If you’ve been following the debate over the House Republican budget proposed by Wisconsin congressman Paul Ryan, you have probably heard that it savagely cuts programs for the poor in order to fund tax cuts for the rich, that its numbers don’t add up, and that in the short run it expands the deficits. These claims, though asserted confidently, either depend on highly contestable assumptions or are demonstrably untrue.
• David Frum writes in The Week that Ryan’s “debt reduction plan actually increases the debt over the medium term — by even more [than] President Obama’s budget would.”
The CBO’s actual projections for the Ryan plan show a debt level in 2021 that is $4.7 trillion lower than its projections for Obama’s budgets. Ryan’s plan is designed to rapidly stabilize federal debt as a share of the economy: That percentage peaks in year three and then starts falling. The CBO projections for Obama’s budgets just show the number rising higher and higher over the decade.
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•“In fact, the [Congressional Budget Office] finds that over the next decade the [Ryan] plan would lead to bigger deficits and more debt than current law,” writes Paul Krugman in the New York Times.
What Krugman doesn’t mention is that current law includes automatic tax increases, including middle-class tax increases that both parties have consistently said they want to avoid. Current law includes cuts in payments to Medicare providers that both parties oppose and have acted against in the past. It includes the expansion of the Alternative Minimum Tax to hit more and more middle-class taxpayers, which — well, you get the idea. Krugman is comparing the Ryan plan with an alternative that is both unrealistic and much more painful than he lets on.
• Jonathan Chait writes in The New Republic: “[Ryan] is making a choice — not just [to] cut Medicare to save Medicare, but also to cut Medicare in order to cut taxes for the rich.” Krugman, again, cites the CBO to write that “a large part of the supposed savings from spending cuts would go, not to reduce the deficit, but to pay for tax cuts.”
These claims are misleading in two ways. First, Ryan’s plan assumes that Congress enacts a tax reform that keeps revenues slightly above historic averages. It is “revenue neutral” with respect to the tax code as it exists following Bush’s tax cuts. Current law automatically raises the tax rates to pre-Bush levels in 2013. So if you’re comparing the tax level with current law, including that automatic tax hike, Ryan’s plan represents a tax cut. If you’re comparing it with today’s tax rates, on the other hand, it’s not a tax cut. If you adopt the latter perspective, what Ryan is proposing is to restrain the growth of Medicare and other spending programs in order to reduce deficits and avert a tax increase.
Second, Chait’s claim that Ryan’s plan “includes a massive, regressive tax cut” is certainly true only on a very specific definition of “regressive.” The plan assumes that the tax reform reduces tax breaks and lowers the top tax rate to 25 percent. If you’re among the very richest Americans — in the Forbes 400, for example — then your tax bill will certainly fall. You’ll lose some tax breaks, but you’ll gain more from keeping a higher share of your income above the threshold for the top tax bracket. On the other hand, a lot of Americans who are well-off could end up paying more under such a reform. Progressives who care about the distribution of the tax burden between the richer half of taxpayers and the poorer half will have to wait and see what tax plan the Ways and Means Committee devises before making a judgment about it. Progressives who primarily worry about how the super-rich are doing relative to the upper middle class, on the other hand, already know what they need to know. But it’s not at all clear that this definition of “regressive” is the most important one.
• Annie Lowrey writes in Slate: “The theory is straightforward enough: Tax cuts to wealthy Americans foster prosperity that moves millions of (less wealthy) Americans back to work, with increasing wages. High earnings and employment bolster tax revenue. When combined with huge cuts in domestic spending and radical changes to Medicaid and Medicare, the budget balances out in about 20 years.” She says that Ryan’s plan “relies” on economic forecasts that are too optimistic.
Which they almost certainly are. But that has nothing to do with whether Ryan’s plan reduces the debt as he says it will. The plan’s projections for debt reduction do not assume that any extra revenue comes in from higher economic growth. The CBO applies the same economic assumptions to Ryan’s plan that it applies when making projections about Obama’s budget and current law. Lowrey and like-minded critics have identified a flaw in the plan’s marketing, not its design.
I created an account with the National Review Online simply to comment on this article. Mr. Ponnuru, this article has no depth to it. You use flawed logic to make assumptions, which you claim as fact and in the next breath criticize other writers/speakers for doing the same. For example, when you write "...The Congressional Budget Office assumes that Medicare will go bankrupt in 2021 ..... price reductions, although I’m a little less confident about that.”
