Looking At Ryan's Budget Blueprint

Melissa Block speaks with Paul Krugman — economics professor at Princeton University and a columnist for the New York Times — and Douglas Holtz-Eakin — president of the American Action Forum and former chief economist for the President's Council of Economic Advisers. Krugman and Holtz-Eakin discuss Republican Rep. Paul Ryan's budget proposal, which suggests turning Medicare and Medicaid into state block grants to address the federal budget.

MELISSA BLOCK, Host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, Host:

The president's speech follows the Republican plan unveiled last week. Its author is Paul Ryan, chairman of the House Budget Committee. And Congressman Ryan's 2012 budget blueprint would radically restructure Medicaid and Medicare. It would slash government spending by nearly $6 trillion over 10 years. And, it would cut taxes.

BLOCK: Douglas Holtz-Eakin, welcome to the program.

DOUGLAS HOLTZ: Thank you very much.

BLOCK: That's New York Times columnist and Princeton economics professor Paul Krugman. Paul Krugman, welcome to the program.

PAUL KRUGMAN: Hi there.

BLOCK: And Douglas Holtz-Eakin, I want to start with you. You see a path toward what you call fiscal sobriety and fairness in the Ryan plan. I want to ask first about tax cuts. Congressman Ryan would lower individual tax rates to 10 percent and 25 percent, corporate tax rates down to 15 and 25 percent. You favor those tax cuts? And if so, why?

HOLTZ: The bulk of the problem is spending, and all spending has to be considered. But number four, the route to the future is through tax reform. And so the Ryan plan is a revenue-neutral tax reform. It does call to lower the top corporate rate and top individual rate to 25 percent, but in the process, it should broaden the base so as to raise the same tax dollars as it did before cutting those rates.

BLOCK: Paul Krugman, we just heard Douglas Holtz-Eakin say that the Ryan plan is revenue-neutral. Your take on that?

KRUGMAN: Yeah, I'll give you my five-point description of the plan.

BLOCK: Uh-oh.

(SOUNDBITE OF LAUGHTER)

KRUGMAN: The second thing that's real is a huge cut in taxes on corporations and the wealthy, which as it happens is just about the same size, about $3 trillion over the next decade.

BLOCK: And the third is the Medicare plan, which is to replace Medicare with a system of vouchers that will be well below the actual cost of health insurance for senior Americans. The part of the plan that's real is a plan to take about $3 trillion from the neediest Americans and give it to wealthy Americans and corporations.

BLOCK: On this question of tax cuts, Douglas Holtz-Eakin, what's the evidence for you that tax cuts create jobs, when you think about the record of President Bush, for example?

HOLTZ: And so for those who are unhappy with the specifics of Mr. Ryan's proposals on Medicaid and Medicare, they should be under an obligation to provide their own plan.

BLOCK: And Paul Krugman, what about that challenge from Douglas Holtz- Eakin? If not the Paul Ryan plan, we're looking at $14.3 trillion in national debt. What's your scenario for taking that on?

KRUGMAN: But there's other things we can do. I would say, actually, you know, we have one health care system in America that has been extremely good at containing costs. That's the Veterans Administration. Why don't we have an option for Medicare recipients to buy into a VA-type system, which would be a major cost saving?

BLOCK: Douglas Holtz-Eakin, what would you want to hear from the president?

HOLTZ: So he's been silent on spending, and I think it's time for him to be specific about what he'd do.

BLOCK: Paul Krugman, what will you be listening for?

KRUGMAN: I think he needs to talk about two things. He needs to explain to the nation that the problem of health care cost is not actually a problem of government spending on health care. It's a problem of health care costs. Talk about what he's done, but talk about what more we can do about really addressing the issue of health care costs, which is every bit as serious for private insurance as it is for Medicare and Medicaid.

BLOCK: Look, there is really no way we can make this thing work without more revenue. Some people are going to have to pay higher taxes. I think he needs to refocus this discussion away from cutting government spending as the whole story to we need true health care reform, and actually you have to pay for government, too.

BLOCK: Paul Krugman and Douglas Holtz-Eakin, thanks for talking with us.

KRUGMAN: Well, thank you.

HOLTZ: Thank you.

BLOCK: Paul Krugman is a Nobel Prize-winning economist at Princeton University and a New York Times columnist. Douglas Holtz-Eakin is president of the think tank American Action Forum, and formerly the head of President George W. Bush's Council of Economic Advisors.

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