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Will the Ryan Budget Start a Real Conversation?

April 5th, 2011 . by economistmom

As the federal government prepares for a shutdown in the event that continued funding is not agreed to by this Friday (see the memo that was sent around yesterday, as reported by the Washington Post’s Ed O’Keefe), today Paul Ryan releases his own budget plan.  There have been plenty of preemptive critiques of the plan from those with a completely different view of the fiscal policy world who oppose the notion that the budget can and should be balanced by cutting spending alone, but the best critics who want to avoid just making things worse recognize that the time for merely throwing barbs has passed.  For example, in Monday’s Washington Post, E.J. Dionne isn’t shy about suggesting that the Ryan plan will promote “an even more unequal society”–but at the same time he praises Ryan’s character and conviction and in the end challenges President Obama to not just sit there but do something to defend “progressive government” (emphasis added):

This week, Rep. Paul Ryan (R-Wis.) will announce the House Republicans’ budget plan, which is expected to include cuts in many programs for the neediest Americans.

The Ryan budget’s central purpose will not be deficit reduction but the gradual dismantling of key parts of government…

Put the two parts of the Ryan design together — tax cuts for the rich, program cuts for the poor — and its radically redistributionist purposes become clear. Timid Democrats would never dare embark on class warfare on this scale the other way around.

But while I am assailing his ideas, let me put in a good word about Ryan himself: He is, from my limited experience, a charming man who truly believes what he believes. I salute him for laying out the actual conservative agenda. Here’s hoping he is transparent in the coming weeks about whom he is taking benefits from and toward whom he wants to be more generous. If he thinks we need an even more unequal society to prosper in the future, may he have the courage to say so

[The conservative agenda] is all extreme and irresponsible stuff. The president knows it. The coming week will test who he is. When Ryan releases his budget, will the president finally engage?

“This is our time,” Obama liked to say during the 2008 campaign. This most certainly is his time to stand up for the vision of a practical, progressive government that he once advanced so eloquently.

And in today’s Washington Post, (Republican) Senator Tom Coburn says it’s time to stop bickering over the little stuff and start working together–as in, with the other side and not just with the extremists in one’s own party–on the big stuff (emphasis added):

Here’s some perspective on this week’s debate: When our grotesquely obese government is borrowing $4.1?billion a day in order to function, the $29?billion gap between the House-passed continuing resolution and a possible compromise is enough to fund the government for seven days. Seven days.

What’s extreme in this debate is not our cuts but our complacency.

It’s time for politicians to tell the truth and talk in trillions, not billions. The $14.2?trillion question before us is whether discussion of our debt crisis is hyperbole and fear-mongering, or whether our debt truly is the “greatest national security threat facing our nation,” to quote Adm. Mike Mullen, chairman of the Joint Chiefs of Staff.

This question is critical because until there is a consensus in the country we will never have a consensus in Washington. There is no question that the American people are deeply concerned about spending and deficits. I’m concerned their representatives do not understand how close we are to a crisis. I’ve found great fault with my friend President Obama because this national conversation should be led from a presidential podium, not by political odd couples in the Senate. But in the absence of leadership from others in Congress or the administration, I will continue to work with any colleague from either side of the aisle who is honest about this country’s fiscal peril…

The best catalyst for forcing Congress to tackle our debt crisis will be the upcoming vote to raise the debt limit. We can either appease like Chamberlain or prepare like Churchill. Appeasement means avoiding the real issue and pandering to the debt-dodgers and dogmatists in both parties who define purity not on the basis of principle but partisanship and power.

I’ve confronted the phony purists on my side and need partners on the left to confront the same on theirs. We will never address these challenges without putting everything on the table and making choices that may end careers. Of my Republican friends I would ask: What good is a Republican Party without a republic? And of my Democratic friends: What good is your commitment to the poor without an economy to sustain your commitments?

House Budget Committee Chairman Paul Ryan, who unveils his budget this week, deserves credit for pushing the debate toward our $14.2?trillion question. His critics who fail to offer plans of their own have little credibility.

Congress can choose a path of prosperity over austerity but only if we act quickly. History, and future generations, will not be kind to those who sleep.

So let’s hope that after Ryan releases his budget today that we’ll hear some criticism of the constructive variety, because we really don’t have time to waste on any more of that destructive bickering we’ve been doing so far.  Let’s hope that a real (and adult) conversation will begin.

19 Responses to “Will the Ryan Budget Start a Real Conversation?”

  1. comment number 1 by: John Q.

    Does the adult conversation include a discussion about how extending the Bush tax cuts explodes the deficit? Just wondering…

  2. comment number 2 by: Gipper

    Ryan tried to start a conversation 2 years ago with his Roadmap and Democrats dismissed it. Not with the House of Representatives in Republican hands, let’s see if Obama and the Democrats try to demagogue Ryan into oblivion or engage him.

