2012 U.S. Elections / International

The Political Economy of Paul Ryan

By Francis McLoughlin

Let me begin with a little character assassination. Not only is Paul Ryan, the GOP’s Vice Presidential candidate, not a profound political thinker, he is —shockingly— thoroughly unprincipled. His voting record is conspicuously inconsistent on one significant point. The GOP’s PR firms may market Mr. Ryan as a tough, austerity-minded man of anti-collectivist, anti-labour principle, but he is far from. To take just one instance of his posturing as a man of principle, the 2005 speech he delivered to the Atlas Society, an Ayn Rand-fan club, saw him take the fight back to basics: “The fight we are in here, make no mistake about it, is a fight of individualism versus collectivism”. Mr. Ryan, this great individualist, has the good fortune of being a scion of a family that was part of the so-called Irish Mafia which built Wisconsin.

In 1884, his great-grandfather founded Ryan, Inc., a national construction firm, which is still run by his family (not his immediate family, I should clarify, but beloved relations no less). Now what other explanation could one possibly come up with to account for a curious little discrepancy between word and deed, when perusing Congressman Ryan’s voting record, and finding that he has consistently broken with his party to vote to protect the wages of unionised construction workers, if not that the Congressman’s family’s firm relies heavily on this labour, and would suffer if the wages were not protected? One can thank Mother Jones magazine for bringing this detail to our attention.

In a joint-interview with his running mate on 60 Minutes soon after his nomination, Mr. Ryan treated his interlocutor to a boiler-plate phrase: “What I see is a new amount of crony capitalism… but the President has brought this to a whole new level. President Obama is picking winners and losers based on connections… We want to get Washington out of the business of picking winners and losers…”. “And what”, a reporter might have ventured to ask the Vice Presidential candidate, “about your seeming tendency to vote on legislation based on the interests of his family’s business”? Alas, prime-time television in the United States is not a place in which the elementary claims of civil servants undergo cross-examination. But so much for Mr. Ryan’s Ayn Rand-inspired anti-collectivism. As for the claim that he is an intellectual, I don’t know the guy, and don’t wish to presume, but somehow I doubt he has committed much thought to the fundamental inconsistencies between the doctrine of his alleged hero Thomas Aquinas and the cheap screeds of Ayn Rand. Have you? For one thing, Thomas was opposed to usury, whereas Rand was a defender of unbridled capitalism. Thomas was for morality based on natural law, Rand for ruthless self-advancement and godless materialism. Is it not too much to ask that the question be put to him: How do you reconcile such contradictory positions? See what he says, beyond the vacant stare.

Mr. Ryan and his colleagues are best known for their thoughts on what to do about the government safety-net program for retirees—what is commonly termed ‘Social Security’. This program provides the majority income for nearly two-thirds of America’s elderly, not to mention the only income for one-fifth. David Stockman, that ol’ supply-side guru for the Reagan administration, has suggested recently that “A true agenda to reform the welfare state would require a sweeping, income-based eligibility test, which would reduce or eliminate social insurance benefits for millions of affluent retirees”. Mr. Stockman, who served as director of the Office of Management and Budget from 1981 to ’85, wrote an Op-Ed piece in the New York Times titled ‘Paul Ryan’s Fairy-Tale Budget Plan’, in which he pointed out that:

“…the supposedly courageous Ryan plan would not cut one dime over the next decade from the $1.3 trillion-per-year cost of Social Security and Medicare. Instead, it shreds the measly means-tested safety net for the vulnerable: the roughly $100 billion per year for food stamps and cash assistance for needy families and the $300 billion budget for Medicaid, the health insurance program for the poor and disabled”.

And this critique comes from a Reaganite ideologue of trickle-down economics, who sneers that Mr. Ryan’s “…phony ‘plan’ [tries] to solve the entitlements mess by deferring changes to social insurance by at least a decade”. And now a word from the other corner. Paul Krugman charges that:

“[Mr.] Ryan basically proposes three big things: slashing Medicaid, cutting taxes on corporations and high-income people, and replacing Medicare with a drastically less well funded voucher system. These concrete proposals would, taken together, actually increase the deficit for the first decade and beyond”.

Thus, Mr. Krugman, the New York Times’ in-house Keynesian liberal, concludes, “All the claims of major deficit reduction… rest on the magic asterisks. In that sense, [Mr. Ryan’s] isn’t even a plan, it’s just a set of assertions”. One loves it when the centre-Right and the centre-Left come together to savage the racketeering of the Washington permanent governing class.

