Full text of Ryan’s speech as prepared for delivery to the Economic Club of Chicago:

“Shared Scarcity versus Renewed Prosperity”

I’m here to talk about the economy today – about the need to get four quarters of strong, consistent performance.

That wasn’t another Jay Cutler joke, I swear. It could be, but it’s not.

I’ll come to the point. Despite talk of a recovery, the economy is badly underperforming. Growth last quarter came in at just 1.8 percent. We’re not even creating enough jobs to employ new workers entering the job market, let alone the six million workers who lost their jobs during the recession.

The rising cost of living is becoming a serious problem for many Americans. The Fed’s aggressive expansion of the money supply is clearly contributing to major increases in the cost of food and energy.

An even bigger threat comes from the rapidly growing cost of health care, a problem made worse by the health care law enacted last year.

Most troubling of all, the unsustainable trajectory of government spending is accelerating the nation toward a ruinous debt crisis.

This crisis has been decades in the making. Republican administrations, including the last one, have failed to control spending. Democratic administrations, including the present one, have not been honest about the cost of the tax burden required to fund their expansive vision of government. And Congresses controlled by both parties have failed to confront our growing entitlement crisis. There is plenty of blame to go around.

Years of ignoring the drivers of our debt have left our nation’s finances in dismal shape. In the coming years, our debt is projected to grow to more than three times the size of our entire economy.

This trajectory is catastrophic. By the end of the decade, we will be spending 20 percent of our tax revenue simply paying interest on the debt – and that’s according to optimistic projections. If ratings agencies such as S&P move from downgrading our outlook to downgrading our credit, then interest rates will rise even higher, and debt service will cost trillions more.

This course is not sustainable. That isn’t an opinion; it’s a mathematical certainty. If we continue down our current path, we are walking right into the most preventable crisis in our nation’s history.

So the question is, how do we avoid it?

The answer is simple. We have to make responsible choices today, so that our children don’t have to make painful choices tomorrow.

If you look at what’s driving our debt, the explosive growth in spending is the result of health care costs spiraling out of control.

By the time my children are raising families of their own, literally every dollar we raise in revenue will be paying for three major entitlement programs.

Some of this is demographic – every day, ten thousand baby boomers retire and start collecting Medicare and Social Security.

But a lot of it is simply due to the fact that health care costs are rising faster than the economy is growing. Revenues simply cannot keep up.

It’s basic math – we cannot solve our fiscal or economic challenges unless we get health care costs under control.

The budget passed by the House last month takes credible steps to controlling health care costs. It aims to do two things: to put our budget on a path to balance, and to put our economy on a path to prosperity.

I am here today to stress the point that these goals go hand in hand. Stable government finances are essential to a growing economy, and economic growth is essential to balancing the budget.

The name of our budget is The Path to Prosperity.

See, right now, we’re finally having a debate in Washington about how to address our fiscal problems. But we’re still not having the debate we need to have.

To an alarming degree, the budget debate has degenerated into a game of green-eyeshade arithmetic, with many in Washington – including the President – demanding that we trade ephemeral spending restraints for large, permanent tax increases.

This sets up a debate in which we are really just arguing over who to hurt and how best to manage the decline of our nation. It is a framework that accepts ever-higher taxes and bureaucratically rationed health care as givens.

I call it the “shared scarcity” mentality. The missing ingredient is economic growth.

Shared scarcity represents a deeply pessimistic vision for the future of this country – one in which we all pay more and we all get less. I believe it would leave us with a nation that is less prosperous and less free.

To begin with, chasing ever-higher spending with ever-higher tax rates will decrease the number of makers in society and increase the number of takers. Able-bodied Americans will be discouraged from working and lulled into lives of complacency and dependency.

