Tuesday, April 12, 2011

Bartlett: Ryan Roadmap "Gives Wealthy a Free Pass"

Posted By on Tue, Apr 12, 2011 at 4:32 PM

Bruce Bartlett, who worked in both the Reagan and Bush I administrations, picks apart Congressman Paul Ryan's Roadmap:

One would think that a comprehensive budget proposal designed primarily for the purpose of reducing budget deficits and the national debt would put at least some of the burden on the revenue side of the equation. First, it would reduce the need to cut spending so heavily and improve the chances of passage; unless Ryan is only interested in scoring points with the Tea Party crowd, he will need the support of at least some Senate Democrats and President Obama if he wants any aspects of his plan enacted.

Second, Ryan’s plan puts an exceptionally heavy emphasis on cutting programs like Medicaid and food stamps that primarily aid the poor, while the well-to-do are essentially held harmless because they don’t benefit much from federal spending. The one government spending program that arguably benefits the wealthy disproportionately is national defense because, as UCLA economist Earl Thompson has argued, it protects their capital. And that’s the one major program Ryan lets off the hook almost completely.

For Ryan, it is an article of faith that federal revenues must never rise above 19 percent of the gross domestic product no matter how dire the nation’s debt problem. No explanation for this necessity is offered in his plan, other than observing that the historical range of federal revenues as a share of GDP has been between 18 percent and 19 percent of GDP during most of the postwar era. Ryan simply asserts, without evidence, that this range is the one most compatible with prosperity.

Conservatives dogmatically believe that taxation is the single most important factor in economic growth, and the lower taxes are the better. But if that were the case, then the late 1990s should have been a period of exceptionally slow growth: Federal taxes averaged 19.9 percent of GDP from 1997 to 2000. In fact, that period was among the most prosperous in American history, with real GDP growing an average of 4.5 percent per year. By contrast, during the last four years, federal revenues have been exceptionally low, averaging just 16.5 percent of GDP. But growth averaged less than 1 percent per year.

[Capital Gains and Games]

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