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The Radical Gradualism of Paul Ryan

The status quo is far more ‘extreme’ than the Republican budget

Apr 18, 2011, Vol. 16, No. 30 • By YUVAL LEVIN
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Late last month, Senator Charles Schumer of New York led a conference call in which Senate Democrats briefed reporters about the ongoing budget battle. At the outset, unaware that his comments were already audible to reporters on the line, Schumer provided some marching orders, advising his colleagues to describe Republican proposals as radical. “I always use the word extreme,” he said. “That’s what the caucus instructed me to use this week.”

Two Choices

It was no surprise, therefore, that when House Budget Committee chairman Paul Ryan released the Republican budget proposal for 2012 last week, Democrats in Washington called it radical and extreme. The White House labeled the plan unbalanced. Representative Chris Van Hollen, the senior Democrat on the House Budget Committee, called it “ideology on steroids.” Iowa senator Tom Harkin said the Ryan plan “gives new meaning to the term extreme.”

But it wasn’t only Democrats who seemed struck by the radical character of Ryan’s proposal. Many supporters of his budget, too, noted above all its boldness, or its wholehearted fiscal conservatism, which is just another way to say that he proposes a dramatic change.

And it is true, of course, that Ryan’s budget offers an unflinching conservative program. He proposes to have the federal government spend $5.8 trillion less over the next decade than it would under current law. He would reduce the accumulated deficits by more than $4 trillion over that period, and continue such reductions in the years that follow. He would thereby quickly begin to reduce the size of the federal debt relative to the economy, and over the coming decades would not only balance the budget but actually begin to pay off the principal of the debt. He would do that by reducing domestic discretionary spending, reforming the tax code to broaden the base and lower rates, block-granting some federal welfare programs (including Medicaid) to the states, repealing Obamacare, privatizing Fannie Mae and Freddie Mac, cutting back farm subsidies and corporate welfare, and (most significant in the long run) reforming Medicare for those now younger than 55 from an open-ended entitlement into a system of premium supports to subsidize the purchase of private insurance.

This adds up to an extraordinarily comprehensive and ambitious conservative policy agenda​—​more so than any Republican budget we have seen before, including those proposed by the Gingrich Congress in the ’90s and by Ronald Reagan in the ’80s. And yet, to call it “extreme” misses a crucial point. Ryan’s plan is above all a gradual and measured solution to our fiscal problems​—​one that offers continuity and security to help us avoid a truly extreme crisis.

This becomes especially clear when Ryan’s approach is contrasted with the alternative offered by the Democrats. Ryan talks about this moment as a choice between two visions. But in fact, it is a choice between a vision and a nonvision. Opposed to the House Republicans’ agenda is not a different set of solutions to our deepening fiscal problems proposed by the left, or even a defense of our existing welfare state. What the Democrats offer instead is complaisance that amounts to a knowing acquiescence in a preventable disaster. The Democratic party now has no discernible policy agenda whatsoever. It offers only a reflexive defense of an indefensible status quo.

In his own 2012 budget, released in February, President Obama proposed to do essentially nothing in response to the coming fiscal calamity​—​indeed, his budget would increase the deficit. Senate Democratic leader Harry Reid told MSNBC last month that we should not consider any changes to Social Security until we actually confront a catastrophic failure of the program in the 2030s, saying “Two decades from now, I’m willing to take a look at it. But I’m not willing to take a look at it right now.” In a conference call with liberal bloggers about Ryan’s budget last week, House Democratic leader Nancy Pelosi warned against proposing a Democratic counteroffer for entitlement reform. “Once you put another proposal on the table you’re conceding that there must be some big problem,” she said.

But of course, there is “some big problem.” The Democrats argue that America should stay the course, but there is little question now that the course we are on leads to a disastrous fiscal crisis. The explosion in domestic spending in recent years, the looming collapse of our health care entitlements, and the resulting crushing burden of debt have joined into a perfect storm. The national debt has doubled in the past decade, and the Congressional Budget Office projects it will double again in this decade and continue to balloon to unprecedented levels. Our creditors are looking at the same projections, so America will likely find it difficult to borrow money at affordable rates before long. Bill Gross, founder of the world’s largest mutual fund, recently warned that we have just a few years to show the markets that we intend to change course before the country faces a serious debt crisis.