Worse – when it becomes obvious that taxing the rich doesn’t generate nearly enough revenue to cover Washington’s empty promises – austerity will be the only course left. A debt-fueled economic crisis will force massive tax increases on everyone and indiscriminate cuts on current beneficiaries – without giving them time to prepare or adjust. And, given the expansive growth of government, many of these critical decisions will fall to bureaucrats we didn’t elect. 

Shared scarcity impedes economic growth, results in harsh austerity, and ends with lost freedom. 

In a recent speech he gave in response to our budget, President Obama outlined a deficit-reduction approach that, in my view, defines shared scarcity. The President’s plan begins with trillions of dollars in higher taxes, and it relies on a plan to control costs in Medicare that would give a board of 15 unelected bureaucrats in Washington the power to deeply ration care. This would disrupt the lives of those currently in retirement and lead to waiting lists for today’s seniors.

Now in criticizing the President’s policies, I should make clear that I am not disputing for a moment that he inherited a difficult fiscal situation when he took office. He did.

Millions of American families had just seen their dreams destroyed by misguided policies and irresponsible leadership that caused a financial disaster. The crisis squandered the nation’s savings and crippled its economy.

The emergency actions taken by the government in the fall of 2008 did help to arrest the ensuing panic. But subsequent interventions – such as the President’s stimulus law and the Fed’s unprecedented monetary easing – have done much more harm than good, in my judgment.

In the aftermath of the crisis, we needed government to repair the free-market foundations of the American economy, as it did under Reagan in the early 1980s, by restraining spending… keeping taxes low… enforcing reasonable, predictable regulations… and protecting the value of the dollar.

Instead, leaders in Washington embarked on an unprecedented spending spree… enacted a deeply flawed overhaul of financial rules… passed a new health care law that raised taxes by $800 billion… and encouraged a sharp departure from a rules-based monetary policy, which created even more economic uncertainty. 

In the 2010 election, the voters sent a message: This isn’t working. Washington needs to try something else.

We know what that something else must be, because we know what has always made growth possible in America. We need to answer that call for new economic leadership by getting back to the four foundations of economic growth:

First, we have to stop spending money we don’t have, and ultimately that means getting health care costs under control.

Second, we have to restore common sense to the regulatory environment, so that regulations are fair, transparent, and do not inflict undue uncertainty on America’s employers.

Third, we have to keep taxes low and end the year-by-year approach to tax rates, so that job creators have incentives to invest in America; and

Fourth, we have to refocus the Federal Reserve on price stability, instead of using monetary stimulus to bail out Washington’s failures, because businesses and families need sound money.

Let me deal with each in order.

The first foundation, real spending discipline: it’s pretty simple. You can’t get real, sustainable growth by continuing to pile on the debt. More debt means more uncertainty, and more uncertainty means fewer jobs.

The rating agency S&P just downgraded the outlook on U.S. debt from “stable” to “negative.” That sends a signal to job creators. If S&P is telling them that America is a bad investment, they’re not going to expand and create jobs in America – not at the rate we need them to.

Mounting debt also threatens our poorest and most vulnerable citizens, because those who depend most on government would be hit hardest by a fiscal crisis. We have to repair our safety net programs so that they are there for those who need them most. This starts by building on the successful, bipartisan welfare reforms of the mid-1990s.

Our reforms save the social safety net by giving more power to governors to create strong, flexible programs that better serve the needs of their populations. Most important, they make these programs solvent. 

As we strengthen welfare for those who need it, we propose to end it for those who don’t. We end wasteful corporate welfare for those such as Fannie Mae and Freddie Mac, big agribusinesses, and others that have gotten a free ride from the taxpayer for too long.

All of these steps are necessary to getting spending under control. But they are not enough. We cannot avert a debt crisis unless we directly address the rising cost of health care.

Getting health care costs under control is critical, both for solving our fiscal mess and for promoting growth. One reason that many people aren’t getting raises is that rising health care costs are eating into their paychecks.

The second foundation addresses the growing scourge of crony capitalism, in which Washington bureaucrats abuse the regulatory process to pick winners and losers in the private economy.

