NCPA - National Center for Policy Analysis


February 17, 2010

With over $9 trillion in federal budget deficits expected over the next 10 years, lots of people in Washington are talking about the gap between taxes and spending.  Rep. Paul Ryan is unusual in that he's proposed to do something about it, says Josh Barro, a Senior Fellow with the Manhattan Institute. 

Ryan, the ranking Republican on the House Budget Committee, released last month an updated version of "A Roadmap for America's Future."  The Roadmap proposes radical changes in entitlement programs and our tax code, with the intent of making the federal budget sustainable while encouraging economic growth. 

The plan is not perfect, but it contains a lot of excellent components and is a good starting point for discussions on fiscal reform, says Barro: 

  • It would put a brake on runaway entitlement spending; reform provisions of our tax code that discourage capital investment and foster runaway health care costs; and significantly reduce marginal tax rates.
  • The plan's key drawback is that it takes far too long -- over 40 years -- to bring the federal budget deficit to a sustainable level under 2 percent of gross domestic product (GDP). 

The centerpiece of the Ryan plan is entitlement reform.  This is important, because entitlements (especially health care entitlements) are the key driver of our unsustainable federal budget, says Barro: 

  • Under the Roadmap, federal Medicare and Medicaid spending would peak at 6.7 percent of the economy in 2035 and then begin falling.
  • Under current policy, today's figure of 5.3 percent would nearly double to 10.0 percent over the same period, continuing to rise thereafter.
  • Ryan would achieve these savings by taking Americans currently under 55 out of Medicare and instead give them vouchers to buy private insurance in retirement.
  • The value of these vouchers would grow more slowly than medical inflation.
  • Additionally, Ryan would introduce means testing and gradually raise the retirement age to 69. Medicaid would undergo a similar reform. 

Social Security would not see short-term savings, partly because the Roadmap introduces individual accounts that raise the near-term cost of providing benefits.  Like Medicare, Social Security would also undergo means testing and a rise in the retirement age (to 70) which would produce long term savings, says Barro. 

Source: Josh Barro, "Rep. Ryan's Economic Road Map Is a Good Start," Real Clear Markets, February 16, 2010. 

For text:

 For Roadmap: 


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