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Josh Barro

The poor vs. old election

The 2012 election is a clash between two groups fighting for control over the long-term federal budget. But the groups aren’t Republicans and Democrats — they’re old people and poor people.

Last week, Mitt Romney pledged that as president, he would not only delay implementing Medicare reforms until 2022 — and then only for new retirees — but he would also restore over $700 billion in cuts to Medicare that were included in the Affordable Care Act.

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While Republicans claim to be the small government party, this means Romney has gotten to Obama’s left on the Medicare issue, promising to spend 10 percent more on the program than the president would over the next decade.

Meanwhile, Romney and Paul Ryan want to slash spending on health care entitlements for the poor and the lower middle-class. They would repeal the health care law and all the insurance subsidies and Medicaid expansions that go along with it. And they would further slash Medicaid by linking the growth of future federal spending to inflation, not the actual increase in the cost of delivering care.

In total, while Romney-Ryan would outspend the president by hundreds of billions of dollars over the next decade on Medicare, they would underspend him by $1 trillion on Medicaid.

On non-health entitlements, the story is similar. Romney pledges no changes to Social Security for people in or near retirement. But he has been critical of the growth of the Food Stamp rolls and has pledged to convert that program into a block grant to the states. As with his Medicaid proposal, block grants would likely entail spending cuts and less generous benefits.

Romney understands who Republican base voters are. They skew older, and while they like “small government” rhetoric, they are not eager for cuts to Medicare and Social Security. That’s why Romney calls for cutting aid to the poor now, and to the old later, at a date when he would no longer be president.

This is the wrong set of priorities. It’s true that the federal budget is unsustainable, and that cuts must be made. Particularly, the growth of health care spending is unsustainable and must be slowed. That is why cuts must start now, not in 10 years; and why they must start with Medicare, which is a much more generous benefit than Medicaid.

President Obama has recognized that the upward march of Medicare spending threatens other, higher priorities of government, like ensuring that every American has health insurance. And he has advocated for and gotten Medicare cuts passed into law, at great political cost. Republicans have left reining in the Medicare entitlement to the Democrats.

This is sad in part because Romney and Ryan actually have a solid framework for controlling Medicare spending, if only they would propose that it begin now. Their plan builds on the existing Medicare Advantage Program, which allows private insurers to offer plans to compete with traditional Medicare.

But instead of using competitive bidding to increase the sweetness of Medicare benefits (which is how the system works today) it would use bidding to achieve cost control. Seniors would still be guaranteed a benefit package equivalent to traditional Medicare, but they would have to take the plan from one of the two lowest bidders, or pay a supplement to get the plan of their choice.

This is a reasonable and non-Draconian way to introduce cost control to Medicare. So why do Romney and Ryan propose to delay its implementation for 10 years, while slashing the Medicaid budget now?

Republicans should be running on restructuring the president’s Medicare cuts, and using consumer choice to blunt their impact. Instead, they are saying that we shouldn’t cut at all now; we can worry about Medicare later. That makes little sense if Republicans are supposed to be the party of small government — but a lot of sense if they are the party for putting the old ahead of the poor.

Josh Barro blogs about economic and fiscal issues for Bloomberg View.
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