Such a crisis would do grave harm to our economy, as rising interest rates would undermine consumer purchasing power and (by raising the cost of government borrowing) accelerate the very fiscal problems underlying our exploding debt. Meanwhile, our entitlement obligations would grow out of control even more quickly, forcing harsh austerity measures. Under current law, even without a debt crisis, Social Security benefits would suddenly be cut by more than 20 percent in the mid-2030s when the program’s trust fund runs out. Medicare benefits would be similarly imperiled, and taxes simply could not be raised high enough to fill the gap without crushing the economy. All of this will come at us much sooner if we lose the confidence of our lenders.

In other words, our current course points to a radically disruptive shock to the system, and Democrats seem intent on taking no action to prevent it. What the Ryan budget offers instead is a gradual, manageable change of course that might allow us to continue to experience the kind of growth and stability we have seen since the Second World War.

The plan is surely a departure from the status quo, but that status quo is itself a radical departure from the American experience. For all his budget cutting, Ryan proposes to bring federal spending and taxes down to about 19 percent of GDP​—​the average level in the postwar years, not some radical fantasy. A plan that sought to address our fiscal problems by raising taxes far higher than this historical norm—as Ryan’s detractors on the left would have to do, though they are loath to say so—would almost certainly yield weaker growth, and therefore have a harder time restraining the growth of the debt.

Spending on welfare and entitlement programs, too, would continue to increase each year under Ryan’s plan, but at a far more manageable rate in line with postwar spending levels. Block granting and capping costs would allow for more flexibility in the design of welfare programs and some cost control, but it would hardly shred the social contract, or bring about the kinds of austerity cuts that a real fiscal crisis would require.

On the contrary, underlying the Ryan budget is a vision of security and stability, of gradual reform of the welfare state in the face of changing circumstances. The document is full of calls to save the social safety net and “[fulfill] the mission of health and retirement security for all Americans.” Its basic aim is to avoid sudden or radical breaks, because predictability and security are essential both for enabling growth and for instilling confidence in consumers, producers, investors, and creditors.

This explains, for instance, why this supposed embodiment of conservative extremism doesn’t fully balance the budget for two decades. The Ryan budget begins to turn things around quickly​—​reaching primary balance (that is, a balance between taxing and spending excluding interest payments) and beginning to reduce the relative size of the debt by 2015​—​but it doesn’t reach a truly balanced budget until the 2030s. To get to such balance right away would require enormous immediate cuts in entitlement benefits or massive tax hikes, either of which would be highly disruptive both to people’s lives and to the performance of the economy.

This also helps explain why the budget’s most ambitious reform​—​the transformation of Medicare​—​doesn’t begin for 10 years. If you believe we confront an urgent crisis, why would your most significant proposal be put on hold for a decade, and exclude today’s retirees and near-retirees? Because Ryan’s basic goal is to avoid a disruptive shock in American life. His transformation of Medicare aims to allow those who have made long-term plans around certain expectations to keep those plans, and to allow others to make their own plans around the new arrangement. The 10-year lag is thus a crucial part of the reform, and the clock must start soon because waiting would mean that when the programs are forced to change, the change would have to be sudden and harsh.

Leaving the benefits of current seniors untouched is, of course, also good politics, as it neutralizes the most powerful source of opposition to entitlement reform. Indeed, for all the political risk that entitlement reform no doubt involves, the gradualism of the Ryan budget gives Republicans an important advantage. It allows them to present themselves as the party that offers protection from sudden shocks​—​both those of a debt crisis and those of the harsh austerity that the response to such a crisis would require if we don’t act now. Stuck with Senator Schumer’s talking points about extremism, the Democrats have failed to realize that, as they once more surrender the mantle of the party of ideas to the Republicans, they now also risk losing the mantle of economic security, and all without gaining the mantle of economic growth.

This is the political promise of the Ryan revolution for Republicans. It is also why we should expect a substantive Democratic response fairly soon. As he casts his eye toward reelection, President Obama will surely conclude that he cannot appear to abide the coming fiscal disaster while Republicans offer plausible solutions. The Democrats will be compelled to counteroffer, and therefore perhaps slowly to abandon the idea that the dream of the social-democratic welfare state can still be salvaged, and to pursue instead a vision of American life more compatible with democratic capitalism in the 21st century.

Such an awakening among liberals would be good for both parties and is essential to America’s future. It may even turn out to be the most important, and most radical, implication of Paul Ryan’s audaciously gradualist budget.

Yuval Levin, a fellow at the Ethics and Public Policy Center, is the editor of National Affairs.

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