path to prosperity.
Nonetheless, with negotiations finished just days ago on last year’s budget, Congressman Ryan has succeeded in jumpstarting the debate about next year’s.
The President himself will join this conversation about how best to do long-term deficit reduction in a major address tomorrow at George Washington University.
This is a debate we must have, and the President’s entrance to it comes not a moment too soon. It will make for a powerful contrast with the House Republicans’ plan.
The contrast we will hear from our President tomorrow will likely not be in terms of commitment to deficit reduction. Paul Ryan’s goal in his budget is to trim the deficit by $1.6 trillion over the next 10 years. He does not succeed in meeting this target, according to CBO—in fact, budget experts say his proposal only achieves $155 billion in deficit reduction—but the number itself is not the issue. Without a doubt, we must be ambitious in setting a target for deficit reduction. We cannot be gun-shy about achieving fiscal discipline.
So no, the contrast will not be about how much we seek to reduce the deficit. It will be about how we go about doing so.
The Republicans would like the looming debate to be one about numbers, but it will instead be one about priorities. And, Madam President, the Ryan budget has all the wrong priorities.
The House Republican budget puts the entire burden of reducing the deficit on senior citizens, students and middle-class families. At the same time, it protects corporate subsidies for oil companies, lets waste at the Pentagon go untouched, and would give even more tax breaks to millionaires.
In short, the Ryan budget puts the middle class last instead of first. As a result, it will never pass the Senate.
In the days since he first rolled out his budget proposal, Congressman Ryan has been hailed for taking on the tough challenges. But a closer look at his proposal shows that it is not bold at all. In leaving Pentagon spending and revenues completely untouched, Ryan’s budget hews exactly to his party’s orthodoxy. It doesn’t gore a single Republican ox. It is a rigid, ideological document.
Consider what Congressman Ryan wants to do on Medicare. In the name of ideology, Paul Ryan’s budget proposes getting rid of Medicare as it exists today and replacing it with a private system that would cut benefits.
Madam President, we’ve seen this movie before. Five years ago, President Bush tried to sell the country on a plan to privatize Social Security. The public rejected it.
Well, if you didn’t like what President Bush tried to do to Social Security, just wait until you see what Paul Ryan and the House Republicans want to do to Medicare.
Their budget plan proposes putting the Medicare system into the hands of private insurance companies. That is a recipe for disaster. It would mean an end to Medicare as we know it.
Beginning in 2022, Americans turning 65 would no longer be enrolled in Medicare, but instead receive a voucher to go shopping for their own health insurance on the open market.
Insurance companies, however, would not be required to honor that voucher, which would average about $8,000. Many private insurance plans for seniors far exceed that price already today. But under the Ryan plan, seniors who cannot find an affordable plan at the value of their voucher will simply have to make up the difference themselves.
This problem would only worsen over time as health care costs rise. Ryan caps Medicare’s spending at the level of inflation even though historically, healthcare costs rise higher than that. As Ryan’s voucher covers a smaller and smaller fraction of actual healthcare costs, seniors would have to cover the gap out-of-pocket.
This is why Alice Rivlin, a Democrat and President Clinton’s former OMB Director who worked with Ryan on his approach for a time, has distanced herself from his final product. She told the Washington Post that she opposes the Ryan plan. She has said: “In the Ryan version, he has lowered the rate of growth and I don’t think that’s defensible. It pushed too much of the cost onto the beneficiaries.”
Other Medicare experts agree with Rivlin. Stephen Zuckerman, a health care economist at the non-partisan Urban Institute said, “The most serious flaw is that the focus of this approach is on limiting federal spending on Medicare, without being concerned about the potential of this change to shift costs to Medicare beneficiaries.”
A better way to rein in Medicare spending would be to trim waste and inefficiency out of the delivery system. But it turns out that Ryan’s plan not only does nothing to reduce overall health care costs, it increases them.
According to the non-partisan Congressional Budget Office, in 2030, traditional Medicare insurance would cost just 60 percent of a private policy purchased with Ryan’s proposed voucher. In other words, the Ryan health care plan would cost two-thirds more than traditional Medicare.
Not only would the Ryan plan increase insurance costs, it would force seniors to shoulder a higher share of those costs.
CBO said, “Under the proposal, most elderly people who would be entitled to premium support payments would pay more for their health care than they would pay under the current Medicare system.”
How much more, Madam President? It is staggering when you look at the numbers. Under the current system, the average senior on Medicare in 2022 will contribute about 25 percent of the cost of their healthcare. CBO found that under the Ryan plan, the share paid by seniors would go up to 68 percent.
This is a crippling burden that would drive the average Medicare recipient into poverty. It is not only too much to ask of our seniors, it destroys the foundation of our healthcare system.
The bottom line is, the House Republican budget would cause the cost of health insurance to rise, and then would make seniors pay a greater share of that higher cost. It is a cut in benefits, plain and simple.
