I want to like the new Ryan budget, but James Pethokoukis points out several of its problems. The new Ryan budget drops the top marginal income tax rate to twenty-five percent. That is lower than the top marginal tax rate proposed by Mitt Romney. Who outside of a mental institution believes that Republicans’ problem in the last election was that they did not propose deep enough marginal tax rate cuts for high earners? I don’t see how this deep a cut in the top marginal income tax rate leaves much room for middle-class tax cuts if is going to be revenue neutral as advertized. This obsession of Republican political elites with cutting the top marginal income tax rate below the George W. Bush levels in the face of enormous projected deficits is bizarre. It is a political fantasy. It isn’t even a popular political fantasy. And as Ramesh Ponnuru pointed out, deep tax cuts for high earners didn’t even prove attractive to Republican presidential primary voters in 2012. Whose vote are Republicans trying to get?
Pethokoukis criticizes the Ryan budget for aiming to balance the budget in ten years rather than aiming for a sustainable budget deficit. I think reasonable people can disagree here. You can run an annual budget deficit of one or two percent a year and, if nominal gross domestic product growth is above two percent, have the debt burden go down as a percentage of GDP. On the other hand, I respect the argument that deficits should only be run during emergencies and that when the emergency passes the debt should be paid down to leave the federal government with maximum fiscal flexibility in the event of calamities whose coming is inevitable, but whose timing is unpredictable.
Pethokoukis is also right to mention that the Ryan budget lacks a Social Security reform plan. I don’t blame Ryan here. Ryan has tackled Social Security reform in the past. He deserves credit for having tried. As Reihan Salam pointed out on twitter, the Ryan budget was the result of intracoalitional bargaining among House Republicans. Some House Republicans only voted for the fiscal cliff deal on the condition that the next House Republican-produced budget balances within ten years. They don’t seem to have been concerned with whether such a budget plan made political and policy sense in the context of their other commitments. Any responsible Social Security reform would have to be phased-in slowly and savings would have been small-to-nonexistent during the budget’s ten year window. So why scare the oldsters with a Social Security reform that won’t even impact most of them?
The worst parts of the new Ryan budget are the result of nonsense behind-covering from allegedly “conservative” Republicans. Reihan Salam wrote that if Ryan tried to move off the twenty-five percent top marginal income tax number and back toward the Bush-era thirty-five percent number, there would be a risk of revolt and chaos within the Republican caucus. At least some of the desire for a plan (no matter how politically unrealistic) that balances the budget within ten years is that it is designed to avoid intra-party challenges from the right. And who wants to scare old people with Social Security cuts while you are proposing sharp tax cuts for high earners? If the Republican strategy seems incoherent and self-defeating it is because Republican are maneuvering against each other even more than they are maneuvering against Obama.
I’m going to end on a hopeful note. There is a critical mass of conservative journalists and policy wonks (Ramesh Ponnuru, Ross Douthat, Matthew Continetti, R. R. Reno, James Pethokoukis, Reihan Salam, and others) who are in favor of a more middle-class-friendly Republican policy agenda. They will win over Republican activists, and the Republican office holders will eventually respond – and the activists will eventually become the Republican office holders. It takes a while to win over public opinion and it will look like nothing good is happening for a while. Then reformist conservatism will, all of a sudden, seem unstoppable. The situation only looks bad now because we are at an early stage of a shift in center-right policy priorities.