In 2005, Mr. Ryan and his colleagues pitched their plan to privatise Social Security to President George W. Bush, whose first term had been given over almost exclusively to managing the campaign in Iraq. Under Mr. Ryan’s initial version, American workers would be able to invest half their payroll taxes (which fund Social Security) in private accounts. The New Yorker’s Ryan Lizza was good enough to rebut the advertised virtues of this arrangement, in what is probably the most comprehensive piece a magazine has run on Mr. Ryan so far, contending that “As a plan to reduce government debt, [Mr. Ryan’s plan] made no sense. It simply took money from one part of the budget and spent it on private accounts, at a cost of two trillion dollars in transition expenses”. Again, where is that big tough austerity-minded debt-slayer who wants nothing more than to turn the cold shower on the United States? All one seems to see in the figure of Mr. Ryan is an attempt to privatise the measly crumbs thrown to single-mothers and the like in the process of expanding the deficit! Though you might think it at first glance unrelated, I invite you to study the following passage from Mr. Lizza’s New Yorker profile of the man:

“…the summer of 1986 brought a life-changing event. One night in August, [a 16-year old Paul Ryan] came home from work well past midnight, and he slept late the following morning. His mother was in Colorado visiting his sister, and his brother, who had a summer job with the Janesville parks department, had left early. Paul answered a frantic phone call from his father’s secretary. “Your dad’s got clients in here,” she said. “Where is he?” Paul walked into his parents’ bedroom and thought his father was sleeping. “I went to wake him up,” he told me, “and he was dead.”

“It was just a big punch in the gut,” [Mr.] Ryan said. “I concluded I’ve got to either sink or swim in life.”

The story recounted by Mr. Ryan here is supposed to represent one of those—indeed, as the magazine puts it—”life-changing” moments that alter a trajectory, and even shape a career. The underlying message is impossible to miss: Mr. Ryan became a libertarian—”I’ve got to either sink or swim in life”—when his family’s breadwinner passed on. What he fails to mention is that it was Social Security that prevented his family from being demoted from inherited riches to… rags.

That intervention by the government to save Mr. Ryan from dropping down a class or two may not have stopped him from advancing plans to dice future Medicare, nor has it given him cause to think twice about serving the interests of Big Government-protected health insurance firms through a voucher system that would subject the elderly to ever-higher co-pays. Mr. Ryan’s greatest success to date lies in his pushing of this proposal onto a bipartisan plate: Our hero’s set of assertions (as Mr. Krugman termed the Ryan Plan) has found an audience… in the White House! Indeed, the present incumbent for the Oval Office has had some very nice things to say in praise of chef Ryan’s austerity dishes.

On 29 January 2010, President Obama spoke before the House Republicans at their retreat in Baltimore, telling them, “I think [Mr. Ryan] has looked at the budget and has made a serious proposal. I’ve read it. I can tell you what’s in it. And there’s some ideas in there that I would agree with…”. That did not stop Peter Orszag, the administration’s then-budget director (now with Citygroup), from rejected the Ryan Plan, however, and telling the press that the proposal would turn Medicare “into a voucher program, so that individuals are on their own in the health-care market”. As numerous economists have pointed out, over time the program, should it be implemented, will not keep pace with rising medical costs, forcing seniors to pay thousands more dollars every year for health care. According to the Urban Institute, Mr. Ryan’s “block grant plan alone would lead states to drop between 14 and 27 million people (the poor and those with disabilities) from Medicaid by 2021”.

But that was then: January 2010. As Secretary of Treasury Timothy Geithner illustrated in his 6 January letter to Congress, the U.S. debt level was rapidly approaching its ceiling—then at $14.3 trillion—and “Never in history has Congress failed to increase the debt limit when necessary”. In fact,

“Failure to raise the limit would precipitate a default by the United States. Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses and could lead to the loss of millions of American jobs. Even a very short-term or limited default would have catastrophic economic consequences that would last for decades. Failure to increase the limit would be deeply irresponsible. For these reasons, I am requesting that Congress act to increase the limit early this year, well before the threat of default becomes imminent”.

