The burst of attention devoted to Congressman Paul Ryan’s 2013 federal budget seems to have passed, at least momentarily, but don’t be deceived: the plan rolled out last week by the Republican chairman of the House Budget Committee is going to be important for a long time to come.
If Mitt Romney wins the presidential election, the budget, which he endorsed, is a good guide to what he will try to accomplish. If Mr. Romney loses, the budget is a good guide to what Mr. Ryan might try to run on as a Republican presidential contender in 2016. And it’s certain that President Obama and his allies will try to use the plan to attack the Republican candidates in the upcoming election.
For all those reasons, it’s worth going back and taking a careful look at what is actually in the Ryan budget. Proponents of smaller government may be unpleasantly surprised.
For one thing, it doesn’t balance the budget. For those of us who believe that the federal budget ought to be balanced over the course of a business cycle, it’s an unpleasant surprise to see that after ten years of Mr. Ryan’s plan, the federal government would still be running a $287 billion annual deficit. That is what the plan produces in the year 2022.
For a second thing, it doesn’t reduce the national debt. Mr. Ryan’s figures show the national debt held by the public growing to $15 trillion in 2022, up from about $11 trillion this year.
For a third thing, the Ryan budget doesn’t reduce the share of GDP that the government takes from taxpayers. In fact, Mr. Ryan’s numbers show federal government revenue as a share of GDP growing to 18.7% in 2022 from 15.8% this year.
For a fourth thing, the Ryan budget doesn’t reduce government spending. It would increase federal outlays to $4,888 billion in 2022 from $3,624 billion in 2012, an increase of about 35% over ten years.
Voters may be forgiven for deciding that if they are looking for a party that will increase the federal debt and fail to balance the budget while also increasing the federal government’s bite out of the economy, they might as well choose the Democrats, because Mr. Ryan’s plan doesn’t offer a clearly contrasting or attractive alternative.
In Mr. Ryan’s defense, President Obama’s plan is even worse. Also in Mr. Ryan’s defense, it says something about the depths of the fiscal problems America is facing that not even as principled and passionate and intelligent a fiscal conservative as Mr. Ryan can find an attractive way out them.
When Mr. Ryan complains, “the president’s budget calls for more spending and more debt,” it’s technically accurate — the president’s budget does call for more spending and more debt than Mr. Ryan’s budget does. But both the president’s budget and Mr. Ryan’s budget call for more spending, and more debt, than we have now.
Mr. Ryan boasts that his budget “cuts spending by $5 trillion relative to President’s Budget.” That’s like bragging that your dinner has fewer calories and less cholesterol than the quadruple bypass burger at Heart Attack Grill. It’s Washington-style “baseline budgeting” spin, and as Mr. Ryan and Mr. Romney both on some level probably know, Americans are tired of it.
What attracted the most attention in the Ryan budget was his plan to reduce the top individual and corporate income tax rates to 25%, a figure with historical resonance. But at 25%, the corporate tax rate would still be too high to be international competitive. Mr. Ryan himself notes that Canada’s corporate tax rate just went down to 15%. A 25% corporate tax rate in America would be higher than Ireland, higher than South Korea, higher than Switzerland, higher than Hungary, higher than Poland, higher than the Czech Republic.
As for the 25% individual income tax rate, it would come on top of payroll taxes that, in the absence of a “holiday,” take 13.85% of the first $110,100 in wages. And it would apply in addition to state income taxes that also take a hefty bite in states that impose them. Remember, until the 16th Amendment was ratified in 1913, America didn’t have any peacetime federal income tax at all.
And remember, these rates are Republican starting points, which, if history is any guide, would only be negotiated upward in the inevitable compromise with Democrats on the way to getting them passed.
All of this is not to attack Mr. Ryan. He’s one of the best things the Republican Party has going, and if he were left entirely to his own devices rather than having to operate in the context of Speaker Boehner and the rest of the Republican caucus, it’s entirely possible he would come up with a plan more palatable to conservatives, though less likely to pass the House. But, sadly for the country, to say that Mr. Ryan is one of the best things the Republican Party has going these days isn’t saying much.
Ira Stoll is editor of FutureOfCapitalism.com and author of Samuel Adams: A Life.