US Rep. Paul Ryan from Wisconsin describes the GOP’s alternative federal budget, to be officially unveiled at 10:30, in today’s Wall Street Journal. In addition to the shape of the curve under this plan compared to the president’s proposal, I really appreciate the entitlement and tax reforms he outlines.
Entitlement Reform: Ryan’s plan would convert Medicare into a premium assistance program, indexed to income, starting in 2021. It would also transform Medicaid to a fixed amount based on a state’s low-income population. The Medicare fix makes the nation’s most expensive government-run program into real assistance. The Medicaid fix stops rewarding states for expanding eligibility and instead rewards them for finding effective ways to assist the poor.
Tax Reform: Ryan’s plan gives taxpayers the option of sticking with the current tax code or moving to a postcard-sized tax return with a 10% rate for couples earning less than $100,000 and 25% for those earning more. The plan has limited exemptions and deductions, but makes the first $39,000 of earnings effectively tax-free for a family of four. Just as important, it cuts the world’s second-highest corporate income tax rate to 25% – notice that it’s the same rate as the top personal income tax rate?
If Congress adopted this budget and the General Assembly adopted the Back-to-Basics budget, the recession would not end overnight, but the disincentives to produce, save, and invest sure would.
