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What would Republicans do for the economy? An interview with Rep. Paul Ryan.

ryanoneconomy.jpg.JPGPaul Ryan is the ranking Republican on the House Budget Committee, and one of the party's most influential voices on the economy. And with Republicans likely to pick up a lot of seats -- and maybe even the House -- in the upcoming election, he's soon to be one of the nation's most influential voices on economic policy. So I called him to ask what, exactly, he'd like to see done. This transcript is edited for length and clarity. For the Democratic perspective, see the interview I did last week with Sen. Kent Conrad.

Ezra Klein: It’s clear now that there’ll be no more deficit-financed stimulus coming out of Congress. And Republicans, of course, could well take the House in the next election. So with unemployment still near 10 percent, what does the GOP want to do? If stimulus isn’t the solution, what is?

Paul Ryan: I know uncertainty is a new economic buzzword, but for good reason: If we can reduce it, we’ll unlock capital. I’d revisit some of the major issues over the last year. Health care, energy, taxes, financial regulation. I’m not saying these aren’t important issues. We need to reform the health-care system. But these are the wrong solutions. I would advance different solutions with an eye toward international competitiveness and encouraging saving and investing and encouraging certainty.

Then there’s our borrowing. If you look at the deficit, the problem is spending, not taxes. Revenues will come back up. At the end of the day, I’m not a Keynesian, but even Keynesians would agree that raising taxes in this economy is a bad idea. So if it’s helpful for me to concede to that section of Keynesian doctrine, fine. Let’s do that. I really do believe that locking in budget reforms and spending control will help us in the short run by taking pressure off interest rates and monetary policy. Spending control is pro-growth in this age of sovereign debt crises.

But even putting aside the question of whether these are good or bad policies, starting over would take a long time. Repeal would be difficult. Passing something new would be difficult. Congress, as you know better than me, is a slow beast. So doesn’t that leave a lot of uncertainty in the interim? And what about the short term? What can be done now?

I understand that. But an announced policy shift is a quick thing that would change expectations. If you had regulatory forbearance in the credit markets, that would be a quick thing. If the Obama guys said there’ll be no tax increases for two years, it would make a big difference fast. Look at the original [Christina] Romer-[David] Romer paper. She’d agree this is not the time to raise taxes. I think a mistake Keynesians are making is they think this is demand-side and consumption-led. I think we need to focus on investment and jobs. There’s lots of money sitting on the sidelines.

Romer herself, however, thinks this is a problem of aggregate demand. The National Federation of Independent Business’s surveys have shown the main concern of their member businesses is that they’re not going to have customers for their products. So do Republicans have any demand-side solutions, even if they’re just tax cuts? Is there talk of a payroll tax holiday, or anything similar?

There are some who do. Where I come from, I think certainty and long-term solutions are better. Temporary stuff doesn’t work. These short-term stimulative things like rebates don’t work. They’ll pump up some money in the quarter where they occur. You go right back where you were. These short-term stimuli, which Bush and Obama did, don’t change aggregate demand. And that’s why I think we need more of an investment-led recovery. At this point, given the borrowing costs, stimulus is counterproductive.

But we do also have short-term problems. So let’s say that in a stunning performance, Republicans capture the House, the Senate and the presidency in 2010. The election is such a staggering repudiation of Democratic policies that Barack Obama and Joe Biden both resign. What’s the first move?

The move is get spending under control, actually pass a budget, prevent tax increases from hitting the economy, and set the conditions for growth in all these sectors. And I really do believe FinReg was a mistake. I think it’ll end up restricting credit. That’s bad. We need credit.

Then let’s talk about taxes. Republicans want an extension of the Bush tax cuts. And many don’t want to pay for it. But they also say our borrowing is a major problem. I know you’ve got your spending roadmap, but if you need to, how do you decide between those priorities?

I wouldn’t say that every tax cut pays for itself. It depends on the tax. I would say that you cannot reduce the deficit with a sinking economy. The better way, in my mind, is to grow the economy as quickly as possible and control and slow spending. So keep taxes low, maximize growth and cut spending. I just don’t see government spending as a key to growth. The budget I wrote last year cut $4.8 trillion of spending out of the baseline, so I cut spending by more than the tax cuts cost. So I’ve put my money where my mouth is.

