Ryanism: the Big Picture

Source: Ryanism: the Big Picture
National Review
August 08, 2012

By choosing Paul Ryan to be his running mate, Mitt Romney has ensured that a “far-reaching debate about the broader role of government and the entitlement state,” in the words of Politico’s instant analysis, will dominate the final, decisive twelve weeks of the presidential campaign. The long-term budget plans that Representative Ryan has advanced in recent years will be scrutinized, attacked, and praised. Ryan is invariably portrayed as the GOP’s wonkiest politician — these arguments will often sound like the panel discussions most Americans put up with for entire nanoseconds before channel-surfing past C-SPAN. A strange election will get stranger if it turns on voters’ decisions about whether “premium support” for Medicare is or isn’t a voucher.

Amid all this arcana, we must not lose sight of two main functions of Ryanism, now the core of Republicanism after being endorsed by the GOP’s congressional caucus and presidential nominee. First, Ryanism reminds the American people that a long-term trend is not the same thing as a law of nature. That the welfare state always has grown does not mean it always must grow. Indeed, a well-designed and well-administered welfare state can, in a welcome sense, grow and shrink at the same time. Second, Ryanism challenges the Democrats to finally come clean, 80 years after launching the New Deal, about the cost and consequences of their ambitions.

The first thing to keep in mind about Ryanism is how it changes the long-term trajectory of American spending and governance. The New Republic’s Jonathan Cohn sketched the ghost-of-Christmas-future dystopia he envisions if we adopt the Ryan framework: “Ryan’s most recent budget would, by 2050, shrink spending in everything but the big entitlements (Social Security and government health insurance programs) and interest on the debt to less than 4 percent of gross domestic product. To give you a sense of scale, spending outside those entitlements and interest now represents more than 12 percent of GDP and has never, since World War II, represented 8 percent.”

The proposition that all men are created equal does not, however, establish that all GDP percentage points are created equal. Over time they grow, with the help of luck, prudence, and exertion. As nations become more prosperous, things they couldn’t afford become things they can afford.

Consider the 1980s. Federal spending on the welfare state — Social Security and all other income-support programs, Medicare and all other health programs, and all programs in education, job training, and social services — was, according to the Office of Management and Budget, 9.8 percent higher, adjusted for inflation and population growth, when Ronald Reagan left Washington in 1989 than it was when he was elected president. This might be construed as evidence of conservatism’s futility: America’s basic political argument apparently pits fast and enthusiastic Swedenizers against slow, reluctant Swedenizers.

Note, however, that real per capita GDP increased by 22.1 percent during Reagan’s eight years in the White House. Spending on welfare-state programs declined from 50 percent of federal outlays in 1981 to 47.1 percent in 1989. More important, it declined from 11.1 percent of GDP to 10 percent. That sounds like a rounding error, but it means that federal welfare-state spending, relative to GDP, was nearly a tenth lower at the end of Reagan’s presidency than at the beginning. Conservatives may regret that the reduction wasn’t a fifth or a fourth, of course, but to interpret the 1980s’ increase in per capita welfare-state spending as a defeat requires begrudging that decade’s economic growth. Under Reagan, the economic pie grew, and the slice devoted to the welfare state got proportionately smaller.

America, like most modern nations, has used economic growth to enable government growth, especially in the form of a bigger welfare state. For example, total (federal, state, and local) government spending increased from 26.5 percent of GDP in 1965, at the dawn of the Great Society, to 32.6 percent in 2008, at the beginning of the Great Recession. One of the drawbacks of measuring government spending in GDP percentage points is that no government or society ever has more than 100 of them at its disposal. So it’s hard to be sanguine about this 6.1 percent decline in the portion of the nation’s economic output not accounted for by government spending: That trend can’t continue forever.

But it can continue for a while, especially in a growing economy. Adjusted for inflation and population growth, the portion of GDP not accounted for by government spending was 2.2 times higher in 2008 than in 1965. This made it easier for Americans to allocate a growing portion of their growing economy to government spending.

At some point, however, a society may decide that there are economic or political reasons to stop treating the eternal growth of government’s footprint on GDP as the default option. Paul Ryan’s implicit message is that it’s legitimate for a democracy to conclude that a growing economy can facilitate a smaller government as well as a larger one. Moreover, the Reagan precedent shows that economic growth permits us to increase government spending while reducing the government’s claim on our total economic output. It’s especially sensible to expect and arrange for welfare-state programs to decline relative to a growing economy. Prosperity allows us to spend more, in absolute terms, to help the people who need it, while expanding opportunities should mean that fewer and fewer people truly do need help. To insist on the opposite approach would mean that no advances in prosperity would ever discharge the moral obligation to expand the portion of our national output devoted to government programs.

The second feature of Ryanism challenges Democrats to acknowledge the cost of their ambitions. In nations around the world, political parties on the left have won victories by promising people that enlightened, compassionate government would give things to them and do things for them. That sales pitch will be effective as long as Santa Claus is not a villain.

