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The annual House of Representatives budget resolution – you may know it as the “Ryan plan” or perhaps as the “Path to Prosperity” — has turned into a weird Washington phenomenon, one that combines analysis fiscal, political, and psychological. Do the numbers really add up? Will it hurt or help GOP election odds? Does it signal that Roman Catholic Paul Ryan or Randian Paul Ryan is the fellow running the budget committee? And, of course: does the budget suggest Ryan will run for president 2016?
Of those questions, I’m confident only in answering the first. (Alert: CNBC and MSNBC bookers. Ignore that last sentence. I am supremely confident in answering any and all possible questions about the Ryan budget, as well as the 2016 presidential race, the Russian annexation of Crimea, the Yellowstone earthquakes, and the new Captain America film. I also know a thing or two about nanotech.)
Yes, the numbers add up, assuming a sprinkle of CBO-approved, macroeconomic magic from deficit reduction. But close enough for congressional work. Ryan again deserves big, big credit for pushing premium-support reform of Medicare, although the specific details continue to evolve. Another plus is the plan’s emphasis on strengthening work requirements in exchange for government welfare benefits. The GOP should be the party of work, and the Ryan budget nicely reflects that.
The Republican blueprint also has value in demonstrating how fiscally difficult it will be to achieve some commonly-stated GOP goals. To balance the budget and keep the federal tax burden at roughly historical levels in an aging society requires what are likely overly aggressive reductions to future projected safety-net spending. Some programs need reform that could save money, such as disability benefits. Others need reform that will cost money, such as expanding the Earned Income Tax Credit or instituting wage subsidies. (Looking forward to how Ryan fleshes out his vision when he puts forward his anti-poverty program later this year.) I think this exchange I had during a podcast chat with Oren Cass — who want states to manage the safety net with a federal funding stream — is helpful:
Pethokoukis: So this isn’t a case where you’re saying, listen, we’re going to take all this money, we’re going to block grant it back to the states, cut it by 25 percent, and let them start innovating with less money. So this isn’t necessarily a budget device. It sounds to me more like a state-laboratories-of-democracy device and see if they can innovate and use this money better to deal with poverty.
Cass: That’s exactly right. And I think that’s an important point that too often, particularly among conservatives, the anti-poverty issue is actually used as a budget issue, that when we think we’re talking about anti-poverty programs, we’re actually talking about ways to cut the budget deficit. And that’s a fine conversation to have if you’re looking across places to cut from the budget – anti-poverty programs may be one of them, given how big they are – but it’s not a solution to the poverty crisis to cut dollars. That’s not an inherently productive approach.
And so I think the more productive approach in terms of actually solving the poverty problem is to figure out how to make the dollars go as far as possible. And if you are successful, you save money anyway. So if you think about that formula for how much money goes to each state, if there are fewer people in poverty in that state, the amount of funding will naturally decline over time. But the way to save the money is to move the people out of poverty. It’s not just to essentially arbitrarily say we’re going to spend less money than we did last year.
Finally, Ryan and the Republicans are right in that we should try to get income and corporate rates as low as possible. But center-right tax reform needs to focus less obsessively on returning to a top-marginal individual rate last seen in the 1920s than creating a modern tax code that (a) reduces biases against both capital and human investment, and (b) raises a realistic level of revenue when considering 21st century American demographics. At the same time, the Ryan budget rightly recognizes that without deep, structural entitlement reform, the US faces some unpleasant fiscal choices and that simply raising taxes ever higher isn’t the solution.Published in