Liberal Opposition to Ryan Plan Is Delusional Demagoguery

[Guest]

It's one thing for good-faith conservative Republicans to challenge the Ryan plan from the right if they believe its cuts are too small and too slow, but these liberal attacks are something else again.

How catastrophic would the nation's fiscal condition have to be before liberals recognized its urgency? Is there any scenario under which they'd consider setting aside their partisan populism to come to the nation's rescue? Are they capable of even temporarily setting aside their redistributionist myopia long enough meaningfully to address the main drivers of the national debt?

As we know, President Obama hasn't addressed and won't address our financial problems. He has never presented a budget plan that even pretends to rein in entitlement spending or comes anywhere close to reducing our annual deficits to less than shocking numbers, much less reversing the debt picture.

When Paul Ryan presented his plan in April 2011, Obama mocked, ridiculed and demonized him and Republicans as wanting to inflict pain on the elderly and autistic, among other sympathetic groups. Yet when Obama's treasury secretary appeared before the House and the Senate, he admitted the administration's plan wholly fails to address the long-term debt issue and said only that the administration doesn't like the way Ryan's plan approaches it.

We are witnessing the end results of liberal policies on a wide variety of issues -- from health care to the economy to the national debt -- yet liberals can't give them up. Instead of acknowledging that their utopian dreams haven't delivered, they are shaking their fists at Republicans and conservatives, as if it were our fault that reality doesn't conform to their fantasies. They'd be much better off reading Mark Levin's "Ameritopia," but I won't hold my breath.

In The New Republic, Jonathan Cohn rails against "the stunning immorality of Paul Ryan's budget." The Washington Post's editorial board denounces "Paul Ryan's dangerous, and intentionally vague, budget plan."

Cohn, obviously not given to hyperbole, suggests that no politician would ever boast about a plan that would rob health insurance from tens of millions and "effectively eliminate the federal government except for entitlements and defense spending" -- "except Paul Ryan just did."

It's not as though "tens of millions" have anything desirable with Obamacare, and whatever they do have costs multiples of what it was advertised and will also wreck the quality of our health care and greatly diminish our freedoms. So how about instead of the cherry-picking we get a little more of the whole picture?

Cohn obviously resents any proposals that would deprive liberals of the Monopoly money they use to effectuate their social planning schemes, even though extending the status quo would guarantee national insolvency and the disastrous consequences it would bring. How do they figure government dependents would fare if that were to occur?

Instead of contributing something -- anything -- toward long-term solutions to the problems they largely caused, Cohn and his fellow liberal finger-pointers are scapegoating Ryan and Republicans for offering a reasonable plan to navigate us out of this mess.

The Washington Post's editors are no better. They lead with what they pretend is a self-evident truth but what is no more accurate than their Keynesian maxim that deficit spending stimulates the economy. "There is no credible path to deficit reduction," they write, "without a combination of spending cuts and revenue increases."

Sorry, but after a certain point, tax rate increases yield diminishing marginal returns for the revenue ledger, which we've seen throughout our history at both the macro (entire economy) and micro (luxury tax) levels. No matter how high they jack up the tax rates, they're not going to produce a significant fraction of the additional revenue needed to balance the budget, let alone begin to reduce the national debt.

Try a simple exercise: Compare the Bush budgets with the Obama budgets, and see the startling amount of difference economic growth makes on the generation of revenue. We're talking hundreds of billions of dollars.

I don't believe that Ryan is proposing tax cuts primarily because he believes we pay too much in taxes. I think he did so because of the practical reality that we can't ultimately balance the budget -- even with substantial spending cuts -- unless we have a growing economy that yields a bigger pie to generate sufficient revenue.

The painful truth is that Ryan's plan is modest and moderate, not grandiose and extreme. If you want to criticize it, do so on the basis that the country could use an even bigger fiscal diet, not that it is too severe.

Democrats and their liberal helpmates are stoking the flames of the fire that threatens the republic; Ryan and others are driving the firetrucks and are merely debating over how big the hoses should be.

In a saner and less polarized nation, Obama would be ousted in a historic landslide in November. He very well may be.

http://townhall.com/columnists/davidlimb...uery/page/full/

[Neil D]

When Austerity Is Self-Defeating

By Matthew Yglesias

In "Fiscal Policy in a Depressed Economy" (PDF) Lawrence Summers and Brad DeLong try to nail down the center-left's take on the "macro wars," attempting to mount a robust defense of fiscal stimulus in the conditions of the Great Recession without overturning the conventional wisdom about the primacy of monetary policy from the era of the Great Moderation.

They say that normally stimulating the economy with discretionary fiscal policy won't work because the central bank, in order to avoid inflation, will respond to any stimulative impact with higher interest rates. Thus government purchases will "crowd out" private sector activities, which may be good or bad in the long term but either way won't change the level of economic activity in the short term. But in a period when rates are up against the zero bound and still the economy is depressed, the calculus is different. By simply committing to keep interest rates low despite the expansion in government debt, the central bank can allow an expansion in government purchases to increase the amount of economic activity and not just crowd out private sector investment.

But what about the need to repay the loan later with taxes? Doesn't that produce growth-slowing distortions? Yes, it does. But they argue that the decision to allow for a very prolonged period of depression also creates economic distortions. For starters, a prolonged recession means a prolonged period of time of below-average investment—a time during which population growth and depreciation mean that a society's stock of capital goods is declining. Secondarily, when people are employed they're constantly learning job-relevant skills whereas when they're unemployed they're slowly un-learning those skills. Thus not fixing a recession leads to declines in both physical and human capital. They illustrate this dynamic by showing that the CBO has steadily lowered its estimate of the U.S. economy's "potential output" as the recession has dragged on:

They also mount some provocative evidence that this kind of factor explains why core European unemployment remained so stubbornly high for most of the 1980s and 1990s. They quote Ball (1997) on Europe noting that "countries with larger decreases in inflation and longer disinflationary periods have larger rises in the NAIRU" while "imperfections in the labor market" that tended to take the blame had "little direct relation to change in the NAIRU." The exception that proves the rule here is that generous long-term unemployment benefits do seem to have NAIRU-boosting properties. But that variable is a mixed bag. On the one hand a labor market policy, but on the other hand an alternative policy response to a prolonged depression.

Their net point is that rather than a tradeoff between short-term pain and long-term gain, we face a tradeoff between the long-term pain of needing to repay a larger stock of debt and the long-term pain of needing to deal with an economy that's permanently crippled by under-capitalization and deteriation of worker capabilities. They argue that this means fiscal stimulus passes cost-benefit analysis even under very restrained estimates of the fiscal multiplier.