Paul Ryan on the Budget, the Nationalization of our Economy

Rep. Paul Ryan (R-Wis.) is a rising star in conservative politics.  He is a bright, articulate spokesman for the ideas and ideals that have made America the greatest nation on Earth.  As the ranking Republican on the House Budget Committee, Ryan was lead author of the GOP alternative budget this year and was it’s most vociferous proponent.  Ryan is now at the center of the healthcare debate as a member of the House Ways and Means Committee. 

Ryan talked healthcare and the status of the budget yesterday with HUMAN EVENTS Editor Jed Babbin and Congressional Reporter Connie Hair in an exclusive interview. (The following is a transcript edited for length.)

HUMAN EVENTS: You’re the budget man.  Let’s talk a little bit about, if you would please, we’re interested in finding out what you can tell us about how the conference went on the budget resolution.

REP. PAUL RYAN:  [laughs] I wasn’t invited so I can’t really tell you how it went because they didn’t include us.  We show up at the dog and pony show, the official meeting of the conference which technically the rules require.  We each have our say and they go back and cut their deal back in the closed room and they sign the report and it is done.  That is how the majority operates.  That’s how most majorities operate.  

This budget, the way I try to describe this to constituents, and I just did 25 town hall meetings on this, the way to look at it is, these are the architectural plans of the government that they envision.  This is the blueprint.  That’s the way the process works.  Now they have basically ratified the Presidents blueprints for the shape and size of the federal government under his presidency.  Now they move forward to erect this budget, this government.

HE:  Now this goes to the substantive committees.

RYAN:  That’s right.  The architectural plan has been approved, now they’re going to frame the house for the plumbing and put the electricity up — they go to the committees.  Cap and trade coming out of Waxman’s Commerce Committee, in Ways & Means, we’re going to do all of these tax bills, the healthcare bills, Appropriations does all their big spending bills and so on and so forth.  All of this is supposed to culminate and come together in the fall where these pieces are brought back together, passed, and then the House will be finished.  Their government will have been built.  And next year they’ll build from there on top of it.  And that’s basically how it works.

HE:  In terms of the substantive legislation, though, it seems to me the Senate was trying to build in some things that would make some parts of the legislation still susceptible to a point of order.  Did any of that survive?

RYAN:  No, well, on cap and trade they have said that it is their intent to not use reconciliation for cap and trade.  I think they’re probably sincere in saying that.

HE:  They don’t have a lot of choice because the Democrats are in disarray.

Right, because there are coal state Democrats and southern Democrats.  Technically speaking it can still be reconciled because what matters in reconciliation is what committee you send the instructions to, and the instruction to Commerce is go find $1 billion in savings.  So in the House, because they’re giving the Commerce Committee [reconciliation instruction for] $1 billion in savings, Commerce can get that out of any area in its jurisdiction it wants to.  And $1 billion means net $1 billion.  They can have a $1.7 trillion cap and trade bill that raises the bill by $1.7 trillion and spends $1.699 trillion, and it will satisfy the reconciliation requirements; putting reconciliation on it, sending it out of the House, sending it to the Senate.  Technically speaking they could pull that one out.  I don’t think that’s their intent.  They seemed pretty clear about it because they have their own disarray on cap and trade.  So we believe we have a chance at defeating cap and trade either here on the House floor or via filibuster in the Senate.  

But the big issue was [Democrat Senate Budget Committee Chairman] Kent Conrad kept saying he would never use reconciliation for healthcare.  Healthcare is 17% of our economy.  This bill is a thinly-veiled attempt at nationalizing that section of our economy.  They put reconciliation protection on that, which is an abysmal perversion of the bill, the law, the process of reconciliation and they now have that in their back pockets.  They know that if they can’t get their 60 votes for their healthcare bill, they can just run it through with reconciliation.  

HE:  One of the things that really worries our readers the most is this idea of some national board setting standards of care.  Say, for example, someone is approaching 60 years old therefore it’s not cost effective to have a stent put into their heart.  

RYAN:  That’s exactly right.  It’s called rationing and it’s what they do in England and Canada and other single payer systems.  That board is already in place and was part of the stimulus package.  The bureaucracy is called the Institute of Comparative Effectiveness.  It’s in place.  It has a $1.3 billion budget.  They’ve already named the guy who’s gonna run it.  The vision is, that gets put into place, and then you pass the healthcare legislation with the government run plan option and that is directed and guided by the Institute of Comparative Effectiveness.  It doesn’t take a lot of imagination to figure how this works because it is exactly what they use in these other countries.  In fact, in England it’s called the National Institute of Comparative Effectiveness, otherwise known as NICE. [laughter]  You can’t make this stuff up.  

