As America rings up another $3 tril- lion-plus budget - almost a historic peacetime 25 percent of gross national product (GDP) - 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 House Budget Committee Chairman 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 Mr. Ryan’s strategy to lead us to a prosperous and secure future. Mr. Ryan intends that these cuts lead to growth, growth more robust than the anemic 2 percent President Obama would be perfectly comfortable seeing.
Yet now from the right comes opposition. The right thinks Mr. 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, Rep. Tim Huelskamp of Kansas and Rep. Justin Amash of Michigan, actually voted against Mr. Ryan in committee, leaving him with a 19-18 squeaker. If they are joined by enough like-minded Republicans when Mr. Ryan’s budget comes to the floor, the Democrats and Nancy Pelosi will be happy. Those Republicans will have proved that their party cannot govern.
Mr. 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 growth. So his budget balances out in 2039, though possibly sooner. Some of the Republicans think future Congresses cannot be trusted to carry out the cuts that Mr. 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 poorhouse.
The defeat 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 Mr. Ryan subsequent to his budget. His critics, who claim the budget will not be balanced until 2039, are using the Congressional Budget Office estimates arrived at by static scoring. This assumes there will be little public response to lower taxes and 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 Mr. Ryan’s alternative scenario, using dynamic scoring, lower taxes and other inducements to growth will speed up the economy, increasing GDP by as much as 1 percentage point a year. Thus, the Ryan budget lowers the debt-to-GDP ratio from where it stands now, at 74.2 percent of GDP, to 50 percent of GDP in 10 years. The budget could be balanced not in 2039 but in the early to mid-2020s. The Republican critics need not worry. Add to that the likelihood that the Ryan 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. America need not end in Greek tragedy. All Republicans and many Democrats need to get aboard the Ryan budget.
R. Emmett Tyrrell Jr. is founder and editor-in-chief of the American Spectator and an adjunct scholar at the Hudson Institute. He is author of the forthcoming “The Death of Liberalism” (Thomas Nelson).