Thursday, September 16, 2010

Why Ryan Wins, and His Next Major Battle

Claremont's Voegli:

Part of Representative Ryan's sudden prominence derives from his ability, increasingly rare in Washington, to be serious about public policy without being strident about partisan politics.

...which ought to explain (to all but the most obtuse) Ryan's re-elections in what WAS Les Aspin's District.

...the bigger reason for Ryan's rise from obscurity to importance is that the issue he is most serious about—deficit reduction—is an issue about which Americans are growing increasingly concerned.

After citing Galbraith's counter-argument about deficits (in essence, 'they don't matter,') Voegli makes a critical distinction:

Saying that markets are rational does not preclude the possibility that they are fallible. The 4% rate on 20-year treasury bonds would be more comforting if we hadn't so recently seen low interest rates and willing buyers for the bonds being offered by Greece's government, not to mention securities backed by the monthly payments on subprime home mortgages.

....and then cites Steny Hoyer(!!!) and Galston of Brookings as the counter to Galbraith.

House Majority Leader Steny Hoyer, for instance, told the Brookings Institution in March that if America failed to treat the deficit problem with utmost urgency the "extreme economic crisis" that has befallen Greece "will happen here." A few weeks later William Galston, a fellow at Brookings, wrote that "we can't keep borrowing a trillion dollars a year (and turning over a total of five trillion a year in public debt) without incurring burdensome interest payments and running grave risks." "Will our leaders," asked Galston, "summon the courage to treat our citizens as adults and level with them about what needs to be done? Our future is riding on the answer."

He then agrees that if US economic growth were to be 3.5% (rather than 3.0%) over the next several decades, the deficit would NOT be a problem. There would be no need for tax increases, nor for significant spending reductions.

There are two problems with this: 1) the long-term growth record of the US happens to be 3.0%, and 2) nobody can find the section of the Economy Owner's Manual that tells you which dials to turn to guarantee that additional half-percentage point of economic growth.

Moreover: seems highly probable, as Marron and many others argue, that to go on borrowing money in lieu of raising taxes or cutting spending, in the hope that faster economic growth renders such distasteful medicine unnecessary, will have the effect of reducing economic growth. If a 3.5% growth rate solves all our problems, a 1 or 2% growth rate turns them into catastrophes...


Voegli more-or-less eliminates the possibility of dumping Defense expenditures, acknowledging that Defense is a "Goldilocks" problem--that is, 'What is "Just Right"?' We don't know.

He briefly outlines Ryan's Roadmap and encapsulizes the proposed bargain.

...the core idea behind the roadmap is to means-test entitlement programs, including Social Security, and "voucherize" defined-benefit programs, like Medicare, turning them into defined-contribution programs. The changes offer an implicit swap. In their capacity as taxpayers, Americans will be rescued from decades of relentless pressure for tax increases to pay for all the entitlement promises made long ago. In their capacity as beneficiaries of big programs like Social Security and Medicare, however, Americans will have to make up for those programs' leaner budgets by devoting additional attention and private wealth to financing their lives' final chapters.

TPC, a joint-venture of Urban Institute and Brookings, doubts very much that Ryan's program will generate the 19% revenue-target required to pay off the national debt in 80 years.

What does Ryan say?

Ryan's office issued a simple response to the TPC report, saying that if the two brackets and rates in the roadmap's tax system proved to generate less than the desired 19% of GDP, the thing to do would be to adjust them until that goal was met. This approach is consistent with Ryan's low-key position that the roadmap is a heuristic device, not a huge take-it-or-leave-it package deal. As he told Douthat, "I'm just trying to get this debate going.... I'm not suggesting that I have all the answers. I'm suggesting that I have an answer, and I'm hoping other people will bring their answers to the table."

To say that his response is utterly reasonable--and humble--is to understate.

Yet the demagogues and hucksters who STILL have not grasped the earthquake-proportions of the TEA Party movement condemn this man.

And all he did was be serious about public policy without being strident about partisan politics.

HT: PowerLine


J. Strupp said...

Ryan is being treated with skepticism not condemnation. And for good reason......

The question is:

What "adjustments" in the tax system would Ryan suggest once it's clear that revenues under his Roadmap will miss the 19% GDP target badly. My guess is that his party's solution will entail further "self-funded" tax cuts for the same people who stand to benefit most from his program.

And there's no doubt that Ryan's Roadmap will be seen by certain elements of the GOP as the perfect opportunity to gut social programs once and for all (for better or worse).

It's not that I don't trust Ryan's sincerity, it's that I don't trust the rest of the zeros on his side of the aisle.

J. Strupp said...


You make me laugh sometimes Dadster.

Dad29 said...

What "adjustments" in the tax system would Ryan suggest once it's clear that revenues under his Roadmap will miss the 19% GDP target badly.

Triple the tax on all Keynesians.

If you think it's not an earthquake, why don't you ask Bennett (ex-Senator), Scozzofava and the NYState Pubbie Establishment, Castle, and Rand Paul's opponent in KY--all of whom were blessed by the Enlightened Ones?

Or Brett Davis?

Or, if you like, we can re-visit the question on November 3rd.