    Obviously, the Simpson-Bowles plan forms a nice target for compromise. Ryan makes up for the timidity of Simpson-Bowles on spending cuts. Combine Ryan’s spending cuts with the tax revenue increases of Simpson Bowles, and we’re well on our way to fiscal sanity.

    It’s going to be tough for many Republicans to compromise on taxes as it’s going to be tough for Democrats to compromise on spending. But the mathematics and politics dictate that Federal spending and taxes as a percentage of GDP will be around 20 to 21%.

  3. comment number 3 by: KJ

    I’m not buying that this is an adult plan. It seems fairly childish to me in that it continues the Bush tax cuts. Bring back Clinton era tax cuts and you’ve solved the medium term deficit problem. Run the math, the solution couldn’t be more obvious. Anyone who runs from that solution is not engaging in an adult conversation.

  4. comment number 4 by: KJ

    Sorry, I meant “bring back Clinton era tax rates”

  5. comment number 5 by: SteveinCH

    Actually, that’s not even close to true. Returning to the tax code that existed under Clinton is worth about 2% of GDP on an annual basis. Now the bulk of that comes from the “middle class” part of the tax increase that no Democrat has been willing to touch. Even assuming that Democrats were willing to suggest such a thing, it does not solve the crisis. Nothing that fails to rein in Medicare or Medicaid can solve the crisis.

    Ryan’s proposal solves it for the government (although not necessarily for the citizenry) by shifting the burden from the government to individuals. I strongly suspect he is correct that this shift will put pressure on price inflation, just as it will also hurt some people, particularly those who are just above the cutoff for increased support (aka larger voucher).

    That said, raise taxes and hope that demonstration projects in the ACA cure cost inflation in Medicare seems to have a much lower chance of reducing government health care expenditures and a meaningfully lower chance of reducing total health care expenditures.

  6. comment number 6 by: JS

    Ryan’s plan does raise taxes, just not on the top 5%

  7. comment number 7 by: markg

    The intrinsic value of a dollar coin is about 7 cents. Why does the public accept something that is only worth 7 cents for a dollar? It is because the govt declares that coin to be worth a dollar and accepts it for the payment of taxes. The govt can mint all the coins it wants.
    So why are we debating over a number of something that the govt can create. Ryan says he wants to cut $Xbillion for the sake of saving something the govt can create. That’s childish debate. The debate should be about how govt spending/taxing is going to effect the economy. They should not be talking about solvency, bankruptcy, or getting the money to pay for spending. They should be talking about best uses of real resources, productivity, inflation, poverty and living standards.

  8. comment number 8 by: KJ

    StevienCH is off on the Clinton tax rates. Source is here: http://www.cbpp.org/cms/index.cfm?fa=view&id=3435. But only a bit. Clinton tax rates give us back 2.5% of GDP which is a bit less than half of the projected deficit in 2021. But running a deficit in the 3-4% range is not that bad. With a few cuts, especially to defense, we’d be well below 3%, which means we wouldn’t be in any sort of crisis.

    And besides, we are the richest nation on earth. This whole thing is not a crisis by any stretch. We have more than enough GDP to put the entire deficit to rest if necessary. As markg makes clear, an adult conversation would revolve around best uses of resources, productivity, and living standards. The entity that prints the money can’t, by definition, go bankrupt. Unfortunately, no one seems to understand that.

  9. comment number 9 by: Jim Glass

    Bring back Clinton era tax cuts and you’ve solved the medium term deficit problem. Run the math, the solution couldn’t be more obvious.

    CBO ran the math. Result:. An across-the-board 50% increase in income tax rates on everyone, individuals and businesses by 2030, and going up forever from there.

    That’s rather more than getting back to the Clinton tax rates — that’s almost an increase equal to the WWII tax increases (from a much higher base, of course) and the increases never stop soon dwarfing those of WWII.
    .
    And that is only to keep even with the rising spending on Medicare an Social Security. It doesn’t count the rest of the govt, much less all the other spending and debt service cost increases inucrred post-2008.

  10. comment number 10 by: SteveinCH

    KJ,

    Running at 3 to 4 percent assuming low interest rates and 10 years of sustained high growth is not only bad, it’s awful. And of course, putting the Clinton tax code back would raise less money than you are forecasting since there are tax increases that have occurred since…the $100 billion or so per year in the ACA and the Medicare uncapping spring to mind off the top of my head.

    And of course the world doesn’t end in 2020. If you don’t attack costs, you can’t raise the money to cover it.

    Who knew you were a MMT guy. Here I was planning to take you seriously.

  11. comment number 11 by: markg

    SteveinCH (or anyone else),
    Exactly what is your concern with deficits? Is it inflation, bankruptcy, insolvency, high interest rates, value of the dollar, or something else? Or is it “debt is bad because everyone says so”?

