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Archive for the ‘Paul Ryan’ Category

Congressman Paul Ryan, the Republican Chairman of the House Budget Committee, has unveiled the GOP’s latest budget plan.

Is this proposal deserving of applause or criticism? The answer is yes and yes, with a bit of emphasis on the former.

Let’s start with some depressing news. The Ryan budget has gotten weaker each year.

Three years ago, he put forth a budget that limited spending so that it grew 2.8 percent per year.

Two years ago, he put forth a budget that limited spending so that it grew 3.1 percent per year.

Last year, he put forth a budget that limited spending so that it grew 3.4 percent per year.

His latest budget continues this slide in the wrong direction. Here are the numbers from the new budget, showing that the burden of government spending will rise by an average of 3.5 percent annually over the next 10 years.

And this is during a time when inflation is projected to be about 2 percent per year!

Ryan FY2015 Budget

Since it would be foolish to ever expect perfection from the political process, let’s now look at the positive features of the Ryan budget.

1. Spending may be growing, but it would grow at a slower rate than the President’s proposed budget.

2. Spending may be growing, but it would grow at a slower rate than nominal economic output, thus satisfying Mitchell’s Golden Rule.

3. Perhaps most important, the budget contains genuine and structural reform of both Medicare and Medicaid, so it at least partially solves the long-run fiscal crisis.

4. The budget also foresees tax reform, including lower tax rates for households, a 25 percent corporate tax rate, and a move toward territorial taxation.

Now let’s close with some hard-to-judge news.

The tax reform would be “revenue neutral,” so it’s difficult to accurately assess the proposal without knowing the “revenue raisers” that would offset the “revenue losers” listed above (particularly since lawmakers would be bound by static scoring).

If lower tax rates are financed by getting rid of distortions such as the healthcare exclusion, the net effect is very positive.

But if lower tax rates are financed with increased double taxation (a major shortcoming of the Cong. Camp tax plan), then it’s unclear whether policy has improved.

One final comment. I’m disappointed that the House Budget Committee’s report approvingly cites Congressional Budget Office analysis to suggest that the Ryan budget would boost economic performance.

I think that’s a tactically and morally dubious approach. It’s tactically misguided because the Ryan budget supposedly hurts growth from 2015-2017 according to CBO’s short-term Keynesianism.

And it’s morally dubious because it’s wrong to use bad arguments to advance good policy. The supposed added growth beginning in 2018 is based on the assumption that interest rates are the significant determinant of economic growth – which is the same thinking displayed in the left-wing debt video I shared yesterday.

Paul Ryan and the House GOP can legitimately claim that the proposed budget is good for growth. But improved economic performance would be the result of a smaller burden of government spending and a potentially less destructive tax system. Those are the policies that free up labor and capital for the productive sector and boost incentives to utilize those resources efficiently.

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How Disappointing, but how predictable.

Politicians approved legislation in 2011 that was supposed to impose a modest bit of spending restraint over the next 10 years.

It wasn’t much. The enforcement mechanism, known as sequestration, merely was supposed to guarantee that spending climbed by $2.3 trillion rather than $2.4 trillion over the 10-year period.

But something is better than nothing, and the sequester that took place this year was a bitter defeat for President Obama and other advocates of bigger government.

And it also provided comic relief as the White House engaged in hysterical rhetoric in an attempt to scare people about sequestration.

But now there’s a deal to weaken the sequester and allow more government spending over the next two years. Hatched by Paul Ryan, the Republican Chairman of the House Budget Committee, and Patty Murray, the Democrat Chairwoman of the Senate Budget Committee, the most important takeaway is that the agreement will increase spending caps by $63 billion over the next two years.

This chart shows what will happen.

Murray-Ryan Budget Deal

The second most important thing to understand is that the Murray-Ryan deal contains several tax hikes. But since politicians can’t resist prevaricating, these provisions are being referred to as “user fees” and “offsetting receipts.”

The most outrageous tax hike is the added levy on airline travel. Honest people call this an increase in the ticket tax. The folks in Washington call it an “Aviation security service fee.”

