Proposed Spending Cap Is Just the Ryan Budget in Sheep’s Clothing

April 15, 2011 at 2:08 pm

Senators Bob Corker (R-TN) and Claire McCaskill (D-MO) have introduced a bill that would limit total federal spending to 20.6 percent of gross domestic product (GDP), its average level between 1970 and 2008.  Although this proposal may seem relatively benign, it’s actually just as radical as House Budget Committee Chairman Paul Ryan’s budget plan, and it would require draconian cuts in Medicare, Medicaid, and possibly Social Security.

The spending level of an earlier era doesn’t accommodate the fundamental changes in society and government in recent years: not just the aging of the population and substantial increases in health care costs, but also new federal responsibilities in areas such as homeland security, prescription drug coverage for seniors, and veterans’ health care.  As a result, it would be simply impossible to maintain federal spending at its average for decades back to 1970 without slashing Social Security, Medicare, Medicaid, and an array of other vital federal activities.

Corker-McCaskill would impose automatic across-the-board cuts in spending if its spending limits were breached.  Achieving the cap entirely through this mechanism would result in cuts of about $1.3 trillion in Social Security, $860 billion in Medicare, and $550 billion in Medicaid over the 2013-2021 period (see table).  By 2021, these and other mandatory programs would be cut by 19 percent, as our new analysis of Corker-McCaskill demonstrates.  The cuts would be even more severe in later decades.

Cuts in Medicare, Medicaid, and Social Security Over the Next Decade Under Corker-McCaskill's Automatic Mechanism (in billions of dollars)

Policymakers could avoid these across-the-board cuts by making specific cuts in particular programs.  But there’d be no way to spare Social Security and Medicare and Medicaid from huge reductions, since together they will account for nearly 60 percent of federal program spending by 2021.  And if policymakers protected Social Security, they would have to make even deeper cuts in Medicare and Medicaid.

In fact, the large spending cuts required by Corker-McCaskill would necessitate the same kinds of radical policies that Chairman Ryan’s budget plan contains:  converting Medicare into a voucher system that would more than double seniors’ out-of-pocket costs, converting Medicaid into a block grant that would cut funding for state Medicaid programs by nearly half by 2030, and eliminating health reform’s provisions that will extend coverage to 34 million more Americans.  Indeed, even the cuts in the Ryan plan wouldn’t be quite deep enough in some years to meet the Corker-McCaskill cap.

So, Corker-McCaskill may trigger across-the-board cuts or it may force huge policy changes.  But, either path would end in the same place as the Ryan budget — higher health care costs and less coverage for tens of millions of Americans.

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More About Paul N. Van de Water

Paul N. Van de Water

Paul N. Van de Water is a Senior Fellow at the Center on Budget and Policy Priorities, where he specializes in Medicare, Social Security, and health coverage issues.

Full bio | Blog Archive | Research archive at CBPP.org

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