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
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.