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Ryan Rides To The Rescue With Realistic Budget Plan

Investor's Business Daily
April 6, 2011
By Ernest S. Christian and Gary A. Robbins

It's jump ball on the federal budget - and America's future is up for grabs.

Although often cast in numerical terms involving trillions of dollars, the real budget battle is about human dignity, freedom and progress. Can we preserve these and other bedrock characteristics of American civilization? Or will they and we be dragged down by mindless fiscal excesses in Washington?

The two most immediate protagonists in this historic budget drama are President Obama, the likely villain, and Paul Ryan, the Republican chairman of the House Budget Committee, the emerging hero.
Obama holds the modern record for the biggest debt and deficits in the shortest time and is sub rosa heading America toward the biggest tax hikes in history.

In opposition to Obama's road to ruin, Ryan has unveiled a high-minded "Path to Prosperity" by which America can escape the spend-debt-tax trap set by Obama before it's finally and fatally sprung.

Obama governs on a zero-sum basis, pitting Americans against each other, in the apparent belief that the only way for anyone to be better off is for government to make other people worse off.

The Republican budget is designed to make everyone better off. Cut taxes, cut spending, induce jobs and income growth, repeal ObamaCare, rescue Medicare, protect seniors and enable young Americans to create a new golden age of freedom and prosperity in the 21st century. And this is just for starters. Wait until 2013 for the best stuff.

Seniors Protected

The "win-win" Ryan-Rivlin proposal saves Medicare from financial collapse while at the same time allowing existing senior Americans (those now 55 and older) the option to continue with present Medicare.

Ryan's budget achieves $6 trillion of outlay savings - including $1 trillion in historic health care entitlement reform - but seniors are protected. Cynical Democrats may have hoped that with the debt crisis already at $10 trillion and Obama pushing it to $21 trillion, they could frighten fiscally responsible Republicans into cutting back on seniors - but Ryan deftly avoids the sucker punch.

Ryan also avoids the tax trap. Many people - including some well-meaning Republicans - have been lured into thinking that America's financial crises can be solved by combining spending cuts with big tax increases.

But dollar-for-dollar, tax increases do more harm to the private economy - and, therefore, to GDP growth and jobs - than they add to Treasury revenues for deficit reduction. This is the "dig the hole deeper" approach taken by Obama's Bowles-Simpson Commission. It won't work.

Ryan does the smart thing. He and Ways and Means Chairman Dave Camp plan big cuts in both individual and corporate tax rates.

Individual tax rates will be 10% and 25% - and the present exorbitantly high tax rates on corporations (their stock is in nearly everyone's retirement plan portfolio) will be reduced to 15% and 25%.

Even under CBO's old-fashioned static scoring method - which Democrats insist on - the Camp-Ryan tax reforms will induce economic growth. On a correct dynamic scoring basis as performed by the Heritage Foundation, the positive effects of tax reform on both the budget and the lives of millions of Americans are even bigger. Each year, roughly 1.3 million new jobs will be added. Household wealth will average $500 billion more over the 10-year period.

Fiscal Freeze

The Republican plan reduces outlays as a percentage of GDP from the current level of 24.1% to 19.9% in 2021. Tax rates are lower - but revenues as a percent of GDP increase from today's 14.8% to 18.2% in 2021. And by 2021, debt as a percent of GDP is 40% less than under Obama's budget.

The Republican "Path to Prosperity" is the kind of common-sense government downsizing that voters were calling for in the game-changing election last November, when they threw out so many big-spending Democrats and, had Obama himself been up for reelection, would probably have thrown him out as well.

Ryan's budget resolution freezes and reforms much government spending at or below 2008 levels, thereby saving $4 trillion. It cuts subsidies, corporate welfare, government waste and bloat - and whacks those notorious Washington swingers known as Fannie and Freddie, who helped cause the mortgage crisis.

It will be a struggle to plug the gigantic hole that Obama has blown in America's finances. But everyone who is called upon to give up a government subsidy or to pay more should look upon the temporary sacrifice as if they were putting money away in a savings account that will pay them dividends as America returns to prosperity.

Some conservative Republicans have been heard to criticize Ryan's budget plan because it does not completely eliminate the federal deficit within 10 years. Not a good objection. Cutting tax rates, getting the deficit and debt heading downward, and boosting economic growth is much more important than adherence to some arbitrary date.

Everyone who has America's best interest at heart - including a good many Democrats in both the House and the Senate - ought to stand up and cheer.

Christian, an attorney, was a deputy assistant secretary of the Treasury in the Ford administration. Robbins, an economist, served at the Treasury Department in the Reagan administration.

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