But you aside, it doesn’t look like that’ll be the choice. So what if you have to choose between more tax cuts and lowering the debt?

You said we had the White House and Congress! If we get that, I’m cutting spending and keeping taxes low.

I’ll predict now that even if you get that, we’re not going to see Ryan-esque spending cuts coming from the Republican Party.

You’ll see a big fight. That’s for sure.

Do you worry that even if you got your spending cuts, the American economy will suffer? A report released by the National League of Cities, the National Association of Counties and United States Conference of Mayors said they’ll have to lay off 500,000 people in the next few years if they don’t get some fiscal relief. That’s 500,000 people on the unemployment rolls.

I’ve always believed we need automatic stabilizers. We need a safety net. But I think it’s becoming equally important to show we’re not going to borrow endlessly. I also think it’s a bad idea to bail out states from making the necessary decisions they need to make to increase and fix their structural deficit problems. All you’re doing then is putting their liabilities on the federal books. And I assume those jobs are mostly public sector jobs. If you focus on those, that money comes from the private sector. The money isn’t free. It’s being taken out of the private economy and pumped through the private sector. The right path is to keep the money in the private sector and so they have money to invest. We should focus on growth in the private sector, not growth in the public sector.

But part of the problem right now is that even when you put that money in private coffers, they’re not spending it. They’ve got a lot of capital on hand now, but they’re sitting on it. What gives you confidence that your path will work, when pretty good profits and stock prices right now aren’t working?

We need to do things to free up credit. We need regulatory forbearance there. Right now, the policymakers and regulators are doing opposite things. So you’re right that there’s a lot of capital parked out there, and we need to coax it out into the markets. I think literally that if we raised the federal funds rate by a point, it would help push money into the economy, as right now, the safest play is to stay with the federal money and federal paper.

And a lot of this is psychological. The people who have capital are sitting on their hands: I just talked to a guy who builds nurseries and canceled three construction projects next year because he just doesn’t know what’s happening. People are just too nervous, they don’t know what the economy will be, what the regulations will be, what the taxes will be, and to the extent you can increase certainty, you can unlock some of that credit.

To wrap this up, let me try and say this back to you so I’m sure I have it right: Your economic approach would be to repeal and replace the big legislation we’ve passed in the last year, make a long-term commitment to keep taxes low and cut federal spending, get regulators to ease up on the credit market, and generally focus on pulling the government back, as you believe that’ll leave space for private businesses to step forward.

That’s right, but let me clarify one thing: You said repeal and replace. You can say I’m offering more uncertainty by redoing these laws. I’m saying it’s the quality of these laws that’s the problem. Better solutions could’ve been passed. On FinReg, I’d do the Luigi Zingales stuff. On health care, you know what I’d do.

But to just push you on this one more time, even under the best circumstances, that will take a long time. What Congress produces won’t be what’s in your white papers. So best-case scenario: Replacing them takes awhile, and there’s going to be natural uncertainty as banks, for instance, now have to wait to see what the new rules will be on them. And so what do you do in the interim to unlock this capital?

If Nancy Pelosi came to me and said I’ve been wrong, you’re right, what do you want to do immediately, we could put caps on spending, maybe make a good dent on future spending through the [fiscal] commission, and extend the tax cuts two years. That, in and of itself, would really help the economy.

Update: There's been some criticism of Ryan's suggestion that we should increase the federal funds rate to push capital out into the private sector, so I asked Ryan if he'd like to expand on the point. Here's his reply:

“Of course I do not think increasing the federal funds rate is what one does to spur immediate economic growth. But I do think we need to understand that the extremely accommodative monetary policy we have had for the past two years is not risk free. Observers like Kansas City Fed President Tom Hoening have made the case for a modest increase in the federal funds rate to send signals of monetary credibility, get back to normalcy and ward off speculative behavior (i.e., the next bubble). (More from Hoening [pdf]).

