The wait is over. Mitt Romney has made his move and selected House Budget Committee Chairman Paul Ryan (R-WI) as his vice-presidential nominee. This is a bold decision that turns the race from a referendum on the unemployment rate to a choice between two very different fiscal paths for America. After months of empty rhetoric and dancing around issues, Romney has pivoted the election-year debate to serious policy proposals (and he should be commended for that). This campaign could be the most serious debate on fiscal and economic policy in years, and it's one that President Obama will win handily if he plays it right.
In 2010, Congressman Paul Ryan proposed a radical plan to end Medicare as we know it. Ryan's plan would have the government give beneficiaries a fixed amount of money to purchase insurance coverage instead of covering all the medical procedures that a beneficiary needs. If that money isn't enough, beneficiaries have to use their own funds to cover the difference. This pushes the burden of rising health care costs off of the federal government and onto the backs of America's seniors. And by selecting him as his running mate, Mitt Romney has now embraced Ryan's Medicare plan in its entirety.
This leaves President Obama with one of the most important political choices of his presidency. The conventional wisdom among left-leaning politicos is that Obama should barnstorm across the country, proclaiming that Medicare is fine just the way it is, making him a liberal hero: the champion of the New Deal, the defender of seniors, and the anti-Paul Ryan. Supporters of this approach argue that defending these popular entitlement programs will inevitably lead to an easy re-election for President Obama. But in reality, that campaign would be disastrous for America and imperil the President's re-election.
Despite being a "risky" pick, Paul Ryan is no Sarah Palin. When it comes to budget policy, Chairman Ryan knows the issues inside and out. In some ways, this year's vice-presidential debate could be a lot like the one in 2008 -- if anyone is going to be outgunned on policy specifics like Sarah Palin, it's going to be Joe Biden this time around. Paul Ryan is skilled at presenting his ideas to hostile audiences, and for good reason -- when it comes to many of our long-term fiscal challenges, Congressman Ryan is right on the money.
Medicare, Medicaid, and Social Security, as they currently stand, cannot be sustained in the long-term. When Social Security was first enacted, it had 42 workers to pay the taxes for the benefits of 1 retiree. By the 1960s, when Medicare and Medicaid were enacted, that number was down to 5 to 1. Now, that number is 3 to 1. Within the next 30 years, it will drop down to just two workers supporting each retiree. That means the return on your payroll taxes is shrinking. In fact, the average American is already paying more in taxes than they will receive in Social Security benefits. As our demographics shift, we need to reform these programs to ensure they can remain solvent and paying off their promised benefits. Otherwise, beneficiaries will abruptly face as much as a 25 percent cut when the money runs out -- and nobody wants that.
The situation with Medicare and Medicaid is even more serious than Social Security's. The challenge with these programs is that in addition to absorbing a demographic transition, they must contend with exploding health care costs that are further exacerbating their fiscal flaws. There are only three factors that play into the cost of Social Security: the worker/beneficiary ratio, the size of the payroll tax, and the size of benefits. While these are the only three variables that need to be addressed in strengthening Social Security, fixing Medicare and Medicaid also requires reforming our broken health care system. Herein lies the flaw in the Ryan plan: it doesn't address the problem of rising health care costs. This is not real reform -- it's just another way to kick the can down the road. This is simply dismantling Medicare as we know it.
If Obama refuses to recognize the problem and Ryan successfully calls him on it, Obama will either appear unprepared or unwilling to tackle the serious problems that face our nation. If the American people appreciate this line of attack, Mitt Romney will be taking the oath of office in January 2013. If they don't, then Obama will have locked himself in a politically untenable position that will make real solutions impossible. There will be no room for him and the GOP to compromise, and our country will suffer for it.
But there is another, smarter approach -- and it's one that can win the 2012 election.
Obama should embrace a real reform package -- one that makes Social Security, Medicare, and Medicaid more progressive, protects the truly vulnerable, and ensures that these programs would remain solvent and able to pay out promised benefits into the foreseeable future. Obama needs to embrace Bowles-Simpson, the bipartisan plan proffered by his own fiscal commission.
In addition to outflanking Congressman Ryan on sustainable entitlement reform, endorsing Bowles-Simpson also wins him the debate on tax reform and deficit reduction. Congressman Ryan likes to frame himself as a deficit hawk, but the reality is that the tax cuts in his plan prevent the budget from being balanced for another 30 years. While slashing social programs and raising taxes on the middle class, the Romney-Ryan plan offers unaffordable tax cuts at the top for those who need it least. By endorsing the Bowles-Simpson program for tax reform, President Obama is pushing a plan that makes the tax code simpler, fairer, and more progressive: exactly the kind of reform the American people want right now.
This strategy would be genius for the president. His base would not abandon him for supporting these entitlement reforms, seeing that the alternative would be far worse. He would re-energize young voters like myself by promising us a fiscally sustainable future, and he would get the backing of moderates who are desperately looking for compromise in an age of ideological extremism. Finally, offering such a plan would catch Ryan off-guard. Paul Ryan's whole argument has been that "at least he has a plan." If Obama offers a plan to save Medicare and Social Security from themselves, create a better tax code, and balance the budget in the long-run, Ryan's entire appeal would fall apart. President Obama would succeed in his attempts to recapture the unity vote that carried him 2008, and he would go on to win re-election.
After all this, he would have the political capital to accomplish the kind of big, bipartisan reforms that he set out to enact four years ago -- and show that Hope and Change were more than just words.
It's your move, Mr. President. Make it a good one.
This op-ed was originally published on the blog of the American University College Democrats.
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