Are Paul Ryan's Budget Plans Radical or Weak Beer?


So it's a Mitt Romney-Paul Ryan ticket.

Rep. Ryan (R-Wis.) has distinguished himself as a serious politician who was ready and willing to talk substantive budget issues years before even his own party's leadership wanted to have that conversation. He's been characterized by Democrats and other opponents as a radical budget-cutter who wants to toss granny out of her wheelchair and down a flight of stairs, like Richard Widmark did in Kiss of Death.

The first thing I think worth saying about the Ryan pick is that it shows Romney has not given up. While the vice-presidential candidate in the end doesn't make a lot of difference, it shows that Romney isn't afraid to pick someone who is young and vital. Imagine if Romney had gone with a color-of-water pick such as former Gov. Tim Pawlenty (R-Minn.) whose impressive record in office was undercut by his Minnesota Nice exterior.

Commentators will line up quickly to praise or damn the Ryan selection, but it strikes me operationally as a smart choice, especially if Ryan plays the traditional attack-dog role that vice-presidential candidates are supposed to. He is in a good, knowledgeable position to rebut claims that capitalism is always at fault. Then again, from a small-government libertarian perspective, he voted for Medicare Part D, No Child Left Behind, TARP, auto bailouts, and all the wars waged by George W. Bush. So even as he makes the 2012 election race more interesting and hotly contested, he underscores the fact that today's GOP is offering an echo of the Democratic Party, not a real alternative.

To the immediate issue: Is Paul Ryan the budget-slashing psycho that his detractors will immediately start saying he is? Not hardly. Here's some info about the budget plan he released earlier this year—a plan the GOP House embraced and passed:

The Ryan/congressional GOP budget has been released. As a starting point, consider this: The Ryan plan says that we will spend $3.6 trillion this year while bringing in $2.4 trillion in FY2012. In contrast, President Obama's budget says that we will shell out $3.8 trillion in FY2012 and bring in $2.5 trillion.

In brief, the Ryan plan is not as bad as President's Obama budget, which wants to spend $3.8 trillion in FY2013 and envisions spending $5.8 trillion in FY2022. Over the next 10 years, Obama assumes that federal spending would amount to 22.5 percent of GDP while revenues would average just 19.2 percent of GDP. That ain't no way to run a country.

In this sense, Ryan's plan is slightly better but still doesn't pass the laugh test. He would spend $3.5 trillion in 2013 and $4.9 trillion in 2022 (all figures in the post are in current dollars unless otherwise noted). Spending as an average of GDP would average 20 percent of GDP and revenue would amount to just 18.3 percent. Go here to read the whole plan; figures on outlays and revenue are in Table S-1.

As I noted in my headline for that March 21 blog post, Ryan's plan is better than Obama's plan and it might even be good enough for government work. But it ain't good.

Yet Ryan's plan is weak tea. Here we are, years into a governmental deficit situation that shows no sign of ending. How is it that Ryan and the Republican leadership cannot even dream of balancing a budget over 10 years' time? All of the discussion of reforming entitlements and the tax code and everything else is really great and necessary—I mean that sincerely—but when you cannot envision a way of reducing government spending after a decade-plus of an unrestrained spending binge, then you are not serious about cutting government. If Milton Friedman was right that spending is the proper measure of the government's size and scope in everybody's life, then the establishment GOP is signaling what we knew all along: They are simply an echo of the Democratic Party.

And keep in mind that reducing government spending isn't simply an ideological point of pride. Government spending crowds out private spending, which tends to be more efficient and effective. Raising taxes to pay for government spending (or even to reduce deficits) is a tough slog. Former Obama chief economist Christina Romer's reputation-making works shows that raising taxes 1 percent of GDP to cut deficits leads to a 3 percent reduction in GDP. And as Veronique de Rugy has written, the most-proven way countries with advanced economies have reduced debt-to-GDP ratios is by cutting spending. It's not by raising spending and raising taxes.

Read the whole thing here.

And make no mistake: Unabated deficit spending does lead to increased taxes sooner or later.

In 2011, de Rugy and I detailed "The Good, The Bad, and The Ugly" in Paul Ryan's earlier version of the plan. We hoped that Ryan's basic premise of increasing annual federal spending by a trillion dollars would become the ceiling of acceptable discourse. After all, the 21st century has been nothing but a massive expansion of government spending (60 percent in real terms under Bush alone) and folks such as Sen. Rand Paul (R-Ky.) have put forth thoughtful alternatives to actually cut government spending.

But it nows seems that the 2012 election may come down to a vision of a government that either spends $1 trillion or $2 trillion more annually than we do now. Which is not a welcome development.

Reason on Paul Ryan.

And although he's since denounced ideological flashpoint Ayn Rand in the pages of National Review, here's Ryan praising the Atlas Shrugged author for promoting a moral defense of capitalism: