Republicans on Capitol Hill and the presidential campaign trail argue that the country faces no greater and immediate challenge than reducing the federal budget deficit. The budget plan unveiled on Tuesday by U.S. Rep. Paul Ryan amounts to the fullest expression of their concern. They see deficit reduction as the “path to prosperity,” such fiscal discipline unleashing economic growth.
To a degree, Ryan and colleagues are right about putting the country’s finances in order. The recent injections of federal spending have been a necessary counter to the painful (and continuing) process of deleveraging. Yet once the recovery gains steam, deficit reduction must begin, aiming for a responsible 3 percent of the overall economy.
The key question, and one that belongs front and center in this election year, is: How to get there? Ryan again has opted for a careless course.
Consider the whopping tax cuts the House Budget Committee chairman has proposed. He calls for reducing the current six income tax rates to two, 10 percent and 25 percent, the top rate down from 35 percent. If the country would do well to lower its corporate tax rate (while closing loopholes), putting American firms on a par with foreign companies, it hardly makes sense to deliver yet another dollop of tax relief for wealthy households. Ryan talks about erasing individual income tax deductions, exemptions and credits to cover part of the lost revenue. He identifies none.
His budget plan is specific about spending reductions. The Congressional Budget Office examined the Ryan proposal (at his request) and found that by 2050 it would result in most of the federal government ceasing to exist — except for Social Security, defense and health care. Spending would shrink to 16 percent of the overall economy, or the lowest level since 1950.
A good thing? Weigh the wreckage, the country all but eliminating programs for such items as veterans, highways, education, national parks, food safety, border control and medical and scientific research. Programs for the disadvantaged would be whacked, too, including housing subsidies and child care for the working poor. More, Medicaid and Medicare would be squeezed, the former via an insufficient block grant to states, the latter by introducing an insufficient voucher system.
No wonder Robert Greenstein of the Center on Budget and Policy Priorities described the Ryan plan as likely to produce “the largest redistribution of income from the bottom to the top in modern U.S. history.” Even more telling, he cited the departure of what the much-lauded Bowles-Simpson plan sought — deficit reduction without increasing poverty or widening inequality.
Yes, there is a better way, one that recognizes the need for a balanced approach and that as important as fiscal discipline is, it doesn’t require a something as drastic and destructive as the Ryan plan.