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First Thoughts on Ryan-Murray



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Based on the outline that a staffer e-mailed me a couple of hours ago, the Ryan-Murray budget deal makes a trade that most Republicans would likely prefer not to make. It balances higher spending in the near term against longer-term reductions that, combined with increases in user fees, will reduce the deficit over ten years. But since promised future reductions can be reversed, Republicans are being asked to trade certain cuts today for uncertain cuts down the road.

Still, many Republicans might rationally choose to do so, for five reasons. First, the deal is microscopic, so small as to amount to economic rounding error. Second, it reduces government pensions by changing an indexing formula, a method that might have a better chance of sticking than more straightforward reductions, making these future cuts more certain than most. And if the new indexing continues forever, then spending will drop in the long run by much more than it will increase over the next two years. Third, if House Republicans pass this, it will reduce uncertainty and help the economy. Fourth (though this weakens the previous point some), the deal appears not to lift the debt limit, so they can play that game again if they want to. Finally, assuming that the debt-limit increase is not going to lead to another showdown next year, this deal allows Republicans to talk about Obamacare all next year.

For Democrats, who might prefer not to talk about Obamacare next year, and who wanted to increase unemployment-insurance benefits, it seems like a weak deal as well. Such is the fruit of bipartisan negotiation. Given the strong economic data over the past two months, many of them might choose to vote for it in the hope that policy stability will help bolster an already accelerating economy, allowing them to run on a strong economy next year.

There are many people in both parties who have to vote against this deal, but probably enough who don’t to allow it to pass.

— Kevin A. Hassett is director of economic-policy studies at the American Enterprise Institute.



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