WASHINGTON -- As America rings up another $3 trillion plus budget -- almost a historic peacetime 25 percent of Gross National Product -- and borrows another $1.3 trillion to pay for it, one should not be surprised that the usual mob of special pleaders is fuming at anyone who has the temerity to suggest a sane alternative. These are the new Democrats and they do not mind putting us on the road to Greece.
Thus they howled when Chairman of the House Budget Committee Paul Ryan proffered a budget to avoid the Greek Tragedy. His budget contemplates spending reductions of more than $5 trillion over the next decade, cutting deficits by more than $3 trillion, taxes by $2 trillion, and the national debt by more than $1 trillion. It is all part of Ryan’s strategy to lead us to a prosperous and secure future. Ryan intends that these cuts lead to growth, growth more robust than the anemic 2 percent that President Barack Obama would be perfectly comfortable with.
Yet now from the right comes opposition. The right thinks that Ryan has not cut enough. He has slain no government bureaucracies. Some on the right even want him to prove that he is sincere about budget cuts by lopping off a few percentage points more at the Pentagon. Two Republicans, Tim Huelskamp of Kansas and Justin Amash of Michigan, actually voted against Ryan in committee, leaving him with a 19-18 squeaker. If they are joined by enough like-minded Republicans when Ryan’s budget comes to the floor, the Democrats and Nancy Pelosi will by happy. These Republicans will have proved that their party cannot govern.
Ryan is a supply-sider. He advocates one of the few economic innovations in years. He realizes that the budget cannot be balanced without faster economic growth. Sure it would be nice to balance the budget in five years but not with tax increases. Tax increases would only slow down growth. So his budget balances out in 2039, though possibly sooner. Some of the Republicans think that future Congresses cannot be trusted to carry out the cuts that Ryan proposes, certainly not through all the vagaries leading up to 2039. Well, for my part, I think they can. The country has changed dramatically. A new majority of Americans composed of conservatives and independents understands that we have been spending ourselves into the poor house.
The defeat that the Democrats suffered in 2010 was just the beginning. They will lose more seats in 2012 and the White House.
Yet even if I am wrong, we do not have to wait until 2039 for a balanced budget, according to an alternative scenario released by Ryan subsequent to his budget. Ryan’s critics, who claim the budget will not be balanced until 2039, are using the Congressional Budget Office estimates arrived at by static scoring. This means they assume little public response to lower taxes. People will continue to act the same with lower taxes as with higher taxes. But history has shown they act differently. With lower taxes you get growth.
According to Ryan’s alternative scenario, using dynamic scoring, lower taxes and other inducements to growth in the economy will speed up the economy, increasing GDP by as much a one percentage point a year. Thus the Ryan budget lowers the debt to GDP ratio to 50 percent in 10 years. Where it now stands at 74.2 percent of GDP it would decline to 50 percent of GDP. The budget could be balanced not in 2039 but in the early-to-mid 2020s. The Republican critics need not worry. Add to that that Ryan’s budget gets the federal take of the economy down from 24.1 percent of GDP to 19.8 percent in 2021 and you see real change. American need not end in Greek Tragedy. All Republicans and many Democrats need to get aboard the Ryan budget.