Also – I’m not convinced – but intrigued – with the debate over the carry trade that is going on right now. What I mean by that is banks can borrow at essentially no cost from the Fed, plow the money back into no-risk Treasury securities, and earn that modest spread. This dynamic, while obviously helping banks recapitalize, could be curbing capital deployment in the private sector.

I'm intrigued – but not convinced – by this argument. I appreciate the opportunity to fully explain my point.”

Photo credit: By Joshua Roberts/Bloomberg

By Ezra Klein  |  July 29, 2010; 4:41 PM ET
Categories:  Economic Policy , Economy , Interviews  
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Comments

So now they're down to "extend the tax cuts two more years?" Doesn't that produce uncertainty since they aren't permanent?

Ryan, being the budget wonk that he is, should provide some data to back up his claims that the private sector will step up if the government eases up on them. Weren't we easy on them during the entire Bush presidency? Why didn't we have a booming economy?

I'd also like to hear some analysis of his suggestion to raise interest rates 1% in a time of near deflation.

Posted by: mschol17 | July 29, 2010 4:53 PM | Report abuse

GREAT first followup question. What better way to create certainty for business than by revisiting the legislative enactments of the past 2 years and changing everything once again.

Posted by: simpleton1 | July 29, 2010 4:54 PM | Report abuse

So, he's got nothing, then. Right.

Posted by: JkR- | July 29, 2010 4:56 PM | Report abuse

What does he mean that "given the borrowing costs, stimulus is counter-productive?"

Aren't borrowing costs historically low right now?

Posted by: genericOnlineID | July 29, 2010 5:01 PM | Report abuse

This man is on to your game Ezra. Your side has failed.

Posted by: daveredhat | July 29, 2010 5:03 PM | Report abuse

How, exactly, do the Republicans even have a chance at "the presidency in 2010"? Even an impeachment and conviction of Obama leaves Biden as President.

Posted by: clawrence12 | July 29, 2010 5:04 PM | Report abuse

In the hypothetical world where the GOP takes control of the presidency and both houses of Congress, he thinks there'd be a "big fight" over cutting spending?

Because that's what happened during the six years that the GOP did, in fact, control all three institutions?

Posted by: edwardlahoa | July 29, 2010 5:05 PM | Report abuse

So, in the short term extend the Bush tax cuts. In the long term reign in spending and repeal social programs. I'm pretty sure that was their prescription in the good times too.

Posted by: MosBen | July 29, 2010 5:06 PM | Report abuse

Paul Ryan is a joke. We have a high-tech economy and he's talking about building nurseries.

Posted by: mdg1111 | July 29, 2010 5:06 PM | Report abuse

I'd like to see some specifics in what spending he'd cut. It's easy to say it, but we've seen how that goes in reality. Personally, I agree with the previous poster - he's got nothin'.

Posted by: Lizka | July 29, 2010 5:08 PM | Report abuse

how would raising the fed funds rate stimulate investment?

Posted by: jduptonma | July 29, 2010 5:11 PM | Report abuse

Lizka, here's the link to Rep. Ryan's proposed spending cuts (CBO estimated savings in excess of $4.8 trillion):

http://www.roadmap.republicans.budget.house.gov/Plan/

Ask and ye shall receive.

Posted by: clawrence12 | July 29, 2010 5:16 PM | Report abuse

MosBen, did you see my answer to your question on the Lunch Break thread?

Posted by: clawrence12 | July 29, 2010 5:22 PM | Report abuse

Today on my Twitter feed McCain said he was going to balance the budget by building and flying more F-35's or something like that.

Posted by: flounder2 | July 29, 2010 5:27 PM | Report abuse

Yeah - Ezra, I think you do a great job with these interviews, but I think you missed the key question this time. "What specific spending cuts?"

Too often, Republicans get away with promising vague spending cuts that would be popular in the abstract - but when you name specific programs you could cut that would actually affect the budget, no one is very happy. If Paul Ryan or any Republican is going to fix the economy with "spending cuts," they need to be specific and stand for their ideas.