There’s also a tax hike on private pension plans, as well as additional taxes (oops, I mean “user fees”) on trade.

You also won’t be surprised to learn that the so-called spending cuts in the agreement are mostly fluff and gimmicks.

The Treasury Department and Justice Department have been told not to spend “unobligated balances” in their forfeiture funds, but that was money they presumably weren’t going to spend anyway.

States, meanwhile, have been told they have to pay part of the cost of managing mineral leases on federal lands within their borders. Maybe someone can explain to me why payments from state governments to Washington count as a budget cuts.

And the agreement also assumes that Washington will do a better job of policing fraud in areas such as unemployment insurance and illegal utilization of handouts by prisoners. Those would be positive developments, to be sure, but one has to wonder why they weren’t enforcing those laws already.

By the way, the aforementioned tax hikes and make-believe spending cuts are supposed to generate “savings” over 10 years that will “offset” the higher spending that will occur in 2014 and 2015.

Needless to say, it’s goes without saying that all the new spending will take place in 2014 and 2015. But I wouldn’t hold my breath for alleged savings that are supposed to take effect in the following years.

Simply stated, the ink won’t even be dry on this agreement before the lobbyists, politicians, bureaucrats, and interest groups that control Washington start maneuvering to bust the spending caps and weaken the sequester next year. And the following year. And the year after that. And…well, you can fill in the blanks.

So what’s the bottom line?

Well, it’s clearly a big disappointment that Congressman Paul Ryan engineered this turkey of a deal rather than fighting for the sequester. Heck, this was the guy who put together very good entitlement reforms, yet now he’s helping Obama escape the sequester?

To be fair, folks on the Hill have told me that Ryan didn’t have much leverage because several Republicans indicated that they wouldn’t vote to comply with the sequester spending levels.

But if that’s the case, he should have at least forced a vote so the American people could see which GOP politicians are wobbly on the critical issue of restraining Leviathan.

To close on a somewhat optimistic note, it does appear that all the new spending is confined to 2014 and 2015. So if the spending caps are preserved for subsequent years, then it’s possible that the long-run trend line of government spending is unaffected.

That would be a good outcome. Not because the long-run trends are positive (if you look at the long-run data, we’re screwed), but because at least they wouldn’t have made a bad situation even worse.

If you want to damn the Murray-Ryan plan with faint praise, you could say it’s not nearly as bad as the read-my-lips deal of George H.W. Bush. That’s certainly true, but the sequester would be a much better outcome.

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There’s a saying in the sports world about how last-minute comebacks are examples of “snatching victory from the jaws of defeat.”

I don’t like that phrase because it reminds me of the painful way my beloved Georgia Bulldogs were defeated a couple of weeks ago by Auburn.

But I also don’t like the saying because it describes what Obama and other advocates of big government must be thinking now that Republicans apparently are about to do the opposite and “snatch defeat from the jaws of victory.”

More specifically, the GOP appears willing to give away the sequester’s real and meaningful spending restraint and replace that fiscal discipline with a package of gimmicks and new revenues.

I warned last month that something bad might happen to the sequester, but even a pessimist like me didn’t envision such a big defeat for fiscal responsibility.

You may be thinking to yourself that even the “stupid party” couldn’t be foolish enough to save Obama from his biggest defeat, but check out these excerpts from a Wall Street Journal report.

Sen. Patty Murray (D., Wash.) and Rep. Paul Ryan (R., Wis.), chief negotiators for their parties, are closing in on a deal… At issue are efforts to craft a compromise that would ease across-the-board spending cuts due to take effect in January, known as the sequester, and replace them with a mix of increased fees and cuts in mandatory spending programs.

But the supposed cuts wouldn’t include any genuine entitlement reform. And there would be back-door tax hikes.

Officials familiar with the talks say negotiators are stitching together a package of offsets to the planned sequester cuts that would include none of the major cuts in Medicare or other entitlement programs that Mr. Ryan has wanted… Instead, it would include more targeted and arcane measures, such as increased fees for airport-security and federal guarantees of private pensions.

But the package may get even worse before the ink is dry.

