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Paul Ryan's Third Strike

Paul Ryan's Third Strike

By Will Marshall - March 13, 2013

If Rep. Paul Ryan was chastened by his 2012 election defeat, it doesn’t show in his latest budget. It’s a defiant reaffirmation of libertarian dogma that makes no pretense of being a realistic blueprint for governing.

In fact, the House Budget Committee chairman’s new plan aims to shrink government on an even faster timetable than his previous two, balancing the federal budget in 10 years. He proposes to cut public spending by $4.6 trillion over the next decade, but raises nary a penny in new tax revenue.

That of course makes his plan radioactive to Senate Democrats and President Obama, who campaigned and won on explicit promises to take a “balanced” approach to debt reduction. Nonetheless, Ryan seems quite pleased with his handiwork. “We House Republicans have done our part,” he wrote in Tuesday’s Wall Street Journal. “We’re outlining how to solve the greatest problems facing America today.”

Actually, all Ryan’s plan proves is that it is mathematically possible to balance the budget in 10 years with spending cuts alone. So what? You could achieve the same result by raising taxes the same amount. Neither is going to happen. Democrats will never accede to the first, and Republicans will never accede to the second.

What, then, is the point of this exercise? One is to draw the sharpest possible contrast with Democratic calls for tax increases and faintheartedness when it comes to slowing health care spending. But Ryan’s budget also is a concession to restive Tea Party conservatives in the House. Earlier this year, they reluctantly agreed to back a temporary extension of the government’s borrowing authority. In return, the Republican House leadership promised a new plan to balance the budget in 10 years.

Since Ryan’s previous budget didn’t balance until 2038, Democrats predicted his new blueprint would mean unthinkably brutal cuts in federal spending. Here Ryan got a break, ironically, from the fiscal cliff tax deal. It will shave about $850 billion off of projected deficits, and more optimistic forecasts by the Congressional Budget Office take another $800 billion off deficits by 2023.

Still, what Ryan is proposing is bad enough. It’s an arch-conservative fantasy that not only protects the wealthy from tax increases, but would reduce the top marginal rate from 39.6 percent to 25 percent. It would also roll back new regulations on Wall Street, make it harder for the poor to get public assistance and, for good measure, deprive tens of millions of Americans of health coverage by repealing Obamacare.

Although it’s called “Pathway to Prosperity,” Ryan’s plan would plunge our convalescent economy into an icy bath of austerity. While easing caps on military spending, it would take another big bite -- $249 billion -- out of domestic spending. That category includes investments in essential public goods like infrastructure, science and education, all of which make U.S. workers and businesses more productive. Discretionary domestic spending is not responsible for our debt problem, but it’s already borne the brunt of two previous efforts to impose fiscal restraint in the form of the Budget Control Act of 2011 and the sequester.

What is driving long-term spending growth are health care costs, and here Ryan swings a mean ax. His budget would slash about $2.7 trillion over the next decade from Medicare, Medicaid and Obamacare. That includes $700 billion in Medicare savings from Obamacare -- a provision Ryan attacked on the stump last year but now looks better because it helps him hit his budget numbers.

In addition to pruning overall Medicaid spending, Ryan would convert it -- and the food stamp program -- into block grants to the states. And he reiterates his controversial “premium support” idea for Medicare. Under this approach, future retirees would get a fixed payment to buy either private coverage or the traditional government plan.

While Obama and most liberals ritually denounce premium support, they have yet to offer a more plausible way to bend down Medicare’s cost curve. The idea, moreover, sprang originally from the minds of two Democrats, former CBO Director Robert Reischauer and Brookings Institution economist Henry J. Aaron (though Aaron has since recanted). Both had become frustrated with Medicare’s inflationary fee for service model. Democrats ought to keep an open mind on the subject, but its inclusion in a stridently ideological document like the Ryan budget will make that more difficult.

Ryan’s proposals for reforming the tax code are worth discussing. He would close many major loopholes and use the revenue to buy down corporate rates to 25 percent, and personal rates to 25 and 15 percent. Progressives can quibble with details, but the right kind of sweeping tax overhaul would help struggling middle-class families whose incomes have stagnated, and spur economic investment and growth.

What’s more, engaging Republicans on tax reform may be the only way to get revenues back on the table in deficit reduction talks.

The Ryan plan’s chief flaw may be its premise. America’s biggest problem isn’t the national debt, it’s anemic economic growth. Nor does Ryan acknowledge the progress that has already made against runaway deficit spending. Through a combination of the 2011 budget caps, the tax increases in the fiscal cliff deal, and the sequester we are close to having stabilized the national debt around 74 percent of GDP.

What remains now is to put it on a downward trajectory. Rather than balance the budget prematurely and jeopardize economic recovery, we should ensure that deficits grow slower than the economy. In that way, we’ll gradually whittle down the nearly $17 trillion national debt and restore our “fiscal reserve.”

Ryan, alas, prefers grand ideological gestures to such fiscal realism. His budget is more likely to perpetuate than break Washington’s fiscal impasse. 

Will Marshall is president of the Progressive Policy Institute.

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