Posted by: madjoy | July 29, 2010 5:29 PM | Report abuse

As Clwarence says, Ryan has actually laid out his spending program in detail, and we've talked through it in past interviews (to find them, click the "interviews" category on the left sidebar). Ryan's roadmap voucherizes Medicare and Medicaid and holds down their spending by making the vouchers increase at less than the cost of health care. So he's actually been specific on this point.

Posted by: Ezra Klein | July 29, 2010 5:34 PM | Report abuse

madjoy, since clicking on the link I provided seems too burdensome, some of the specifics include job re-training, requiring competitive bids, changes to existing law designed to hold down the tax burden on the economy, limiting it to 19% of GDP and completely eliminating the alternative minimum tax [AMT] / tax on savings, shifting toward a consumption tax for businesses, making it easier for U.S. businesses to invest and create more jobs in the U.S.

Feel free to actually read more yourself (including savings on healthcare and Social Security).

Posted by: clawrence12 | July 29, 2010 5:41 PM | Report abuse

@jduptonma:
"how would raising the fed funds rate stimulate investment?"
I think the concept is that right now they can get free 0% loans from the fed so why do anything. Make the fed loans cost something and banks will start looking to make money elsewhere.
.
Of course this also submarines the concept of lowering taxes in a skittish economy. People will just save the money and you don't get any economic benefit.
.
Unlike, say unemployment payments, food stamps and the other things the 'lazy' people life high on the hog on.

Posted by: rpixley220 | July 29, 2010 5:41 PM | Report abuse

@jduptonma:
"how would raising the fed funds rate stimulate investment?"
I think the concept is that right now they can get free 0% loans from the fed so why do anything. Make the fed loans cost something and banks will start looking to make money elsewhere.
.
Of course this also submarines the concept of lowering taxes in a skittish economy. People will just save the money and you don't get any economic benefit.
.
Unlike, say unemployment payments, food stamps and the other things the 'lazy' people life high on the hog on.

Posted by: rpixley220 | July 29, 2010 5:42 PM | Report abuse

Yes, clearly what this economy needs to succeed is more regulatory forbearance. I'm sure if allowed the freedom by strangulating government regulators, we'd see financial companies really push the innovation envelope on derivative schemes that could literally create money out of thin air, oil companies that could dig deep sea wells more quickly and for less money than anyone thinks possible, and health insurers could increase rates 25%-50% annually to help people understand the true high cost of the great healthcare America provides. Man, what could go wrong with that?

Posted by: horacemann | July 29, 2010 5:43 PM | Report abuse

"we could put caps on spending, maybe make a good dent on future spending through the [fiscal] commission, and extend the tax cuts two years. That, in and of itself, would really help the economy."

Caps on spending: done
Middle-class tax cuts extended: done
Catfood Commission: pending

so he's saying that extending the Bush tax cuts for the wealthiest 2% will "really help the economy."

#gopwonderboyfail

Posted by: andrewlong | July 29, 2010 5:49 PM | Report abuse

Of course! The rich would save us all; if only they could be certain we weren't going raise their taxes!

Same old, same old...

Posted by: mudlock | July 29, 2010 5:52 PM | Report abuse

Ezra, why didn't you ask the obvious question re: regulatory forbearance "Didn't regulatory forbearance allow the financial markets to melt down and start this disaster during the Bush years?" That wouldn't have been so hard to do....

Posted by: srw3 | July 29, 2010 5:53 PM | Report abuse

That story about promoting certainty is just nuts. The Republicans are saying they might want to make a bunch of vaguely defined changes if they get a large enough margin in the house and if they get a large enough margin in the senate. and if Obama agrees not to veto....if you ask me that sounds like a recipe for uncertainty....

Although the best bet for certainty probably would be a Republican takeover of the house. Not for the reasons Ryan says, but because things will deadlock to the extent that nothing will get done. The only real uncertainty then will be whether things escalate to the point the Republicans shut the government down.

Posted by: zosima | July 29, 2010 5:54 PM | Report abuse

The stock market INCREASED the last time the federal government shut down.

Posted by: clawrence12 | July 29, 2010 6:06 PM | Report abuse

He claims in a hypothetical where the Republicans have the White House and Congress that they'll cut spending and lower taxes. Didn't they have that from 2001 to 2007 with a much less obstructionist minority? How did that work out for the debt? + 3 or 4 trillion if I'm not mistaken.