Democrats on Thursday stepped up their demands in advance of the closing days of negotiations between Ms. Murray and Mr. Ryan. House Democratic Leader Nancy Pelosi (D., Calif.) brought a fresh demand to the table by saying she wouldn’t support any budget deal unless in included or was accompanied by an agreement to renew expanded unemployment benefits that expire before the end of the year—which would be a major threat to any deal.

Gee, wouldn’t that be wonderful. Not only may GOPers surrender the sequester and acquiesce to some tax hikes, but they might also condemn unemployed people to further joblessness and despair.

That’s even worse than the part of the plan that would increase taxes on airline travel to further subsidize the Keystone Cops of the TSA.

But look at the bright side…at least for DC insiders. If the sequester is gutted, that will be a big victory for lobbyists. That means they’ll get larger bonuses, which means their kids will have even more presents under the Christmas tree.

As for the rest of the nation? Well, you can’t make an omelet without scrambling a few eggs.

P.S. I suppose we should consider ourselves lucky that this looming agreement isn’t as bad as some past budget deals, such as the read-my-lips fiasco of 1990.

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There’s a joke in Washington that Democrats are the evil party and Republicans are the stupid party.

Except this joke isn’t very funny since a lot of bad policy occurs when gullible GOPers get lured into “bipartisan” deals that expand government. Consider, for example, all the tax-hiking budget deals – such as the “read my lips” capitulation of the first President Bush – that enable more spending.

To be fair, sometimes Republicans are placed in a no-win situation. During the “fiscal cliff” discussions last year, Obama held the upper hand since he would get a huge automatic tax hike if nothing happened. So the final agreement, which resulted in a smaller tax increase, was actually better (or, to be more accurate, less worse) than I was expecting.

But in other cases, Republicans should prevail because they have the stronger hand. That’s the situation we’re in today with the automatic spending cuts known as sequestration.

The sequester, which resulted from the 2011 debt-limit fight, was an unambiguous defeat for Obama and a significant victory for advocates of smaller government. And it was a defeat for all the lobbyists, special interests, and crony capitalists that get rich when there’s more money in Washington.

Though I don’t want to exaggerate. The “cuts” merely reduce the projected growth of federal spending.

But after years of unconstrained spending by both Bush and Obama, any fiscal restraint is a welcome development. Indeed, the sequester helps to explain why we’ve seen two consecutive years of lower spending in Washington for the first time since the 1950s.

No wonder Obama is desperate to cancel sequestration, even to the point of making himself a laughingstock to cartoonists.

But maybe Obama will have the last laugh because some Republicans are negotiating with Democrats to undo some of the benefits of sequestration. Here are some excerpts from a Politico report.

…an agreement may not be so elusive after all. Hopes are growing that Ryan and Murray could reach a narrow deal to replace a portion of the automatic spending cuts known as sequestration, according to lawmakers and senior aides involved in the discussions. …On Tuesday, several key lawmakers and aides said there was about a 50-50 chance, if not better, that a small deal could be reached — a much better prognosis than many had anticipated. Murray said in an interview Tuesday that she’s in “very good conversations” with Ryan. “The goal here is to replace sequestration with responsible spending cuts and revenue,” Murray said.

I shudder to think what Senator Murray means by “responsible spending cuts.” Presumably gimmicks.

But we don’t need a vivid imagination to know what she means by “revenue.” The real question is why Republicans would be willing to “feed the beast” with more revenue, particularly when it means eviscerating the genuine spending restraint imposed by sequestration.

It even appears as if Republicans are willing to increase unemployment as part of a bad deal.

House and Senate appropriators are putting major pressure on Murray and Ryan… Revenue raisers being discussed include increased Transportation Security Administration fees… As an extra bargaining chip, Republicans would consider including an extension of extended unemployment benefits, which expire on Dec. 28. …Murray has made clear she won’t agree to any structural changes to Medicare or Social Security, particularly without significant revenue increases.

So let’s summarize this issue.

Current law is the sequester, which is a big victory.

The big spenders understandably want to eliminate or weaken the sequester, and would be especially happy to get more revenue coming to Washington.