  12. comment number 12 by: AMTbuff

    When China and others stop buying US government bonds, we will either hyperinflate or default. Either option will devastate the economy. Then we will be forced to do what we should have done before the crisis: make the spending and revenue match each other.

    Post-crisis the economy will be shattered, so the revenue level will be much lower than now. That will force a sudden end to the generous welfare state. Such a rapid and unfavorable change for tax recipients will make the riots in Greece look tame.

    A crisis will reset the scope of government benefits to pre-1960 levels or less. If our democratic system does not withstand this stress, the tragedy will be historic, all the more so for its having been unnecessary.

  13. comment number 13 by: SteveinCH

    Exactly right AMT. And please don’t tell us that the government can print all the money it wants. Everyone here has already heard it and formed his or her own opinion.

  14. comment number 14 by: grooft

    Why should Ryan get any benefit of the doubt.

    His budget INCREASES the deficit for the first ten years and then reduces it by converting Medicare to vouchers and laying more of the health costs onto seniors in EXPENSIVE, Private, profit-seeking insurance rather than the considerably cheaper and cost-constraining Medicare.

    What is to like. Ryans document is filled with fantastic, far-fetched magical ‘budget balance’ without any connection to reality.

    The man is a fraud. Doesn’t care about deficits. Just cares about getting the tax rates down on the richest set.

    Whoa Momma. Wanna buy a bridge?

  15. comment number 15 by: grooft

    And as an economist, do you have any thoughts on the Heritage Foundation ‘analysis’ on the GDP growth, employment increase and reduction of unemployment to 2.8%?

    Economist or LIAR — you be the judge.

  16. comment number 16 by: Jim Glass

    SteveinCH (or anyone else), Exactly what is your concern with deficits?… Or is it “debt is bad because everyone says so”?

    Gee, markg, back on 3/24 you asked the same question, (however tactlessly):

    “So what’s your point economistmom?… Please explain what all these numbers mean. I could do the same thing. Trillion, trillion, trillion trillion. Can I have my PhD now?

    In response, I gave you a very clear explanation of the concerns of everyone but you, and of “what all these numbers mean” – clear enough even for members of Congress to understand, since the CRS wrote it for them. I also added the thought.

    “One of the many things about MMTers that saps their credibility and keeps them from being taken seriously by near the entire world is that …they just keep endlessly repeating themselves in minor variations rather than answering others’ observations. For instance, check” what you’d just done there.

    And now you once more ignore the answer to your question, only so you can have the fun of asking it again – which is not serious behavior, so why should anyone take you seriously?

    But if you fancy you should be, here’s what to do – read the answer to your question given by the CRS and quoted in my prior comment, then reply showing you understand it (if you can), and explain the errors made by CRS, by your Moslerian lights.

    Be responsive – stop being a poser, as you have been up to now, e.g. when going on…

    Bixby and her need to read Mosler’s 7 deadly innocent frauds. But they will not because they know they cannot win against MMT

    :-) Yes, that must be it!

    so they choose to ignore it. I pity them.

    Ha, seems like projection there, dude. But prove the psychologists wrong. Stop pestering our host and the rest of us here by asking the same question about ABCs of economics over and over — showing only your lack of ability to comprehend ABCs.

    Tell us where the CRS is wrong, exactly. If you are incapable of doing that, well, not understanding who you are criticizing is hardly a sign of intellectual superiority! We can then all just ignore you, and you can pity yourself.

  17. comment number 17 by: AMTbuff

    @grooft: What is to like?

    Merely the possibility of avoiding economic collapse that also shreds the social safety net and risks loss of our democracy. Other than that, nothing.

  18. comment number 18 by: Jim Glass

    Matt Franko,

    You took up my challenge above to markg to give an MMT answer to the CRS analysis of the problem with big federal deficits. Good for you.

    Not so good for markg who keeps only sniping, ducking, and running.

    But you put your answer in another thread where comments are now closed.

    I have a reply for you, but don’t want to spend our host’s space and bandwidth on MMT stuff that is far off topic for her posts, and a proper annoyance to many here.

    So I’ve put it on a web page elsewhere, in case you or anyone else is interested. (That also gave me the freedom to blather on as long as I liked. Fun!)

    It’ll be there for a couple days, then I’m going to take it down. FWIW.

  19. comment number 19 by: Matt Franko

    Jim,
    I went over to that link and it doesnt look like comments are turned on there…

    Please check it out, but for now, please consider you cannot manipulate terms in ex post accounting identities as “policy levers” so to speak.

    If we want full employment (now, with the criminal banks busted out) then we should increase the fiscal deficit thru tax cuts until U falls to zero-ish and let the accounting identities work out to where it may…

    Also, Randy Wray, sort of addresses this issue (in a related way) here:
    link_http://neweconomicperspectives.blogspot.com/2011/04/modern-budget-cutting-hooverians-want.html

    Please check out your temp page you put up wrt comments or maybe I’m missing how to post over there…
    Resp,