Get on the internet and you can see rationing story after rationing story after rationing story: cancer treatments, hip replacements, you name it.  We live near Canada and at these town hall meetings I have all of these people telling me these Canadian rationing stories because a lot of Canadians come to Wisconsin for their healthcare — it’s a pretty common thing — those who can afford it.  So the Institute of Comparative Effectiveness will be the government bureaucracy that is in charge of designing the government protocols for healthcare: what procedures are used, what procedures are prescribed, how, where, who, when, all of that stuff.  

But, now, here’s the big deal.  Here’s where the nucleus of this problem occurs at least in my mind:  the entire premise of a government run plan option.  The problem with that is when you have the government as an offeror of health insurance in the marketplace; it is basically akin to having the referee serve also as a player in the game.  The government has such enormous built in advantages, there is no way the private sector can compete with it.  It’s kind of like my daughter’s lemonade stand competing against McDonald’s.  Let me just actuarially give you a brief walkthrough of what this means.

The actuarial firm that the Democrats are so fond of using, a very reputable firm, called the Lewin Group, has done a study now on if they take this plan like the one Obama proposed in his campaign where you have the government run option and they use the Medicare reimbursement structure which is what they say they’re going to do, which is what the bills we’ve seen so far do, what that does is it underpays providers with the government run plan option.  The federal government already finances about half of healthcare now through Medicare and Medicaid.  It underpays providers, those providers and doctors inevitably as they do today make it up on the private pay side.  They increase their prices for the private pay side so there’s cross-subsidization that occurs.  So every person that moves over to the government pay plan because they have a pre-existing condition, they don’t have health insurance now, or the employer says I’ve had it, I don’t want to do it anymore, the government can take care of you, every one of those people who keeps moving over you get a death spiral with private health insurance becoming more and more expensive.

So according to the Lewin Group, in a few years, 120 million people will move from private health insurance to government-run healthcare.  

HE:  Going back to this group, this Institute for Comparative Effectiveness group, who is going to populate that?  Is this going to be a bunch of bureaucrats?  Are they even going to be doctors or more like ACORN community organizers?

RYAN:  The guy behind the idea is Peter Orszag [Office of Management & Budget].  It was Peter who fought for it in the stimulus package, it was Peter who has resolved and testified for it when he was CBO director.  The most advanced thinking I’ve heard from anybody in the administration is Peter.  He basically believes it ought to be a bureaucracy of really smart people.  

HE:  Oh, the best and the brightest!  Harvard faculty right?

It really doesn’t matter who’s in there.  It’s the whole structure of the thing that’s the problem.  It’s the whole architecture and the whole notion of a government agency designing healthcare protocols, reimbursement structures, and how it’s to be delivered.  

HE:  In terms of the overall picture, you’re a numbers gentleman, we have X percentage of the American economy including the healthcare system already pretty much under government control.  How far down the road are we in terms of nationalizing?

RYAN:  I haven’t crunched the financial thing yet because that one’s a little tougher.  You have to make certain assumptions.  But if you take the energy sector and the healthcare sector – that’s 25% of our economy that they want to run or micromanage.  We think we’ll probably defeat them on cap and trade which will deny them for now the victory of nationalizing 8% of our economy.  The victory that could slip through our fingers simply because they have the votes is the healthcare one which is 17% of our economy.  

The numbers are that they need about $1.3 trillion on top of current levels of spending to finance their healthcare vision.  They’ve identified $646 billion in the budget with $300 billion coming from tax increases, limiting the charitable deductions and that, and $300 billion coming from cuts to Medicare providers.  They believe they can get another $600 billion from those two sources as well:  another $300 billion from more tax increases and another $300 billion from more cuts to healthcare providers.  What’s really interesting about this is if you keep squeezing the Medicare reimbursement system down, because that’s a price control model, that’s going to carry over to this public plan.  That’s going to put so much pressure on healthcare providers, it’s going to make private healthcare insurance so much more expensive, it’s going to accelerate the transition of people getting kicked out of their private health insurance and onto the government plan. According to Lewin, seven out of ten people who have health insurance from their jobs will be losing it in the next few years under this kind of scenario.

You have to understand, the goal here is to have a single-payer system but to use our rhetoric of choice and competition.  “If you like what you’ve got you can keep it.”  That’s really not the intent of the policy.  The intent is, set up a system that looks like if you like what you’ve got you can keep it, you can choose your plan, you can keep your doctor, but the effect of setting it up in this way is that in just a handful of years the only thing left standing is the government plan option and it becomes the government plan monopoly.

This is getting us dangerously down the pathway of what I call crony capitalism, and you already have private business throwing in their lot with the government.  Autos are a good example.  You have businesses that are making the calculation if I can’t beat ‘em, join ‘em.  If I’ve got these great political connections, I might as well use them because if the government’s going to pick winners and losers I’d rather be picked as a winner instead of loser.  