Paul Ryan and the other Republican negotiators have the upper hand since the sequester continues if there’s no agreement.

So we have to ask ourselves why GOPers are even bothering to negotiate. There are two possible answers.

1. The “stupid party” joke actually is an accurate assessment of mental ability and Republicans are easy to trick because of their developmental challenges.

2. Republicans pretend to be fiscal conservatives when talking to voters but secretly want to enable more spending by sabotaging the sequester.

I’m actually being a bit unfair. What’s really happening is that there are divisions inside the GOP. A majority of the Republican caucus presumably understands that they hold a winning hand and they’re content to maintain current law and let the sequester continue.

But the Republicans on the Appropriations Committee tend to dislike the sequester since it reduces their ability to spend other people’s money in exchange for political support.

They correctly complain that America’s main fiscal problem is entitlement spending, so you can understand why they’re a bit irked that their programs are being restrained while boondoggles such as Obamacare are putting us deeper in a fiscal hole.

But that’s not an argument to waste money on so-called discretionary programs. Moreover, the appropriators are wildly wrong when they assert that appropriations spending already has been “cut to the bone.”

There are also some hawks who accurately complain that defense spending incurs a disproportionate share of the sequester, but they are wrong when they say this endangers national security. After all, defense spending still grows under sequestration and America will still account for nearly 50 percent of the world’s military spending.

So what’s the bottom line?

In an ideal world, policy makers would focus first on desperately needed entitlement reform. And I suspect many members of the Appropriations and Defense Committees would grumble a lot less about restraints on discretionary spending if real structural reforms to so-called mandatory programs were being implemented.

But we don’t live in that world. The sad reality of Washington is that genuine entitlement reform won’t happen with Obama in the White House. But that’s not an argument for surrendering on sequestration and allowing discretionary spending to climb at a faster rate.

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It can be very frustrating to work at the Cato Institute and fight for small government.

Consider what’s happened the past couple of days.

Congressman Paul Ryan introduces a budget and I dig through the numbers with a sense of disappointment because government spending will grow by an average of 3.4 percent annually, much faster than needed to keep pace with inflation.

But I don’t even want government to grow as fast as inflation. I want to reduce the size and scope of the federal government.

“Can’t they shut down even one department?”

I want to shut down useless and counterproductive parts of Leviathan, including the Department of Housing and Urban Development, the Department of Education, the Department of Energy, the Department of Transportation, the Department of Agriculture, etc, etc…

I want to restore limited and constitutional government, which we had for much of our nation’s history, with the burden of federal spending consuming only about 3 percent of economic output.

So I look at the Ryan budget in the same way I look at sequestration – as a very modest step to curtail the growth of government. Sort of a rear-guard action to stem the bleeding and stabilize the patient.

But, to be colloquial, it sure ain’t libertarian Nirvana (though, to be fair, the reforms to Medicare and Medicaid are admirable and stem in part from the work of Cato’s healthcare experts).

But my frustration doesn’t exist merely because the Ryan budget is just a small step.

I also have to deal with the surreal experience of reading critics who assert that the Ryan budget is a cut-to-the-bone, harsh, draconian, dog-eat-dog, laissez-faire fiscal roadmap.

If only!

To get an idea of why this rhetoric is so over-the-top hysterical, here’s a chart showing how fast government spending is supposed to grow under the Ryan budget, compared to how fast it grew during the Clinton years and how fast it has been growing during the Bush-Obama years.

Ryan Clinton vs Bush Obama

I vaguely remember taking the SAT test in high school and dealing with questions entitled, “One of these things is not like the others.”

Well, I would have received a perfect score if asked to identify the outlier on this chart.

Bush and Obama have been irresponsible big spenders, while Clinton was comparatively frugal.

And all Paul Ryan is proposing is that we emulate the policy of the Clinton years.

Now ask yourself whether the economy was more robust during the Clinton years or the Bush-Obama years and think about what that implies for what we should do today about the federal budget.

At the very least, we should be copying what those “radical” Canadians and other have done, which is to impose some genuine restraint of government spending.

