Paul Ryan's Bloodbaths and Poverty Traps

Paul Ryan has been a very vocal force behind the AHCA – the American Health Care Act, the GOP’s Obamacare replacement bill – and he is pushing it as heavily as he can to the media. And, he is doing so despite the fact that there is a quickly growing number of people who oppose the bill.


He is so convinced that it is the right move that he is predicting a “bloodbath” in 2018 if Republicans do not pass this health care reform bill. It is an interesting take, especially considering that the last health care reform bill passed through Congress resulted in six years of bloodbaths for the party that passed it.

In fact, given the anger of conservatives over the bill, it seems more likely that there would be a bloodbath if Republicans passed the bill as it is now.

One of the biggest causes for concern here is the tax credit proposed in the bill. The nicer critics of the tax credit plan have called it another entitlement, and it certainly comes across as one. The only difference between this entitlement and others is how it’s distributed: by age, not by income.

Ryan was on Hugh Hewitt’s radio show on Friday, defending the plan. Hewitt played for him a clip of Avik Roy’s criticism of the credit (note: sorry for the block quotes, but it’s incredibly necessary here):

The government subsidizes Medicaid for lower income people at about $6,000 dollars per year. But the tax credit that Paul Ryan wants to give people who are just above the poverty line is plus or minus $3,000 dollars a year. So that’s going to create a huge disincentive to work. If you’re just below the poverty line, and you have the opportunity to get another job that lifts you above poverty, and you find out that your health insurance benefits are going to get cut by $3,000 dollars, you’re trapping that person in poverty.


And here is Ryan’s response to Roy:

…Avik’s jumping on a point that is important, and that is what I would call all the other poverty trap programs. Next year’s budget is where we want to take on welfare reform and what I call the poverty trap. I really think the way we need to fix the poverty trap is to have work requirements, time limits and customize welfare benefits to phase down the benefits in such a way that you don’t create such a cliff or a trap, or a huge work disincentive. […] So I really think with all of the other things that we are planning on doing, especially with the welfare reform we’re going to be doing next year, that those things taken together will address these concerns that Avik is right to point out, but I think he’s a little off in this case.

What Ryan is saying about “poverty traps” more or less makes simple, economic sense, but it is directly contradicted by the need to pass this new entitlement now. Poverty traps are a huge concern, and as we saw when the the 99-week extension of jobless benefits expired, those kinds of programs just keep people on the government teat udder as long as possible.

People who have struggled with or have simply given up finding work see the chance to get money for nothing and take advantage. How is that going to be different when we add these healthcare tax credits?

All of this reform, however good, bad, or ugly it is, is part of a larger legislative agenda. Ryan’s explanation of the logic behind the “200 Day Plan” is as follows:


Think of legislation as one train track with a bunch of trains on the track. If you don’t get these trains through the system, it slows everything else down. So if we didn’t get this done in time, according to our schedule, and we’re planning five weeks over this, this is a five week process of passing this bill, which is fairly lengthy. It slows absolutely everything down, pushes tax reform off past the summer.

The problem that Ryan seems to have put himself in is not that the the trains aren’t running on time. It’s that the trains are arriving out of order. If eliminating poverty traps is the concern, then welfare reform should come first. When you eliminate the issues found in the current entitlement system, then creating a new tax credit/entitlement becomes easier.

Welfare reform, then health care reform, then tax reform. Those key financial reforms passed, then you can work on your military spending fixes.

It seems strange that financial reform is the topic of the year, but you put out a bill that, by all accounts, would make the financial status of the government even worse than it already is.

At best, it seems strange.


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