The New Paul Ryan Budget Plan: A Brief Review

 

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.

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  1. user_1048 Member
    user_1048
    @

    This budget is frustrating for two reasons:

    1) Despite what Paul Ryan says, it doesn’t reduce spending. I understand the GOP might want to slowly ratchet spending down (and thus drive a stake into the heart of baseline budgeting), as opposed to doing it more quickly, but they have to be honest about it. One of the reasons the country is so very cynical about both parties is that they reflexively lie about things that we can easily check.

    2) His proposal, even if the GOP got fully behind it (which it won’t in a million years), isn’t worth a cup of warm spit after a year or so. The next budget will be whatever Congress wants it to be no matter how many paths, plans, schemes, grand strategies, or whatever gets passed this time. We all know why Ryan’s plan extends as far as it does. He can front-load all the candy and ponies and free XBoxes in the first year or two and put all the nasty-tasting cough syrup and Brussels sprouts in the back.

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  2. Vice-Potentate Inactive
    Vice-Potentate
    @VicePotentate

    So as Kevin Williamson writes,

    “His budget submissions have never been perfect — nothing in real politics is perfect — and Senator Paul called Ryan’s 2012 proposal “tepid,” which exemplifies the underlying problem: Representative Ryan’s sober and compromising approach to fiscal conservatism is not aggressive enough to satisfy deficit-and-spending hawks, but it is too aggressive for the revealed preferences of the American electorate, who have provided themselves with Harry Reid and Barack Obama to act as prophylactics against fiscal reform.” which seems about right to me.

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  3. Spin Coolidge
    Spin
    @Spin

    I don’t take issue with the Ryan budget per se, but I do take issue with what Cass is saying.  If I read it right, he’s saying that the anti-poverty programs at the federal level are inefficient.  They could be doing more with the money than they are.  So send it to the states.  So he’s advocating for a system where we the taxpayers send money to the federal government which they in turn send back to the states so the states can run anti-poverty programs.  I have a better idea.  How about we stop taking the money from the taxpayers at all, and let each state decide if it wants an anti-poverty program, and if so, how it should run, and levy taxes directly on the citizens of that state.  

    This business of taking money from people, and swirling it around in DC for a while, then “granting” it back to states is a load of hogwash.  It needs to stop.

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  4. CandE Inactive
    CandE
    @CandE

    Jimmie Bise Jr: 2) His proposal, even if the GOP got fully behind it (which it won’t in a million years), isn’t worth a cup of warm spit after a year or so. The next budget will be whatever Congress wants it to be no matter how many paths, plans, schemes, grand strategies, or whatever gets passed this time. We all know why Ryan’s plan extends as far as it does. He can front-load all the candy and ponies and free XBoxes in the first year or two and put all the nasty-tasting cough syrup and Brussels sprouts in the back.

     

    This.  Until a pol can put the hurt where it will happen then he is just pandering.

    -E

    • #4
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