The Swiss debt brake, which is really a spending cap, might be a good place to start.

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Sigh. Even when they’re sort of doing the right thing, Republicans are incapable of using the right argument.

Paul Ryan, Chairman of the House Budget Committee, has unveiled his proposed budget and he and other Republicans are bragging that the plan will balance the budget in 10 years.

That’s all fine and well, but good fiscal policy is achieved by reducing the burden of government spending, and that means that restraining the budget so that federal outlays grow slower than the private sector.

It’s good to balance the budget, of course, but that should be a secondary goal.

Now for the good news. The Ryan Budget does satisfy the Golden Rule of fiscal policy. As you can see in the chart, federal spending grows by an average of 3.4 percent annual, and that modest bit of fiscal discipline is enough to reduce the burden of government spending to 19.1 percent of economic output by 2023.

Ryan FY2014 Budget

It’s also good news that the Ryan Budget calls for structural reform of entitlement programs, including Medicaid block grants and Medicare premium support. The budget also assumes the repeal of the costly Obamacare program.

And there’s also some good tax policy. Not bold tax reform like a flat tax, but top tax rates would be reduced to 25 percent and many forms of double taxation like the death tax and capital gains tax presumably would be reduced or eliminated.

Let’s be clear, though, that this is not a libertarian budget. Federal spending will still be far too high. Indeed, the budget will consume a larger share of the economy than it did when Bill Clinton left office.

And while Republicans do a good job of restraining spending in the first couple of years of the new Ryan Budget, outlays rise far too rapidly beginning around 2016.

Moreover, there’s no Social Security reform.

Equally worrisome, the budget assumes that the federal tax burden should remain about 19 percent of GDP, higher than the long-run average of 18 percent of GDP and – for all intents and purposes – permanently enshrining Obama’s fiscal cliff victory.

And it’s depressing to see that the Ryan budget has gotten weaker each year.

At this rate, it won’t be that long before the GOP budget and Obama budget converge.

Okay, that’s an exaggeration. But the moral of the story is that the Ryan Budget is a step in the right direction, but much more will be needed to restore limited, constitutional government.

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When I give speeches about entitlement reform, I often make the point that there’s nothing radical about Paul Ryan’s plan to reform Medicare.

Spending will go up, for instance, not down. And the reforms only affect people under age 55. This is evolutionary change, not revolutionary change.

But my main example is that future seniors, for all intents and purposes, will have a health plan similar to what’s now available for Members of Congress. Not only the politicians, but also their staff and the entire federal bureaucracy.

I’m not the only one to think this is a powerful point. Here are a couple of passages from Deroy Murdock’s National Review column on the topic.

The Medicare-reform proposal of presumptive GOP running-mate Paul Ryan is precisely as extreme as the health plan available today to every member of Congress. Ryan envisions average seniors’ being able to enjoy Capitol Hill–style medical options. This itself, however, would be a choice. Seniors who oppose choice in health coverage will be 100 percent welcome to remain within traditional Medicare. …Wyden-Ryan mirrors the way federal legislators buy health insurance. As FactCheck.org’s Brooks Jackson notes, “House and Senate members are allowed to purchase private health insurance offered through the Federal Employees Health Benefits Program, which covers more than 8 million other federal employees, retirees and their families.” …As FactCheck.org, elaborates, “All plans cover hospital, surgical and physician services, and mental health services, prescription drugs and ‘catastrophic’ coverage against very large medical expenses . . . There are no exclusions for preexisting conditions.” Participants may change plans during annual “open season” periods. Also, the government pays 72 percent of the average worker’s premium, with a maximum of 75 percent. Democrats cannot explain why Medicare recipients need to become congressmen to enjoy such choices in health coverage. If Ryancare, in essence, is good enough for senior citizens like Nancy Pelosi and Harry Reid, it’s good enough for any senior who wants it after 2022.

Deroy’s column shows how supporters of entitlement reform can counter some of the left’s demagoguery.

He’s making a point about political salesmanship, but it’s also important to understand why Medicare modernization is good healthcare policy.