Posted by: CEM1 | July 29, 2010 6:10 PM | Report abuse

Why doesn't Rep Ryan join the Democrats? Does he recognize that the CBO just said that the Democrats have greatly reduced the long-term deficit to completely manageable, IF Congress will stick to paygo from here onward? After three decades of Republicans blowing smoke? Making the accumulated debt much easier to pay off? What spending does he specifically want to reduce? He wants to cut $4.8 trillion out of what, and over what timeline?

Does Rep. Ryan want to retain universal health coverage, when he reforms the healthcare system? How will he maintain international competitiveness if he doesn't have universal healthcare? Aren't U.S. businesses flocking to other countries whose cheaper workers have universal healthcare?

If the financial industry is back to making big profits, why does he think there is uncertainty needing regulatory "forebearance"? A lot of this is "psychological"? Should we all go to Wall St. and hold their hands?

Posted by: Lee_A_Arnold | July 29, 2010 6:16 PM | Report abuse

I realize that's he's the best Republicans have got, but can we stop pretending that Ryan has a clue about what to do, or even about how to define the problem?

Posted by: steveandshelley | July 29, 2010 6:24 PM | Report abuse

No, CEM1, we didn't get the Senate until January 20, 2001 and then lost it when Jeffords jumped ship, from June 6, 2001 until January 3, 2003. I realize that Tom Daschle (D-SD) was forgettable; nice try though.

Posted by: clawrence12 | July 29, 2010 6:25 PM | Report abuse

steveandshelly, neither of you think that cutting $4.8 trillion would be a step in the right direction at least?

Posted by: clawrence12 | July 29, 2010 6:27 PM | Report abuse

That's Christina Romer and David Romer (her husband). Not Paul Romer.

Posted by: FosterBoondoggle | July 29, 2010 6:47 PM | Report abuse

I agree with one of the first responses: he has nothing. And Ryan is being pimped to us as one of the "bright ones" on the other side, similar to Megan McArdle. The problem is that when you scratch the surface, they really don't have any ideas other than the conservative meme of the past 30 years that's only helped the upper class.

Posted by: toshiaki | July 29, 2010 7:03 PM | Report abuse

Ezra, I wish you'd pushed him more on the effect of his proposed spending cuts rather than coming back repeatedly to "uncertainty." I know you've expounded in the past on the Draconian effects those cuts would have.

Posted by: sprung4 | July 29, 2010 7:35 PM | Report abuse

Thank you clawrence12. I stand corrected on the Senate during those 19 months.

The point of my argument still stands at approximately 95% strength after correction.

Posted by: CEM1 | July 29, 2010 8:36 PM | Report abuse

full marks to klein & ryan for a straightforward & substantive Q&A...

i bet this is typical of the high-minded exchanges that were prevalent in journolist

Posted by: mds123 | July 29, 2010 9:26 PM | Report abuse

Come on, Ezra. Challenge this nut ball.

Not just that his ideas won't make it through the sausage factory that is congress but that even if you give him the House, a Filibuster-proof Senate, and the White House, his ideas just WON'T work.

ANYONE talking about keeping the Bush tax cuts as a way to a better economy is a cynical moron.

And this guy is supposed to be the "policy wonk" of the Republican party...

Posted by: dplionis | July 29, 2010 9:34 PM | Report abuse

Thank you for running this interview in its entirety. Now we know how full of baloney the Republican Party is. When you are in a less polite mood, you could ask why the Repubicans had the White House, Senate and House from 2001 through 2008, and never attempted any of the medical or finacial reform they swear to believe in. They believe in swift demolition and slow--if ever-replacement. With what, we do not know. Can anyone ever believe these people again?

Posted by: ciocia1 | July 29, 2010 9:57 PM | Report abuse

Ryan seems to believe spending by the government is THE economic crisis, NOT a result of the economic crisis caused by Wall Street. We have high government spending because the housing bubble burst and 8 million people lost their jobs . Deficits are rising because people without jobs can't pay taxes.