Just look at what’s happening in the financial system.  When we negotiated that whole TARP bill, there was never talk about equity injections.  There was explicit discussion that we weren’t going to buy stock in banks.  Our proposal was insure the toxic assets or Paulson’s idea of buying the toxic assets, but deal with the assets that are crashing the system, get them out of the picture so credit can flow again.  So when Paulson did the equity injections that violated the intent of Congress that violated the specific conversations we had at the time, and it set this dangerous ball rolling, which is you had the government owning shares of private corporations.  Now you have the government talking about converting from preferred to common stock which is just de facto nationalization.  Then you had Bush tell us, and I was one of them, on the day before the auto thing if they didn’t get this pot of money that was already set aside for them at the Energy Department, which none of us voted for that energy bill but they got it, they still hadn’t received that money, if they didn’t get that pot of money to help them through the jam then he was just going to open TARP up to them.

I think the mistake Republicans made in the Senate was they filibustered that Energy Department bill, denied that to them — and I didn’t like it — but what Bush staffers kept saying to us is that they didn’t want to be Herbert Hoovered so if the Energy Department money didn’t go to the auto companies they were going to give them TARP money.  By filibustering that Energy Department bill, and not putting limitations on the TARP money, then Bush just gave them the TARP money.  We had two really bad precedents made with the handling of TARP in the last administration which this new administration has the cover of those new decisions and has just taken the ball and run with it way down the field.  So that’s where we are right now.

HE:  If everything goes the way the Democrats want it, and we come up for air on September 30th or October 1st, how much of our economy will have been swallowed by the government, rough guess?

RYAN:  It’s hard to say.  The way we see the healthcare debate is going one of two ways and neither one of them are good ways.  The Plan A is the Ted Kennedy-Henry Waxman public plan option as I just described it.  Let’s say we are successful in defeating that politically and intellectually as we have had some success with cap and trade, then they jettison that and they move over to Plan B which is just to hyper-regulate healthcare insurance in America, federalize the regulation of health insurance and de facto take over the health insurance companies by making them do all the same thing; a mandate on individuals and then all these mandates that we call guaranteed issue of community rating where they basically standardize health insurance, take out all underwriting and they basically have a system where you have four or five big health insurers in America who are simply nothing more than claims processors for the federal government.  They are simply a Blue Cross for everybody with a very expensive mandated healthcare that will be extremely expensive, consuming more and more taxes to pay for this thing, which becomes a new entitlement that is unaffordable and creates a whole new unfunded liability on top of the entitlements we have right now.

HE:  Okay, so if we can’t really project numbers, by the end of first term, if he’s going along the path he’s going along, we’re going to have effectively nationalized healthcare, we’re going to have effectively nationalized the automobile industry, we will have a significant chunk if not more than we can imagine of the banking industry owned by the government, and with healthcare we’re going to be sending our claims forms to Rahm Emanuel.  Is that where this is all going?

RYAN:  Yeah.  The banking thing is too early to say but that’s the trajectory.  I don’t know what the exit strategy is; I have yet to hear someone define the exit strategy on the banking thing.  At the end of the day this is what I call a wholesale replacement of the American system of government, of the American ideal where we equalize opportunity for individuals, but have a limited government, a free enterprise system, dominated by self-determination and liberty and freedom and we replace it with the European notion of equalizing the results of people’s lives.  That, to me, is what’s happening here.  I call it the third great wave of progressivism building on the first two ones:  the New Deal and the Great Society.  A new layer of progressive policies layered on top that they’re going to have to fund with much more taxes than they’re even articulating right now, new benefits, mandates and entitlements, and at the end of this administration the size of our government will be appreciably higher, much higher than it ever has been and it will require much higher levels of taxation, will have inflexible labor markets, will have whole sectors of our economy micromanaged or effectively nationalized by the federal government and we will be a stagnant economy.  Our living standards will go down.  Our unemployment rate will be chronically higher and we will look like Western Europe.  Those are the seeds that are being planted right now.  It’s our job to sound the alarm bells on that and to provide an alternative to show that we can fix today’s problems without having to do that.

The Democrats and this administration right now are using these straw man arguments.  They’re saying that the Republicans are just saying nothing or no or they’re giving you an unacceptable level of insecurity in your life that you just couldn’t accept.  They just want you to be at the whim of the free market which is terrible and did this problem that we have now and the only option is what we’re offering.  They’re trying to win the argument by default by mis-characterizing or tearing down their opponents so that people think that what they have to offer is all that there is and therefore they might as well just go along with it.  

We have to offer principled alternatives that speak to people in today’s language with today’s problems that harness our principles and apply them to these problems and reclaim the American ideal.  That’s the way I see it.  And we have to get outside the Beltway to do it. So right now we’re running numbers and getting policies ready so we have answers but we’ve got to get out and communicate these things.