Simply stated, the main healthcare problem in America is the third-party payer crisis. As explained in this video, markets are dysfunctional when government programs and other forms of intervention create a system where 89 cents out of every healthcare dollar is paid for by somebody other than the consumer.

Ryan’s Medicare reform doesn’t directly address this problem, just as block-granting Medicaid and reforming the tax system don’t automatically restore a market-based approach.

But if a sufficient share of future seniors use their premium support vouchers to buy high-deductible catastrophic insurance policies (which presumably will be the smart approach), then a growing share of routine medical expenses will be purchased directly by consumers – thus slowly but surely returning market forces to healthcare.

So I fully agree with Deroy that there are smart ways to promote the Ryan Medicare reforms. But I also want people to understand what it is that we want to accomplish.

I elaborate in my video on Congressman Ryan’s proposed Medicare reform.

Last but not least, check out this chart and you’ll begin to understand the potential benefits of fixing the third-party payer problem.

P.S. The current version of the Ryan plan, now known as Ryan-Wyden, is not as good as the original version because it keeps the current Medicare system as an option.

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Even though I’ve already made clear that I am less-than-overwhelmed by the thought of Mitt Romney in the White House, I worry that people will become to think I’m a GOP toady.

That’s because I’ve been spending a lot of time providing favorable analysis and commentary on the relative merits of the Ryan budget (particularly proposed reforms to Medicare and Medicaid) compared to President Obama’s statist agenda of class warfare and bigger government.

I’ve already done a couple of TV interviews on Ryanomics vs Obamanomics and the Wall Street Journal this morning published my column explaining the key features of the Ryan budget.

Here are some highlights. In one of my early paragraphs, I give Ryan credit for steering the GOP back in the right direction after the fiscal recklessness of the Bush years.

…the era of bipartisan big government may have come to an end. Largely thanks to Rep. Paul Ryan and the fiscal blueprint he prepared as chairman of the House Budget Committee earlier this year, the GOP has begun climbing back on the wagon of fiscal sobriety and has shown at least some willingness to restrain the growth of government.

I probably should have also credited the Tea Party, but I’ll try to make up for that omission in the future.

These next couple of sentences are the main point of my column.

The most important headline about the Ryan budget is that it limits the growth rate of federal spending, with outlays increasing by an average of 3.1% annually over the next 10 years. …limiting spending so it grows by 3.1% per year, as Mr. Ryan proposes, quickly leads to less red ink. This is because federal tax revenues are projected by the House Budget Committee to increase 6.6% annually over the next 10 years if the House budget is approved (and this assumes the Bush tax cuts are made permanent).

Some conservatives complain that the Ryan budget doesn’t balance the budget in 10 years. I explain how that could happen, but I then emphasize that what really matters is shrinking the burden of government spending.

To balance the budget within 10 years would require that outlays grow by about 2% each year. …There are many who would prefer that the deficit come down more quickly, but from a jobs and growth perspective, it isn’t the deficit that matters. Rather, what matters for prosperity and living standards is the degree to which labor and capital are used productively. This is why policy makers should focus on reducing the burden of government spending as a share of GDP—leaving more resources in the private economy. The simple way of making this happen is to follow what I’ve been calling the golden rule of good fiscal policy: The private sector should grow faster than the government.

Actually, I’ve been calling it Mitchell’s Golden Rule, but I couldn’t bring myself to be that narcissistic and self-aggrandizing on the nation’s most important and influential editorial page.

One final point from the column that’s worth emphasizing is that Ryan does the right kind of entitlement reform.

One of the best features of the Ryan budget is that he reforms the two big health entitlements instead of simply trying to save money. Medicaid gets block-granted to the states, building on the success of welfare reform in the 1990s. And Medicare is modernized by creating a premium-support option for people retiring in 2022 and beyond. This is much better than the traditional Beltway approach of trying to save money with price controls on health-care providers and means testing on health-care consumers. …But good entitlement policy also is a godsend for taxpayers, particularly in the long run. Without reform, the burden of federal spending will jump to 35% of GDP by 2040, compared to 18.75% of output under the Ryan budget.