The Left’s political problem is to pay for all the benefactions it wants to bestow. In Europe’s social democracies, leftists have addressed that problem by offering a package deal: “The welfare state we want to build will have to be extensive and expensive to address our serious social needs. It will be so expensive, in fact, that we cannot possibly finance it without taxes that impose real sacrifices on most of our citizens, not just the wealthy. A robust, well-funded welfare state will do so much to improve the quality of life that our citizens would be demonstrably worse off with the higher take-home pay they would enjoy as a result of combining a big tax cut with proportionate reductions in social-welfare programs.”

And that’s pretty much how the Left governs. In Sweden, for example, the world’s most comprehensive welfare state, the most affluent tenth of the income distribution pay 26.7 percent of all taxes. This is virtually identical to their percentage of “all market income,” which is 26.6 percent. (See “Growing Unequal,” a report by the Organisation for Economic Co-operation and Development.) In the United States, by contrast, those in the top tenth pay a portion of all taxes, 45.1 percent, that is a third larger than the portion, 33.5 percent, of the total income they receive. Other famously generous welfare states, such as France, Germany, and Denmark, resemble Sweden, having tax systems far less progressive than America’s.

Why? Because America’s party of the Left must contend with our Don’t Tread on Me Jeffersonianism. To reassure voters more likely than Europe’s to fear ambitious government, the Democrats offer a different package deal: “We’ll build a welfare state that gives things to you, does things for you, and — best of all — someone other than you, someone richer than you, will pay for it.” Thus, Barack Obama promised (as did Hillary Clinton, his 2008 Democratic rival) to expand old social programs and launch new ones without raising any federal tax on any family with an income below $250,000. Having met the easy political challenge, persuading voters to accept government largesse, Democrats have voted “Present” when confronted with the hard part, persuading voters to pay for that largesse. The hard part, however, determines the fiscal feasibility of the easy part.

Liberal writers occasionally criticize this approach. Cohn’s New Republic colleague Timothy Noah, for example, has urged Obama to realize (or admit) that if he doesn’t raise taxes on the middle class, he’ll have to “forget about achieving meaningful deficit reduction.” For Obama to jettison his $250,000-threshold pledge “would be political suicide . . . right now” — that is, when he’s trying to win reelection by telling voters what they can expect from him. But “if Obama gets a second term, he’ll have to get over his aversion to raising taxes on the middle class.” In other words, tell lies during the campaign and face reality after the election.

Obama does not need Noah’s advice on how to be more deceptive, but it’s unlikely that elected Democrats will pay any attention to Noah’s recommendation to be more courageous. Even liberal commentators, who don’t have constituents to placate or coalitions to maintain, convey the need to raise taxes on the middle class infrequently and circumspectly. Democrats who must face voters are far more reluctant to find out whether the promise to raise taxes will boost their careers more than it helped Walter Mondale in 1984. Obama’s pledge about confining tax increases to a small subset of Americans was not an unforced error. Rather, it was an acknowledgment that Democrats have never tried, much less managed, to convince voters that the Democratic domestic agenda is so beneficial that ordinary Americans — not just the CEOs of the companies they work for, or the stars of the TV shows they watch, but their own friends, neighbors, and co-workers — should pay significantly higher taxes for government endeavors.

Democrats hate Paul Ryan because he has taken the measure of their cowardice and made public the logical, humiliating conclusions of their disingenuousness. The most important feature of the House Budget Committee’s long-term plan is its commitment to keep federal taxes where they have been, on average, since World War II, between 18 and 19 percent of GDP, and to bend the spending curve down until it meets that line. There’s nothing subtle about the message to Democrats:

“America is having enormous trouble paying for the welfare state we already have, much less the far more ambitious one you guys want to build. If you ever find the courage, and then the language, to persuade Americans to pay much higher taxes for the sake of perpetuating and perpetually expanding our welfare state, Republicans will challenge those bad policies. We’ll acknowledge, however, that they are at least affordable bad policies.

“It will be easy to know when brave Democrats succeed in catalyzing American politics. That day will have arrived when Republican politicians have good reason to fear that the most serious consequence of opposing a tax increase will be not another denunciation by the New York Times editorial page but defeats at the ballot box. Until Democrats assemble that electoral majority of Americans insisting on higher taxes, we must devise spending plans consonant with the federal government’s existing (and effectively unexpandable) revenue stream. Republicans are proposing big changes in existing social programs and strict limits on future government outlays, to make the operations of the welfare state compatible with the government’s revenues.

“Democrats who find those changes appalling can do one of three things: persuade Americans to accept enormous tax increases; offer an alternative plan, humane and enlightened, for the federal government to address social needs by spending no more than 19 percent of GDP; convince the nation’s voters and the world’s lenders that a huge and permanently widening gap between federal revenues and spending is nothing to worry about. There is no fourth option.”

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