A Budget That Can't Budge

What is the much-discussed Paul Ryan plan?

You probably know the plan’s main elements: A huge cut in Medicaid, a big cut in the value of future Medicare coverage for those under age 55, substantial cuts in discretionary domestic spending, plus a big tax cut aimed primarily at upper-income taxpayers.

Theoretically, this plan constitutes the first step toward the 2012 federal budget. But only very theoretically. The Senate will not pass it, and the president will not sign anything like the Ryan plan. If anything, the Ryan plan pushes us toward a future in which the federal government is funded for the next two years by stopgap continuing resolutions, postponing big decisions until after the 2012 elections.

So is the plan an electioneering document — the first draft of the Republican campaign message for 2012? Again, probably not. The campaign message will be determined by the presidential nominee, not by the chairman of the House Budget Committee. Review the probable nominees, and it’s hard to imagine Mitt Romney or Tim Pawlenty or Haley Barbour or Chris Christie running for president on the basis of a platform much more radical than that offered by Ronald Reagan in 1980.

Third option, then: Is the plan a negotiating ploy, a first offer to get serious bipartisan talks started with Democrats on entitlement reforms? Possibly. But the plan seems as likely to provoke the Democrats into fighting rather than negotiating. From a Democratic point of view, the Ryan plan looks like a Republican demand for all the marbles: Spending cuts for Democratic constituencies to fund tax cuts for Republican constituencies. More relevantly, from a Democratic point of view, the Ryan plan looks like a lethally unpopular demand for all the marbles — exactly the same demand that Democrats turned so decisively against Republicans in 1995. For Democrats, the Ryan plan is not a good faith opening gambit. It’s a temptingly vulnerable political target.

If the plan is not a real-world budget proposal, not an electioneering document, not a negotiating position — then what is it?

Answer: The Ryan plan is a Republican “memo to me" — an attempt by a party emerging from a troubled history to answer the question, “Who are we?” The answer is not aimed at the general public, but at Republicans themselves.

It goes like this: “Perhaps we used to be the people who introduced Medicare Part D. No longer. We have rediscovered our identity as the people who shrink government, not the people who expand it. Here is the proof.”

This “speaking to ourselves” mission explains many things about the plan that are otherwise puzzling.

• Why are there no revenue enhancements of any kind — not even fees or excise taxes that have no negative impact on incentives or savings?
• Why is Medicare protected in its existing form for a decade while the changes to Medicaid go into effect immediately?
• Why is Social Security exempted entirely?
• Why is agriculture treated so lightly — $30 billion in savings over 10 years, all of them (interestingly) to be decided by the Agriculture Committee, a unique concession by a Budget Committee otherwise determined to centralize decision-making?

Pose these questions and the answers become obvious:

These days, Americans over 55 vote heavily Republican. Under-55s lean Democratic, under-30s overwhelmingly so. (That’s the reverse, by the way, of the situation that prevailed as recently as the 1980s). Farmers vote Republican. Medicaid recipients do not. The deficit grows because the deficit reduction plan includes a big additional tax cut to upper-income taxpayers. And so on.

Well, that’s politics. The president’s health care and stimulus plans were larded with much grosser payoffs to Democratic constituencies.

But notice what Ryan's plan does not do.

It does not credibly address the number one concern of Americans: jobs. The job numbers attached to the plan have become instant targets of ridicule. Not even the actual authors of the numbers believe them. See Noah Kristula Green’s article at FrumForum.com:

The Ryan budget touts analysis from the Heritage Foundation which argues that the unemployment rate will reach 2.8% by 2021. (For comparison, ‘natural’ unemployment is estimated to be around 5%.) FrumForum contacted the Heritage Foundation’s Center for Data Analysis to ask about this figure. Heritage responded that they came to this conclusion using a CBO baseline as they were requested to do, and that they view the baseline they were asked to use as one which was too optimistic to begin with.

More surprising still, the debt reduction plan actually increases the debt over the medium term — by even more President Obama’s budget would. Ryan's plan tries to minimize this awkward fact by inserting it within a chart on page 57 that portrays the deficit from 1960 to 2080, a long enough timeframe wherein the worsening of the deficit situation over the period from 2012 to 2021 seems to shrink into historic insignificance.

The real message of the Ryan plan is: Upper-income tax cuts now; spending cuts for the poor now; more deficits now; spending cuts for middle-income people much later; spending cuts for today's elderly, never.

Jobs first, deficit later is actually the right timing of priorities. But the upper-income tax cuts of 2001 and 2003 markedly failed to translate into higher incomes for ordinary Americans. The Ryan plan offers no reason to hope that another round of the same medicine will deliver better results.

As politics, the message is even worse than the economics. Cut Medicaid and Medicare to fund tax cuts? Isn’t that the issue that returned Bill Clinton to the White House in 1996? Don’t all the polls show that Medicare and even Medicaid are popular, and that more tax cuts for the wealthiest Americans are not? Isn’t this a formula for a GOP bloodbath in 2012? And if the plan did somehow become law, is it not a formula for an economy in the 2010s that will underperform for most people in the same way that the economy of the 2000s underperformed for most people?

Those are the questions that will worry economists and swing voters alike. But the plan is not written for economists and swing voters. It is written for the GOP core. Yet one has to wonder: What happens to a party that invests so much energy talking to itself? I am reminded again of the best anecdote in Karen Hughes’ memoir, "Ten Minutes From Normal."

Walking on the beach one day, the former Bush communications director noticed a small plane trawling a huge advertising banner. The banner read something like: “Jill come back. I am miserable without you. Jack.” Hughes thought: “Bad message, Jack. Too much about you, not enough about her.”

That’s advice Republicans should ponder as they absorb Paul Ryan’s inward-focused budget ideas.

Originally published in The Week.

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