The last sentence of the excerpt is critical. If the Golden Rule of fiscal policy is to have the private sector grow faster than government, then the Golden Goal is to reduce government spending as a share of GDP.

I’ve commented before how America will become Greece in the absence of reform. Well, that’s basically the Obama fiscal plan, as illustrated by this amusing cartoon.

What makes the Ryan budget so impressive is that it includes the reforms that are needed to avoid this fate.

No, it doesn’t bring the federal government back down to 3 percent of GDP, so it’s not libertarian Nirvana.

But we manage to stay out of fiscal hell, so that counts for something.

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While most people in Washington are focused on the political implications of adding Paul Ryan to the GOP ticket, my only concern is trying to limit the size and scope of government so we can enjoy more freedom and prosperity.

In this debate for PBS, I explain that the Ryan budget would boost the economy – but only if Republicans actually followed through on their rhetoric and did the right thing after obtaining power.

A few comments on the debate. I channel the wisdom of Mitchell’s Golden Rule by saying the most important goal is restraining the growth of federal spending.

I fully agree with Jared that the GOP economic plans won’t work if Republicans get squeamish about doing what’s best for America. If Romney wins, and does a repeat of the statist Bush years, the GOP will deserve to be cast out of power for decades.

At the end of our interview, I obviously disagreed with Jared’s embrace of the Keynesian fantasy that more government spending magically increases growth. If I was feeling mean, I could have pointed out that he was the co-author of the infamous report claiming that Obama’s so-called stimulus would keep unemployment below 8 percent.

I also appeared on Bloomberg TV to comment on Ryan’s economic plan.

It won’t surprise regular readers of this blog that I emphasized the importance of restraining the growth of government so that the burden of the public sector shrinks as a share of overall economic output.

In my second soundbite, I make a simple point about the Laffer Curve. As we saw in the 1980s, lower tax rates don’t automatically mean lower tax revenues.

I also point out the similarities between what Paul Ryan is proposing today with what was achieved in the 1990s during the Clinton Administration.

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The honest answer is that it probably means nothing. I don’t think there’s been an election in my lifetime that was impacted by the second person on a presidential ticket.

And a quick look at Intrade.com shows that Ryan’s selection hasn’t (at least yet) moved the needle. Obama is still in the high 50s.

Moreover, the person who becomes Vice President usually plays only a minor role in Administration policy.

With those caveats out of the way, the Ryan pick is mostly good news.

Here are the reasons why I’m happy.

Here are two reasons why I’m worried.

  • Both Romney and Ryan are somewhat sympathetic to a value-added tax. My worst-case scenario is they win the election, but then can’t get a good budget approved because of some squishy Republican senators who put self interest above national interest. Romney and Ryan then decide that this European-style national sales tax is the only way – on paper – of making the budget balance. In reality, of course, we’ll suffer the same fate as Europe since the VAT revenues will be used to finance ever-larger government.
  • Ryan has some very bad votes in his past, including support for TARP, the auto bailout, the no-bureaucrat-left-behind education legislation, and the reckless Medicare prescription drug entitlement. Everyone says to ignore those votes because Ryan knew he was voting the wrong way, but if he’s already made some deliberately bad decisions for political reasons, what’s to stop him from making more deliberately bad decisions for political reasons?

But as I said above, don’t read too much into Ryan’s selection. if Republicans win, Romney will be the one calling the shots.

Though this does give Ryan a big advantage the next time there’s an open contest for the GOP nomination – either 2016 or 2020.

P.S. I suspect putting Ryan on the ticket will shift Wisconsin into the GOP column. Based on my last prediction, that would be enough to defeat Obama. But I’ll have to contemplate whether the pick hurts Romney’s chances in another state. You’ll have to wait until September 6 for my updated election prediction.

P.P.S. For those who care about politics, some are saying that selecting Ryan was risky because it gives Obama and his allies an opportunity to demagogue the GOP ticket about entitlement reform. I disagree. Even if Romney picked Nancy Pelosi, that demagoguery was going to happen. Heck, they’ve already accused Romney of causing a woman’s death, so I hardly think they’ll be bashful about throwing around other accusations.

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