The GOP didn’t much care that hundreds of thousands of federal workers would have been sent packing. Nor was it concerned about the contribution such unemployment would, in turn, make to the debt. Mr. Ryan was adamant that his $4.4 trillion deal to cut the deficit be passed, and as the threat of a total government shutdown at midnight of 8 April loomed, the Democrats threw in the towel. Come August, the Democrats in Congress were lopping away at infrastructure and public housing programs (not quite WPAs, but projects of that tendency).

Mr. Orszag was all on board, saying that “reforming [Social Security] could help the federal government establish much-needed credibility on solving out-year fiscal problems”. In other words, the GOP have spread their propaganda so thick, and the Obama administration’s stimulus bill was so weak, that it’s became good PR for the Democrats to go along with the Ryan Plan. That way, the financial institutions that support Mr. Obama can rest assure that their best interests are secure in the face of further fiscal problems in the coming months.

Before Mr. Ryan was crowned the GOP’s Vice Presidential candidate, the Romney Plan had three goals: 1) to lower tax rates by 20 percent, drop the corporate tax rate to 25 percent, and eliminate the estate tax and alternative minimum tax; 2) to raise the same amount of revenue it did before by removing tax expenditures (all the exemptions, deductions, and credits in the tax code that are tantamount to government spending); and 3) to maintain the existing level of progressivity by ensuring that the top one percent pays no less in taxes and everyone else pays no more.

But as at least three economists have pointed out (at the time of writing), it is mathematically impossible to do all three. If it came down to it, Mr. Romney would have been likely to opt for the first two and throw the third to the wind, having no desire to cut tax expenditures for savings, capital gains, and dividends, which go overwhelmingly to the top one percent. Also, as economist Mike Konczal pointed out vis-à-vis the Romney Plan’s prospective privatising of Social Security:

“A privatised welfare state administered through these coupon-like mechanisms, compared to public ones, involve less compulsory risk-pooling and more individualised risk-bearing, which tends to benefit those who are better off”.

All in all, if implemented, Romney’s plan would see the top 0.1 percent gain an average 4.4 percent in after-tax income, and the 0.9 percent under the cream some 3.5 percent, while everyone else lost 1.1 percent. The Ryan Plan is even more extreme, as the Wall Street Journal reported:

“In his 2010 “Roadmap for America’s Future,” [Mr.] Ryan proposed eliminating taxes on corporate income, estates, dividends, interest and capital gains. He would simplify the individual income tax system into a two-rate structure topping out at 25 percent and impose what is effectively an 8.5 percent value-added tax”.

Of course, one can glare at such a callous shifting of the burden from rich to poor. But really all that is beside the point: The United States sees so much tax-evasion on the part of its elites that only a flat-tax along the lines of that which Jerry Brown proposed in his 1992 Presidential campaign would suffice to truly ‘simplify’ the relationship between American citizen and the IRS, collapsing a huge portion of the parasitic tax-advising class of corporate lawyers and accountants in the process.

Turning once again to the aforementioned article on Mr. Ryan’s ‘Fairytale Budget’, Mr. Stockman quite unexpectedly, yet welcomingly, ends with a resounding defence of the FDR-era Glass-Steagall Act, repealed under the Clinton administration. It’s worth quoting in full:

“…the giant Wall Street banks remain dangerous quasi-wards of the state and are inexorably prone to speculative abuse of taxpayer-insured deposits and the Fed’s cheap money. Forget about ‘too big to fail’. These banks are too big to exist—too big to manage internally and to regulate externally. They need to be broken up by regulatory decree. Instead, the Romney-Ryan ticket attacks the pointless Dodd-Frank regulatory overhaul, when what’s needed is a restoration of Glass-Steagall, the Depression-era legislation that separated commercial and investment banking”.

Many Reaganites turned to economic populism at the close of their rather unwholesome era, Paul Craig Roberts being a case in point. With the fiscal conservatives of Mr. Ryan’s kidney attacking (probably correctly) bank-regulation as redundant, it’s gratifying to hear a free-marketeer like Mr. Stockman calling for features of the New Deal measures which renewed the American economy with WPAs and which nationalised insolvent banks in the 1930s instead of bestowing them with tax-payers’ money with which to bid on toxic assets at ‘market’ prices.

Mr. Ryan and his silver-tipped frontman, on the other hand, are now being plied with cash by the same financial institutions (Goldman Sachs perpetually ahead of the rest) that backed President Obama in 2008. As a point of fact, the Romney campaign received a sudden $3.5 million advance by those affectionate corporate PACs on the day Mr. Ryan was announced as his running mate. Need one ask why?

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