Congressional Republicans continue to advance reforms that stop regulatory bureaucrats from strangling job growth and innovation with red tape. We’ve advanced legislation to stop the EPA from imposing job-destroying energy caps on American businesses.

We’ve advanced legislation to revisit the flawed Dodd-Frank law, which actually intensifies the problem of too-big-to-fail by giving large, interconnected financial institutions advantages that small firms do not enjoy.

But most important, we propose to repeal the new health care law and its burdensome maze of new regulations. It’s bad enough that the law imposes an unconstitutional mandate on every American; it also imposes new regulations on businesses, which are stifling job creation.

Let me share with you a figure that serves as a devastating indictment of the new health care law: So far, over 1,000 businesses and organizations have been granted waivers from the law’s onerous mandates. These waivers may prevent job losses now, but they do not guarantee relief in the future, nor do they help those firms that lack the connections to lobby for waivers.

This is no way to create jobs in America. True, bipartisan health care reform starts by repealing this partisan law.

The third foundation recognizes that we cannot get our economy back on track if Washington tries to tax its way out of this mess.

The economics profession has been really clear about this – higher marginal tax rates create a drag on economic growth.

As the University of Chicago’s John Cochrane recently wrote: “No country ever solved a debt problem by raising tax rates. Countries that solved debt problems grew, so that reasonable tax rates times much higher income produced lots of tax revenue. Countries that did not grow inflated or defaulted.”

Higher taxes are not the answer.

Finally, the fourth foundation calls for rules-based monetary policy to protect working families and seniors from the threat of high inflation.

The Fed’s recent departures from rules-based monetary policy have increased economic uncertainty and endangered the central bank’s independence.

Advocates of these aggressive interventions cite the “maximum employment” aspect of the Fed’s dual mandate – its other mandate being price stability.

Congress should end the Fed’s dual mandate and task the central bank instead with the single goal of long-run price stability. The Fed should also explicitly publish and follow a monetary rule as its means to achieve this goal.

These are our four foundations of economic growth. And the House-passed budget starts the long, arduous, and necessary process of restoring these foundations and building a prosperous future.

We lift the crushing burden debt by cutting spending and reforming those government programs that drive the debt. We reduce the deficit by over a third in the first year of our budget, putting an end to the era of trillion-dollar deficits. The House-passed budget doesn’t just put the budget on a path to balance – it actually pays off the debt over time.

We can’t achieve this goal by simply rubber-stamping increases in the national debt limit without reducing spending in Washington.

Speaker Boehner made this clear in a recent speech at the Economic Club of New York: If the debt ceiling has to be raised, then we’ve got to cut spending. The House-passed budget contained $6.2 trillion in spending cuts. For every dollar the President wants to raise the debt ceiling, we can show him plenty of ways to cut far more than a dollar of spending. Given the magnitude of our debt burden, the size of the spending cuts should exceed the size of the President’s debt limit increase.

The House-passed budget also gets health care spending under control by empowering Americans to fight back against skyrocketing costs. Our budget makes no changes for those in or near retirement, and offers future generations a strengthened Medicare program they can count on, with guaranteed coverage options, less help for the wealthy, and more help for the poor and the sick. 

There is widespread, bipartisan agreement that the open-ended, fee-for-service structure of Medicare is a key driver of health-care cost inflation. As my friend Jim Capretta, a noted health-care policy expert, likes to say, Medicare is not the train being pulled along by the engine of rising costs. Medicare is the engine – and the rest of us are getting taken for a ride.

The disagreement isn’t really about the problem. It’s about the solution to controlling costs in Medicare. And if I could sum up that disagreement in a couple of sentences, I would say this: Our plan is to give seniors the power to deny business to inefficient providers. Their plan is to give government the power to deny care to seniors.

We also disagree about how best to deliver the tax reform that Americans have long demanded from Washington.

