HedgeFundLIVE.com — There’s been a lot of tough talk out of Republicans, Democrats, and the White House over the past few days regarding the passing of the federal budget. Republicans want massive cost cuts, Democrats want fewer, and President Obama just wants something to be passed so that he’s not embarrassed by a government shutdown on Friday.
After all, it can’t look too good for the President if Washington comes to a standstill. The end goal of the Republican proposal doesn’t seem too bad; Paul Ryan’s plan aims to reduce our deficit by $4.4 trillion over the next 10 years and reach “primary balance” by 2015, this means the budget would be balanced except for interest payments on existing debt. (The budget wouldn’t really be balanced until 2040).
So how is he going to do this? In very simple terms he’s going to put America on an allowance in many respects. Medicaid, the government-run health insurance program for the elderly, would no longer guarantee a certain level of care; instead, the government would dole out subsidies to help seniors cover premium payments to private insurers.
One way to curb spending is to cap it, and this would certainly cap government spending on Medicaid. Ryan’s plan has similar solutions for Medicaid and the Food Stamp program. Both are run in concert with state governments. The federal government matches (actually over-matches) what states spend on Medicaid. Ryan wants to change Medicaid to a “block grant” system where the government would just send a check to the states for a pre-determined amount. From that point the states would just have to figure it out.
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