If we are serious about reining in Medicare spending, there is a far better starting place than the Ryan budget. It is the healthcare law passed by Congress last year.
Republicans are patting themselves on the back lately for leading on entitlement reform. But when it comes to reining in the runaway costs of Medicare, the truth is the President did it first and he did it better.
In the healthcare law, Madam President, we made a good start on reducing waste, inefficiency, and duplication in the system. We started down the path of making delivery system reforms. We set up a system for studying the effectiveness of different methods and treatments so that care could be delivered more efficiently. We made a down payment on shifting the larger healthcare system away from a fee-for-service model towards a system that pays providers for episodes of care.
The Ryan proposal adopts none of these cost-cutting approaches. In fact, his budget calls for the repeal of the healthcare law altogether. Left unsaid is that this would have a side effect of re-opening the donut hole, another hit to Medicare beneficiaries.
Now, if the Ryan budget’s only goal was to end Medicare, that would be ample enough cause to work tooth and nail to defeat it. But the Ryan budget doesn’t even put most of its savings from ending Medicare towards deficit reduction. Instead, it puts the savings towards further tax breaks for the wealthiest Americans.
That’s right, Madam President. Ryan’s budget not only seeks to permanently extend the Bush tax cuts for millionaires. He wants to cut their taxes even lower than the Bush levels.
As unbelievable as it sounds, he wants to give millionaires and billionaires an extra tax break.
Ryan’s budget proposal would bring the top rate down from 35 percent to 25 percent. This would make for the lowest level since 1931 when Herbert Hoover was President.
This is the trade Congressman Ryan proposes we make: cut Medicare benefits for seniors so we can afford to give millionaires an extra tax break.
This is the exact opposite of what the public wants. They don’t think millionaires and billionaires should even be getting George Bush’s tax cut, let alone an extra one atop that.
In last month’s NBC/Wall Street Journal poll that asked Americans what proposals they most support to reduce the deficit, 81 percent of Americans said they would support a tax on millionaires. This was the highest-polling answer. One of the lowest-polling answers was—you guessed it—cutting Medicare benefits. So the Ryan budget has its priorities completely upside down.
Now, you may ask if Congressman Ryan puts all his savings from cutting Medicare into millionaire tax breaks, how does he propose to achieve any deficit reduction?
The answer is, by targeting the programs most important to middle class Americans. It turns out that the Republican plan to end Medicare is also a plan to end other important programs.
For example, the Republican plan to end Medicare is additionally a plan to cut tens of thousands of teachers. And the Republican plan to end Medicare is additionally a plan cut Head Start for kids. The Republican plan to end Medicare is additionally a plan to cut medical research on diseases like cancer. And the Republican plan to end Medicare is additionally a plan to cut clean energy projects that create jobs and help us become energy independent.
In all, the Ryan plan assumes a steady squeezing of government until by 2050, the total cost of everything save for Social Security and health care is shrunk from 12 percent of GDP to just 3 percent.
But he doesn’t spell out a single detail of how to achieve those cuts. He has a number, but no specifics. That is the definition of a meat axe approach as opposed to a smart, sharp scalpel.
But even though Ryan doesn’t spell out where the cuts would come from to meet his goal, it isn’t a total mystery. We can fill in the blanks. The just-completed debate on the FY2011 budget offers plenty of hints what the Republican approach to cutting spending is.
In the budget debate we just had, Republicans wanted to cut the very programs that create good-paying jobs and help the middle class. They targeted everything from cancer research to financial aid for college.
We fended off many of their worst cuts by successfully pushing to include $17 billion in cuts from the mandatory side. We also got them to agree to reduce Pentagon spending by nearly $3 billion compared to their original budget.
This was not the Republicans’ preferred way to reduce the deficit. Because of ideology, they disproportionately targeted the domestic discretionary part of the budget for cutting, even though it only represents only 12 percent of the total budget.
But our deficit problems weren’t caused by Head Start and cancer research, and we won’t fix them by going after Head Start and cancer research. In the budget debates to come, we need to broaden the playing field beyond domestic discretionary spending.
It should include, for instance, waste in the Department of Defense. The Pentagon makes up half of the discretionary side of the budget, but Republicans continue to treat it as off-limits. Ryan himself leaves it virtually untouched, save for a symbolic trim. To say there isn’t waste at the Pentagon like there is waste elsewhere in the budget is absurd.
The bottom line is, any budget that leaves defense and revenues off the table is ultimately not serious. We need an “all of the above” approach that puts all parts of the budget on the table. A dollar cut from mandatory spending or the Pentagon is just as good as a dollar cut from non-defense discretionary spending.
Deficit reduction is an important goal, but the sacrifice must be shared. The Ryan budget fails that test.
This Democratic Senate will not stand for any proposal that seeks to balance the budget on the backs of the middle class and seniors.
I look forward to hearing the President’s remarks tomorrow. As for Congressman Ryan, I would encourage him to go back to the drawing board and come up with a fairer, more balanced plan.
Thank you and I yield the floor.