Wednesday, March 13, 2013

The Ryan Budget

Representative Paul Ryan released his budget proposal yesterday and it provoked entirely predictable responses.  The liberals, including the two talking heads on Wonkblog, immediately tried to dismiss the proposal.  The two Wonks on the video dismiss that the deficit is a significant problem - don't worry about the dramatic growth of deficits over the last several years.       At the same time, the so called Bipartisan Policy Center (yeah right) did two charts which (in their view) reduce the over all debt by greater levels than other groups in Washington.    More than the proposal by former Senate Pete Domenici and former LBJ economist Alice Rivlin.  

Ultimately, the questions raised by the Ryan proposal come to a second chart,which graphs what the proposal reduces over time.   A key assumption of the proposal is a significant change in Medicaid and some less dramatic reductions in Medicare.  (Although the underlying logic of the proposal is to introduce some market based reforms to Medicare.)   The second major assumption of Ryan's proposal is that the tax system is broken and needs to be significantly fixed by simplification.   The Wonkblog commentators seem to think that is impossible.   They also seem to ignore the positive effects that simplification would have on economic growth.   
I am a lot less comfortable than the Wonkblogers seem to be about the growth in debt in the country - both the speed with which it has grown and the percentage of GDP that our debt represents should be almost terrifying to anyone with some understanding of history.  David Walker, the former Comptroller General of the US (the Chief Accountant for the government) described the problem as a "fiscal cancer" , which in my view is not far off from reality.   If our elected officials (I caught myself from using the term "leaders") can begin to talk seriously, a legitimate reform of the tax system and of the entitlement system may indeed be possible.  It certainly will not be the vision that Ryan offered yesterday.  And it certainly will not be the vision that the President has offered (or actually will offer in the next couple of days).  But it will also most likely be a better vision than the one that all but those in the cocoon of Washington seem to understand without some serious work on debt and deficit.

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