When you mentioned the 500k public service jobs cut by states, Ryans says: ... "And I assume those jobs are mostly public sector jobs. If you focus on those, that money comes from the private sector. The money isn’t free. It’s being taken out of the private economy and pumped through the private sector."

Not true. There is no crowding out. Banks are sitting on 1.8 trillion dollars.

With present interest rates at roughly 2%, I wanted to hear Ryan explain why inflation adjusted interest payments of less than 2% are too high a price to pay to keep 500,000 police on the streets, teachers in classrooms and firefighters on call during the worst economic downturn since the Great Depression.

It's like 1937 all over again. Job killing deficit hawks strike again.

Posted by: gregw571 | July 30, 2010 2:18 AM | Report abuse

yeah that is true, major brands do give out free samples of their popular health products best place to check is http://bit.ly/9UAtgc send it to your friends

Posted by: whitney29 | July 30, 2010 4:33 AM | Report abuse

Ryan is correct, correct, correct. He understands the problem, and understands the people of the United States.

I wish his policies as stated in this article were the law of the land today.

And I hope to see them signed into law in a few years.

Posted by: MKS1 | July 30, 2010 8:07 AM | Report abuse

Ryan's 4.3 Billion in cuts has been the wet dream of the far right for years yet if given control of Congress would not be made into law. Why is the other big piece of the pie Defense never discussed by these right wing lords ? Ryan's policies would just screw the middle class and elderly but why are we surprised ? Ryan should have focused on this like he has done in the past and not be so deferential to this nutjob.

Posted by: Falmouth1 | July 30, 2010 9:42 AM | Report abuse

I'd really love to know how many of Ezra's questions he came up with himself, and how many were part of the JournOlist collaboration.

Posted by: HughAkston | July 30, 2010 9:47 AM | Report abuse

Ezra and clawrence, I do appreciate Ezra's previous interviews with Paul Ryan and I know he's been specific in the past. But the rhetoric in the last week (for which he's been getting a fair amount of publicity) has NOT focused on the specifics of the spending cuts. A lot of people don't know his history, and don't understand what the actual effects of his spending cuts will be on the economy. I still think a post titled "What would Republicans do for the economy?" which neglects the real effects of the spending cuts he proposes is a little disingenuous.

I guess it's not really Ezra's fault - because he has, in fact, covered Paul Ryan's specific plan in the past, and it's reasonable not to cover the same territory twice. I'm just taking out my frustration that the MSM tends to give out free passes and not press Republicans about their proposed "spending cuts" in general - and I feel like this interview, by not tackling it, helps feed into that for casual news readers.

Posted by: madjoy | July 30, 2010 10:27 AM | Report abuse

If the government is so weak that government spending doesn't touch economic growth, how come it's so powerful that even the slightest uncertainty about its behavior has such huge effects on business? Perhaps the uncertainty that keep business from investing isn't about the government but about the consumer? Nah.

Posted by: paul314 | July 30, 2010 10:52 AM | Report abuse

That is some of the most depressing crap I have ever seen - and he is supposed to be a smart Republican? We are screwed if these clowns capture the house... mind you we are screwed anyway what with Republicans attitude in the senate.

Posted by: lazza11 | July 30, 2010 10:52 AM | Report abuse

"Ryan is correct, correct, correct."

Saying it three times doesn't make it any more true. On the other hand, if you click your heels together while saying it, anything is possible.

Also, this:
"If Nancy Pelosi came to me and said I’ve been wrong, you’re right, what do you want to do immediately, we could put caps on spending, maybe make a good dent on future spending through the [fiscal] commission, and extend the tax cuts two years. That, in and of itself, would really help the economy."

made me laugh out loud. Is he really being serious here?

Posted by: slag | July 30, 2010 11:29 AM | Report abuse

Good interview, Ezra. To the liberals that attacked Ryan, what percentage of GDP should the Federal government consume, and what solution do they have to prevent insolvency in Social Security? I see a lot of mindless criticism, but no answers.