You use Foster's quote as if it guarantees your conclusion that Paul's plan will work. It just doesn't follow. Furthermore, your logic is often insulting to the readers intelligence. For example, you write, "If you’re among the very richest Americans — in the Forbes 400, ... Progressives who primarily worry about how the super-rich are doing relative to the upper middle class, on the other hand, already know what they need to know." What are you even talking about here? You can google the definition of regressive in an instant, and it seems as if you are implying that the difference between reinstating pre-Bush tax cuts on the wealthy is somehow similar to making the upper middle class pay more than the very wealthy...? I really don't understand what you are arguing, and it was very difficult to read the entire article. However, I was compelled by the title, and found myself revolted enough to need to finish it. I do, however, wish all readers of this article had a disclaimer at the top that it is filled with circular, flawed logic that only serves to further confuse its audience.
Well, what do you expect the Liberals to say?
Heck, Cons were killing women last week.
I imagine soon we'll hear we are on the verge of producing "Soylent Green" for the elderly and children...
Mr. Ryan,
Watch out for the knife Speaker Boehner has ready to lunge into your back!
And we wonder why the President is afraid to sit down 1:1 in front of the cameras with Rep. Ryan and have an open, unscripted debate about this? Ryan would eat BO's lunch, and without a teleprompter to save him, the Emperor without Clothes would finally be exposed to his fans and loyalists.
Most importantly, any legitimate American who's concerned about our debt needs to call out the Intellectual Dishonesty shown yesterday, and throw the President's words back at him. This is a "False Choice" between killing our senior citizens or asking for entitlement reform. It's a "False Choice" between sending our children to their death by not going to college or reforming our educational system so that we can compete with South Korea. Finally, it's a "False Choice" between kicking our poor on the street or offering them an adequate set of incentives to find work, education, and a future as a taxpaying American.
What I wonder is if we were able to win both houses of congress handily and the presidency, would there be a new plan less timid and ready to do real cutting faster and real entitlement reform?
Is Ryan's plan simply the best we can hope to get now?
When I read Ponnaru's article, I felt completely despondent. Which is easier to explain - Paul Ryan's plan, along with the complex understanding of CBO projections, tax calculations, and assumptions of Congressional actions?
Or the propaganda war cry, "Tax cuts for the rich!"???
I can practically hear Democrat strategists and leftists of all stripes snickering cynically at the audiences they think they are appealing to.
Our only hope is that more people vote who understand two basic facts:
(1) irresponsible borrowing, profligate deficit spending and the government dependency behind both is destroying our country, and
(2) the ONLY hope of reining in deficit spending (and if past is precedent this hope is thin, indeed) is electing enough conservative Republicans to Congress AND a conservative President.
What needs to be continually drummed into people's heads is that currently just under 50% of the adult population pays no income taxes whatsoever. That the top 20% of income earners already pay 80% of the collected income taxes. So, when the mantra of "tax cuts for the rich" is continually chanted by the socialists, does this mean that the percentage of non-taxpayers needs to rise to what? 55%? 60%?
Right now, each actual taxpayer is carrying one other adult American on their proverbial backs. With the current socialist sentiment the opportunity to carry two on one's back is well within sight. Does anyone on the left not understand that this is unsustainable?
The government's problem is not revenue. It is uncontrolled spending on useless activities that merely transfer wealth and they do it in a very inefficient fashion.
britneyj, welcome to NRO, where it's OK to disagree, and you'll find serious, good-natured, grown-up conversations on the issues of the day and the issues of the century.
You didn't like Ponnuru's article, but do read further--lot's of good stuff here. Also, don't miss the Paul Ryan video on the home page.
Thank you for writing this Mr. Ponnuru. The liberals' plan is to continue as we are going and hope that we don't have a big financial crisis before November 2012.
Without openly saying so, the liberals are hoping that some new technology or process will revolutionize our economy and cause it to grow quickly enough to dwarf our current financial troubles. There are several examples of this in history: (1) Great Britain after the Napoleanic Wars had a huge national debt in 1815 that was retired relatively painlessly as the industrial revolution caused its economy to grow at a much quicker pace than it had before 1815; (2) the U.S. after the Civil War grew as a result of the industrial revolution; (3) the U.S. from 1921 to 1929 grew as a result of automobiles revolutionizing our transportation system; and (4) the U.S. from 1996 to 1999 grew as a result of the computer and the internet achieving much wider popularity and revolutionizing the way we do business and lowering the cost of acquiring information.
