Saturday, August 18, 2012

The Emperor's New Clothes

Why does Paul Ryan always remind me of The Emperor's New Clothes, the classic Hans Christian Andersen tale? In it, two weavers make a suit of clothes for the king that they claim is made of a special cloth, invisible to stupid people or people unfit for the office they hold. When the king dons his "new suit," and sees nothing at all, he and the members of his court are too afraid of seeming stupid or incompetent to admit aloud the obvious.

In his analysis of Ryan's famous "budget," Paul Krugman suggests the solution to my puzzle:
First, there are a set of tax cuts for higher income brackets and corporations. The Tax Policy Center (pdf) estimates the cost of these tax cuts, relative to current policy, at $4.3 trillion.
Second, there are spending cuts. Of these, approximately $800 billion comes from converting Medicaid into a block grant that grows only with population and overall inflation – a big cut compared with projections that take into account rising health-care costs and an aging population (since the elderly and disabled account for most Medicaid expenses). Another $130 billion comes from doing something similar to food stamps. Then there are odds and ends – Pell grants, job training. Be generous and call all of this $1 trillion in specified cuts.
On top of this we should add the $700 billion in Medicare cuts that Ryan denounces in Obamacare but nonetheless incorporates into his own plan.
So if we look at the actual policy proposals, they look like this:
Spending cuts: $1.7 trillion
Tax cuts: $4.3 trillion
This is, then, a plan that would increase the deficit by around $2.6 trillion.
How, then, does Ryan get to call himself a fiscal hawk? By asserting that he will keep his tax cuts revenue-neutral by broadening the base in ways he refuses to specify, and that he will make further large cuts in spending, in ways he refuses to specify.
And this is what passes inside the Beltway for serious thinking and a serious commitment to deficit reduction.

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