Posted by: LibertyTom | July 30, 2010 5:20 PM | Report abuse

Paul Ryan has more understanding of economics, public policy and just plain common sense in his fingernail than Obama will ever know. Our leader just swallowed whole the sophistry and leftwing formulary he was fed from his tutors and that (and an unimaginable vanity) is all that fills his incurious and shallow skull.

Daniels-Ryan for President-VP in 2012.

Posted by: blackmage | July 30, 2010 6:22 PM | Report abuse

"what solution do they have to prevent insolvency in Social Security?"

Social Security will not be insolvent for many many years even if we leave it alone, as is. But to put it on even more solid footing for years to come, once we're out of this recession, simply raising the cap at which people no longer pay into the system would do a lot. The cap is currently $106K or thereabouts. That could be raised (and I don't have the math tools to figure out how all this would look or how much it would have to be raised) a moderate amount and put Social Security on solid footing for years.

Posted by: kmgunder | July 30, 2010 7:40 PM | Report abuse

I'm late to this party, but when a politician says, "Cutting spending would get us out of this mess", I would love to ask what historical examples they point to for evidence.

Posted by: StevenDS | August 3, 2010 4:38 PM | Report abuse

I encourage readers to check out Dr. Paul Krugman's column appearing today in the New York Times. He titles it "The Flimflam Man." It's all about Rep. Paul Ryan's economic plan. It offers a great counterpoint to the flag waving at the Post and other publications about GOP economic philosophies. Here's an excerpt:

"One depressing aspect of American politics is the susceptibility of the political and media establishment to charlatans. You might have thought, given past experience, that D.C. insiders would be on their guard against conservatives with grandiose plans. But no: as long as someone on the right claims to have bold new proposals, he’s hailed as an innovative thinker. And nobody checks his arithmetic.

"Mr. Ryan has become the Republican Party’s poster child for new ideas thanks to his “Roadmap for America’s Future,” a plan for a major overhaul of federal spending and taxes. News media coverage has been overwhelmingly favorable; on Monday, The Washington Post put a glowing profile of Mr. Ryan on its front page, portraying him as the G.O.P.’s fiscal conscience. He’s often described with phrases like “intellectually audacious.”

"But it’s the audacity of dopes. Mr. Ryan isn’t offering fresh food for thought; he’s serving up leftovers from the 1990s, drenched in flimflam sauce.

"Mr. Ryan’s plan calls for steep cuts in both spending and taxes. He’d have you believe that the combined effect would be much lower budget deficits, and, according to that Washington Post report, he speaks about deficits “in apocalyptic terms.” And The Post also tells us that his plan would, indeed, sharply reduce the flow of red ink: “The Congressional Budget Office has estimated that Rep. Paul Ryan’s plan would cut the budget deficit in half by 2020.”

"But the budget office has done no such thing. At Mr. Ryan’s request, it produced an estimate of the budget effects of his proposed spending cuts — period. It didn’t address the revenue losses from his tax cuts.

"The nonpartisan Tax Policy Center has, however, stepped into the breach. Its numbers indicate that the Ryan plan would reduce revenue by almost $4 trillion over the next decade. If you add these revenue losses to the numbers The Post cites, you get a much larger deficit in 2020, roughly $1.3 trillion.

"And that’s about the same as the budget office’s estimate of the 2020 deficit under the Obama administration’s plans. That is, Mr. Ryan may speak about the deficit in apocalyptic terms, but even if you believe that his proposed spending cuts are feasible — which you shouldn’t — the Roadmap wouldn’t reduce the deficit. All it would do is cut benefits for the middle class while slashing taxes on the rich...."

Reading about Ryan's plan reminds me of Newt Gingrich's "Contract With America." The GOP continues to package the same old s&%t as new ideas that go something like this: Cut public spending, eliminate regulation, cut taxes on the rich, and prop up the energy and defense industries. Sound familiar?

