Thursday, May 26, 2011

What Forced Ryan's Errors

Ross Douthat today argued that the Republican budget as drafted by Paul Ryan contained an "unforced error" on taxes:
By trumpeting absurd Heritage Foundation growth projections while staying vague (for procedural reasons related to House budgeting, but still …) on how its rate-lowering tax reform would be paid for, the budget made it easy for liberals to claim that the Republicans weren’t just cutting Medicare, but that they were doing it to pay for voodoo economics and tax cuts for the rich. These claims were unfair: The Ryan budget didn’t base its deficit projections on the Heritage numbers, and Ryan’s Medicare reforms assumed revenue-neutrality in the tax code even it the budget didn’t specify how that neutrality would be achieved. But politics is rarely fair, and by packaging an inevitably-unpopular Medicare reform with sweeping cuts in tax rates and then garlanding it with a supply-side fantasy about the likely consequences for economic growth, the House Republicans essentially wrote the Democratic Party an extra set of talking points. (It would have been far, far better if they had packaged the Medicare cuts with a revenue-neutral tax reform that explicitly lowered middle class taxes...)
Well, there are a few things here. . I've talked before about how I interpret Ryan's budget: I think he's signaling that he is, in fact, planning to rely on the Heritage numbers; he has no intension of really paying for rate cuts by cutting an equal amount of tax expenditures. But suppose I'm wrong; Ryan still isn't courting trouble by keeping his pay-fors "vague." If he specified which tax deductions or credits he was planning to eliminate, that's not going to help him at all. Tax expenditures are really popular -- at least for those who get them!

To put it another way...if Ryan admits that he's using phony numbers, then those who praised his "courage" might not have done so. If he specifies the pay-fors and they wind up (as Jonathan Chait expects), that the overall result is to shift the tax burden away from the rich, then Republicans get exactly what they're getting now (but with less wiggle room for objecting to it, if that matters). Or if Ryan somehow does come up with pay-fors that keep the tax burden the same, he's going to wind up having a lot of major Republican supporters quite unhappy with him for taking away their important tax deductions. After all, even if Ryan manages to find enough deductions to can to keep the overall share of taxes from the rich the same, there will be winners and losers within that group, and the losers aren't going to be very happy.

So keeping it vague isn't the problem; the problem is, basically, lowering tax rates for the wealthy as part of a deficit reduction plan. No matter what you do beyond that, it's going to be hard to sell.

One more thing. Douthat suggests, instead, middle class tax cuts. That probably works somewhat better (although it still has some of the same problems; tax reform involving lower rates and fewer tax expenditures is always going to produce winners and losers, and the losers are apt to be a lot more unhappy than the winners are pleased). But, c'mon: Douthat misses the whole point of the exercise, which is to lower tax rates for rich people. Of course, if you accept the idea of increasing the share of taxes paid by the wealthy, then virtually none of these convoluted maneuvers are needed.

So: vagueness isn't a forced error; it's the best of a set of bad choices, given the starting point of dropping rates. And dropping rates for wealthy taxpayers isn't an unforced error; it's "forced" because it's the whole point of the Republican Party, at least these days.


  1. Maybe its just me, but doesn't it seem like the power of the "low tax rates for the rich" meme has increased severalfold since the SC struck down limitations on donations a little over one year ago? The Republicans are most vocal in support of the meme, but by lack of active dissent the Dems seem to be helping it along as well.

    Realistically, why would either party stick it to increasingly important deep-pocketed donors? They won't, and then they won't raise taxes on the middle class either, since that is anathema with lower rates for the rich.

    Friendly question for the Deficit realists: considering the disastrous response to Ryan's Medicare plan, resulting from undue influence of senior voters, as well as the inability to tax rich folks after Citizens United, would it be alright for me to start worrying about the deficit?

  2. It's similar to what Gene Sperling said the other day about the Medicaid portion of Ryan's plan---when we say Ryan's plan cuts benefits for the poor and middle-class to pay for tax cuts to the rich, we're not criticizing it. We're describing it.


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