Liberal like to point to the economic growth that we experienced during the first three years of President Clinton's term as proof that the economy can grow in spite of higher marginal tax rates. This is an outlier that cannot be easily replicated. All of the other examples took place during times of relatively low taxation.
Britneyj: Sorry you had such a hard time understanding the article. Perhaps given your admitted difficulty with reading comprehension you should be less quick to assume logical failures in the article you're reading.
I think that, given the current field of Presidential candidates on the Republican side, the best we can hope for is a Republican majority in BOTH Houses of Congress in the 2012 election.
Having said that, I can't believe that I'm talking about an election that is 19 months away! There is much to be done before then.
"Mythmakers" = apt description. Why these people are often called intellectual heavyweights is beyond me. Maybe if Ryan shopped at Ollivanders Wand Shop he could help us better.
One can conclude that you agreed with every word of the Commander-Campaigner in Chief's "brilliant" speech; it was not "insulting to your intelligence", nor did you feel "revolted" to finish it, that is if you read it.
Here is an idea that you should not find too hard to understand...cancel your NRO account and find your way back to the Huffington Post and the rest of the lib-progressive thiefs!!!
Things are coming to a head, but HOW do we as citizens effect ACTION?? My father had a saying about emptying bushel baskets of (ahem), then filling them back up again, making it look like work. All this development of "Plans", appointing of "Commissions" (I had to laugh at the post-speech scratching of heads over THAT one - another commission to evaluate the results of the FIRST one - hmmm) smacks of exactly this - scurrying around looking busy, taking no ACTION, procrastinating until paychecks are cashed, congressional terms are over and people are out of office, safely back home, and it is someone else's problem. But it will still be OUR problem - the AMERICAN PEOPLE are left with it sitting in our laps. And it is getting to be a VERY heavy elephant.
Your article is a fine analysis of the Ryan Plan and its pros and cons. WHEN and HOW do we get these folks to stop rearranging bushel baskets, and take ACTION?? Clearly they have not learned from the age-old business model that doing nothing results in realization of one's worst fears eventually, because in doing nothing, one allows chaos (or the enemy, or competition, fill in the appropriate bogeyman) to take its course. This is where we are headed if strong hands do not take the reins and control this run-away Wells-Fargo stagecoach.
Seems to me that what this article screams to the high heavens is we really need a complete tax code overhaul so pols on both sides can't play with it trying to confuse people.
In layman's terms, the Medicare voucher system will work for the accountants, but will leave seniors broke and/or underinsured. Also, I wonder why Ryan would attempt Medicare reforms without Social Security? If you're gonna kill off seniors you might as well do it in one fell swoop, right? I'm kidding, of course, but that's really what Ryan's budget is in political terms. Very baffling, isn't it?
I don't think the Left is far off the mark with the critcism of the Ryan plan, as it's fair game as with all budgets. But the return of voodoo economics, haven't we learned anything from history?
As sound as your arguments are, Mr. Ponnuru, I fear BritneyJ's reaction provides insight into how the debate may go with the public. President Obama and the Democrats have clearly decided to demagogue and obfuscate rather than engage in meaningful debate. They know that Rep Ryan's graphs and subtleties will go over the heads of most of the poor old public, but that many in the same public will respond enthusiastically, righteously, and mindlessly to "fairness-based" battle cries to "Tax the Rich!"
Here's my suggestion to the Republicans if they want to actually get something done: Agree to top marginal tax rate increases on households with more than $1,000,000 in annual income (or $2,000,000 or whatever the right cutoff is to avoid nicking the small business owners)and use that concession to finesse and defuse the Democrats' demand to tax the rich. In return, insist that the Democrats go along with the Ryan plan or its moral equivalents. Yes, this will divert some money to the government that might otherwise have gone to create a few more jobs, and it will briefly annoy some wealthy families, but to make an omelet youahve to break some eggs.
(I'd also like to see Social Security included. My understanding is that SS is running deficits NOW in the sense that current FICA collections aren't covering current FICA payouts. If that's the case, then at least some SS payments are now forcing some new and additional Treasury borrowing, above and beyond whatever the ambient level of borrowing was(40 cents for every dollar spent or whatever) That means at least some current SS payments are ALREADY adding to deficits NOW - not the 26 years from now in 2037 that many people keep talking about.)