Here’s a quick story about tax policy. Twenty-five years ago, GE CEO Jack Welch introduced himself to this very club by saying, “I represent a company that doesn’t pay taxes.”

I guess some things never change. 

We have to broaden the tax base, so corporations cannot game the system. The House-passed budget calls for scaling back or eliminating loopholes and carve-outs in the tax code that are distorting economic incentives. 

We do this, not to raise taxes, but to create space for lower tax rates and a level playing field for innovation and investment. America’s corporate tax rate is the highest in the developed world. Our businesses need a tax system that is more competitive.

A simpler, fairer tax code is needed for the individual side, too. Individuals, families, and employers spend over six billion hours and over $160 billion per year figuring out how to pay their taxes. It’s time to clear out the tangle of credits and deductions and lower tax rates to promote growth.

The House-passed budget does that by making the tax code simpler… flatter… fairer… more globally competitive… and less burdensome for working families and small businesses.

By contrast, the President says he wants to eliminate deductions, but he also wants to raise rates. That includes raising the top rate to 44.8 percent. That would amount to a $1.5 trillion tax increase on families and job creators.

The President says that only the richest people in America would be affected by his plan… Class warfare may be clever politics, but it is terrible economics. Redistributing wealth never creates more of it.

Further, the math is clear – the government cannot close its enormous fiscal gap simply by taxing the rich. This gap grows by trillions of dollars each year, representing tens of trillions in unfunded promises to future generations that the government has no plan to keep.

There’s a civic side to this as well. Sowing social unrest and class envy makes America weaker, not stronger. Playing one group against another only distracts us from the true sources of inequity in this country – corporate welfare that enriches the powerful, and empty promises that betray the powerless.

Those committed to the mindset of “shared scarcity” are telling future generations, sorry, you’re just going to have to make do with less. Your taxes will go up, because Washington can’t get government spending down.

They are telling future generations, you know, there’s just not much we can do about health care costs. Government spending on health care is going to keep going up and up and up… and when we can’t borrow or tax another dollar, we’ll have to give a board of unelected bureaucrats the power to tell you what kind of treatments you can and can’t receive.

If we succumb to this view that our problems are bigger than we are – if we surrender more control over our economy to the governing class – then we are choosing shared scarcity over renewed prosperity, and managed decline over economic growth.

That’s the real class warfare that threatens us – a class of governing elites picking winners and losers, and determining our destinies for us.

We face a choice between two futures. We can continue to go down the path toward shared scarcity, or we can choose the path of renewed prosperity.

The question before us is simple: Which path will our generation choose?

In 1979, my mentor, Jack Kemp, captured the essence of why we must choose the path to prosperity:

“We can’t progress as a society by using government to diminish one another. The only way we can all have more is by producing more, not by bickering over how to share less. Economic growth must come first… for when it does many social problems tend to take care of themselves, and the problems that remain become manageable.”

You know, there’s a question I get a lot from people at town halls. When you go around the country showing people a chart that shows that our debt is on track to cripple our economy, people start to ask you whether any plan, even a plan like the House-passed budget, can save America from a diminished future.

They say, Congressman Ryan, I know you have to sound optimistic in public. But in private, do you really think there’s anything we can do to save this country from fiscal ruin? Or should we just be bracing for the worst?

It’s a difficult question. It’s one that gives me pause. Frankly, it’s one that keeps me up at night.

But the honest answer is the one I’m about to give to you: Nobody ever got rich betting against the United States of America, and I’m not about to start.

Time and again, just when it looked like the era of American exceptionalism was coming to a close… we got back up. We brushed ourselves off. And we got back to work – rebuilding our country, advancing our society, and moving the boundaries of opportunity ever forward.

We can do it again. America was knocked down by a recession. We are threatened by a rising tide of debt. But we are not knocked out. We are America. And it is time to prove the doubters wrong once more – to show them that this exceptional nation is once again up to the challenge. 

Thank you.