Posted by: commpro | August 6, 2010 11:56 AM | Report abuse

I encourage readers to check out Dr. Paul Krugman's column appearing today in the New York Times. He titles it "The Flimflam Man." It's all about Rep. Paul Ryan's economic plan. It offers a great counterpoint to the flag waving at the Post and other publications about GOP economic philosophies. Here's an excerpt:

"One depressing aspect of American politics is the susceptibility of the political and media establishment to charlatans. You might have thought, given past experience, that D.C. insiders would be on their guard against conservatives with grandiose plans. But no: as long as someone on the right claims to have bold new proposals, he’s hailed as an innovative thinker. And nobody checks his arithmetic.

"Mr. Ryan has become the Republican Party’s poster child for new ideas thanks to his “Roadmap for America’s Future,” a plan for a major overhaul of federal spending and taxes. News media coverage has been overwhelmingly favorable; on Monday, The Washington Post put a glowing profile of Mr. Ryan on its front page, portraying him as the G.O.P.’s fiscal conscience. He’s often described with phrases like “intellectually audacious.”

"But it’s the audacity of dopes. Mr. Ryan isn’t offering fresh food for thought; he’s serving up leftovers from the 1990s, drenched in flimflam sauce.

"Mr. Ryan’s plan calls for steep cuts in both spending and taxes. He’d have you believe that the combined effect would be much lower budget deficits, and, according to that Washington Post report, he speaks about deficits “in apocalyptic terms.” And The Post also tells us that his plan would, indeed, sharply reduce the flow of red ink: “The Congressional Budget Office has estimated that Rep. Paul Ryan’s plan would cut the budget deficit in half by 2020.”

"But the budget office has done no such thing. At Mr. Ryan’s request, it produced an estimate of the budget effects of his proposed spending cuts — period. It didn’t address the revenue losses from his tax cuts.

"The nonpartisan Tax Policy Center has, however, stepped into the breach. Its numbers indicate that the Ryan plan would reduce revenue by almost $4 trillion over the next decade. If you add these revenue losses to the numbers The Post cites, you get a much larger deficit in 2020, roughly $1.3 trillion.

"And that’s about the same as the budget office’s estimate of the 2020 deficit under the Obama administration’s plans. That is, Mr. Ryan may speak about the deficit in apocalyptic terms, but even if you believe that his proposed spending cuts are feasible — which you shouldn’t — the Roadmap wouldn’t reduce the deficit. All it would do is cut benefits for the middle class while slashing taxes on the rich...."

Reading about Ryan's plan reminds me of Newt Gingrich's "Contract With America." The GOP continues to package the same old s&%t as new ideas that go something like this: Cut public spending, eliminate regulation, cut taxes on the rich, and prop up the energy and defense industries. Sound familiar?

Posted by: commpro | August 6, 2010 11:57 AM | Report abuse

For the most part I disagree with Ryan, but I think he's right in thinking that the super low interest rates are hurting business investment: "...banks can borrow at essentially no cost from the Fed, plow the money back into no-risk Treasury securities, and earn that modest spread. This dynamic, while obviously helping banks recapitalize, could be curbing capital deployment in the private sector."

Posted by: SnowleopardNZ | August 7, 2010 2:49 PM | Report abuse

@SnowleopardNZ

While that rhetoric sounds nice, the numbers tell a different story. "essentially no cost" and "no-risk securities" are true. Numbers are close to 0, BUT NOT AT 0. From the most recent numbers, the federal funds rate is at 0.19%, and the 3 month treasury is at 0.15%. The discount rate from the fed is normally a bit higher than the federal funds rate, which means banks are INCAPABLE of making that "modest spread". However, loans to the private market can still be profitable...

Posted by: yichuanwang95 | August 8, 2010 11:16 AM | Report abuse

@SnowleopardNZ

While that rhetoric sounds nice, the numbers tell a different story. "essentially no cost" and "no-risk securities" are true. Numbers are close to 0, BUT NOT AT 0. From the most recent numbers, the federal funds rate is at 0.19%, and the 3 month treasury is at 0.15%. The discount rate from the fed is normally a bit higher than the federal funds rate, which means banks are INCAPABLE of making that "modest spread". However, loans to the private market can still be profitable...
(Numbers from: http://www.wolframalpha.com/input/?i=us+1+year+treasury+bill)

Posted by: yichuanwang95 | August 8, 2010 11:18 AM | Report abuse

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