Mr. Ponnuru, the problem with your article is that you take snippets of the other articles and segments of the Ryan “Road Map” to prove one point of view. One needs to look at the whole and not its bits. The biggest chunks of our budget are entitlements and defense spending followed by all the discretionary spending (NEA, Planned Parenthood, all the congressional pork spending, EPA, government safety inspections, infrastructure spending etc.) . The overall issue with Ryan’s plan is that it ignores the elephant in the room, the defense budget. Our defense budget is larger than combined defense spending of Russia, China, India, France, UK, Brazil, Canada, Spain, Germany, Israel, Saudi Arabia and Holland combined. One can argue that we are the largest economy of the world so we should measure defense spending as a percentage of GDP. U.S. defense spending is 4.7% of GDP, nations with a higher percentage are Israel, Saudi Arabia, UAE, Oman, Chad, Jordan and few others. You get the picture. China, the second largest economy, spends about 2.2% of its GDP on defense. Mr. Ryan's plan increases defense spending from $801 billion in 2012 to $833 billion in 2021. To put this into context, defense spending in 2000 was less than $300 billion. One can only conclude from his prosperity plan that Mr. Ryan and GOP intend to continue the longest war in U.S. history for another 10 years.
On the other hand Mr. Ryan’s plan reduces ALL combined discretionary spending from $482 to $422 billion. Most of this is done by cutting funding for essential safety testing and inspection of food, water, imported goods, infrastructure spending, education and R&D. Who really benefits from cutting safety inspections? Do we really need imported goods from China to bring lead paint in toys, asbestos in drywall and industrial chemicals as fillings in food products into our homes? I guess we rely on self policing by industry and China!
Mr. Ryan’s plan ignores facts about the runaway defense spending and aims to reduce the deficit on the back of retirees and the poor, call it entitlements, but that is what is being used for.
He talks about tax reform but does not give specifics on how to do it, given the track record of GOP tax cuts based on “trickle down economics” one has to view the tax reform outline with skepticism. The Road to Prosperity under Mr. Ryan’s plan is not the road that the average Joe who muddles at work every day for 30-40 years can get on. It is the road for the big business and the rich to get richer, disguised as do or die action in this tumultuous economic period. The fact is that most Americans will be standing alongside of the Road hoping a couple of crumbs fall out of the windows of the rich for them to pick up. The economic troubles of today has its roots in irresponsible tax cuts of Bush era along with runaway financial market with no regulations and two wars which Mr. Bush started. Mr. Ryan voted in favor of the wars, the TARP to bail out banks, and the tax cuts which forced us to borrow from China and get us in the mess that we are in. Now Mr. Ryan is the economic guru of GOP to get the nation back on track. Is this not funny?
Mr. Ryan’s plan is nothing new. It is typical GOP’s tax cut plans disguised under new shiny wrappings presented to a desperate nation in troubled times. The myth about tax cuts generating economic growth is busted when we look at the facts. Under Mr. Reagan government borrowed more than it did from Washington to Carter combined. Mr. Bush out did Mr. Reagan by borrowing more than all presidents combined borrowing from Washington to Clinton. Another words, they allowed for the government to put its expenditures on credit while giving tax cuts to the wealthy. Of course, anyone can prosper and live it up with unlimited credit which he does not have to be responsible to pay back.
So if GOP is for real about reducing the deficit and making the nation live within its means it has to be honest with the people and have everything on the table including defense and a balanced tax proposal.
IrregularBowels: Your statements are only true if you believe that putting some free market back into the health care market will do nothing to either improve health care or make it cheaper.
Given that you have stated that you want a complete govt takeover of health care, I can understand why anything that goes in the other direction would scare you.
"It’s bad enough that Ryan’s critics do not have good ideas of their own for solving the country’s fiscal problems. For the most part, they don’t even have solid criticisms. If they prevail politically, it won’t be because of the strength of their arguments." The sad thing is that too few Americans give a rip and are so stupid they either don't know they're being lied to or just don't care.
First Welcome to the site. I suggest you read the article many more times, perhaps with a more open mind. You'll see a distinct lack of circular logic.
@Truth Seeker. If it wasn't that Medicare has the highest rate of fraud, the highest rate of claim rejection and the lowest (and most delayed) payouts, you might have a point. All we have though, is that private insurance currently does it faster, cheeper, and pays better.
(standard disclaimer: I work for an insurance company, I sure as heck don't speak for them, nor do they want me to.)
