The Tribune Democrat, Johnstown, PA

October 14, 2012

William Lloyd | Romney plan would make a bad situation worse

William Lloyd

— Will we be better off four years from now if former Gov. Mitt Romney is elected president?

Both Romney and President Obama have vowed to reduce the deficit. However, Romney has rejected tax increases and has promised to continue all of the Bush tax cuts.

In contrast, Obama would allow the Bush tax cuts for the wealthy to expire.

Romney has also promised a significant increase in defense spending. Therefore, to achieve the same amount of deficit reduction as Obama, the Romney plan would require much deeper cuts in domestic spending.

For example, the Romney deficit-reduction plan would make significant changes in Medicare. Specifically, workers born after 1957 would receive vouchers from the government to help them buy their own health insurance or buy coverage under traditional Medicare.

The goal of the Romney plan is to save the government money. Therefore, regardless of the details, achieving that goal would require making future retirees pay a bigger share of their health care costs than they would pay without the Romney plan.

Ironically, Romney would actually increase the deficit by restoring $716 billion in cuts that Obamacare made in the Medicare budget. Those budget cuts did not reduce benefits under traditional Medicare; instead, they reduced payments to insurance companies and health care providers (primarily hospitals). Interestingly, the House Republican budget (sponsored by Romney’s running mate, U.S. Rep. Paul Ryan) made the same cuts as Obamacare did. Romney is correct that paying less to insurance companies might lead them to increase premiums, or reduce benefits, for seniors who are currently enrolled in Medicare Advantage. However, Medicare Advantage costs the government significantly more than traditional Medicare. 

Furthermore, by rejecting the Obamacare cuts in the Medicare budget, the Romney plan would exhaust the Medicare Trust Fund in 2017 rather than in 2025. That would mean an increased threat of benefit cuts for current retirees.

In addition, the Romney deficit-reduction plan would turn Medicaid over to the states. Although Romney argues that the states could operate Medicaid more efficiently than the federal government, he would give the states 30 percent less money than the federal government is spending.

Even if the states could achieve some efficiencies, there is no credible basis for expecting those efficiencies to offset a 30 percent loss in funding. A cut of that size would probably force states to provide less money to nursing homes for the care of patients who are no longer able to pay their own bills.

Faced with a reduction in government aid, nursing homes would likely scale back the care they provide or require the patients’ families to assume more of the financial burden.

Romney has also vowed to repeal Obamacare. However, instead of proposing a specific alternative, Romney would turn responsibility for universal health care over to the states.

Although Presidents Truman, Nixon and Clinton each proposed a federal universal health care program, it took until 2010 for the Congress to enact one. The notion that cash-strapped states would fill the void left by the repeal of Obamacare is fanciful. As evidence, consider Pennsylvania, whose 2011 budgetary woes brought the end of a state program to subsidize health insurance premiums for working adults.

Therefore, as a practical matter, the Romney plan would guarantee that 40 million to 50 million Americans would have no health insurance.

In an effort to stimulate the economy, Romney would reduce tax rates across the board and repeal the estate tax and the alternative minimum tax. Romney assumes that his plan would generate so many new jobs that the government would be able to collect enough in taxes from newly employed workers and more profitable businesses to offset most of the revenue lost from the tax cuts. 

Unfortunately, history is not on his side. Based on the same economic growth assumption as Romney’s, President Reagan won approval of both tax cuts and increased defense spending. When the deficit exploded, it took both tax increases and spending cuts by Reagan, the first President Bush and President Clinton to produce a budget surplus.

Romney has promised that his new tax cuts would not increase the deficit. In view of the Reagan experience, keeping that promise would likely require Romney to eliminate, or significantly scale back, popular tax deductions, such as the ones for home mortgage interest, student loan interest, employer-provided health care and charitable contributions.

Neither Romney nor Obama has a magic elixir that will cure the economy and rebuild the middle class.

However, Romney’s plan would make matters worse.

William Lloyd of Somerset represented Somerset County in the state House of Representatives (1981-1998) and served as the state’s small business advocate (November 2003-October 2011). He writes a monthly column for The Tribune-Democrat.


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