April 7, 2011
The Path to Prosperity...in 2040?By Vasko Kohlmayer
Representative Paul Ryan of Wisconsin is Chairman of the Budget Committee in the House of Representatives. He is also widely acknowledged to be one of the most fiscally conscious members of the Republican Party and of the conservative establishment.
It was, therefore, with much expectation that those concerned about the government's fiscal condition awaited his blueprint budget proposal, which he calls The Path to Prosperity. The hope was that it would pave the way out of the predicament.
Disappointingly, it does not do so, even though many well-meaning people want to believe otherwise.
The first thing that should tip you off that something is seriously wrong with the proposal is that it does not balance the budget. Startling as it may sound, one of Washington's leading fiscal hawks has no intention of bringing federal finances into balance anytime in the foreseeable future.
That the budget needs to be balanced immediately is be quite obvious. Having assumed more obligations than it can conceivably make good upon, the US federal government is for all practical purposes bankrupt. Taking on even more debt simply amounts to fiscal insanity.
This, however, is precisely what Ryan's budget will do. He tries to conceal this by claiming that his proposal "puts the budget on the path to balance and pays off the debt." Notice the phrase "on the path." The question that we need to ask is: How long will this path be?
When you look at the summary tables at the back of The Path to Prosperity you will see that Ryan's proposal still foresees a sizable deficit in 2021, the last year for which he makes projections.
Ryan apparently justifies his "on the path" claim by referring to a study by the Congressional Budget Office which estimates that under his plan the federal budget will balance by 2040. This is almost thirty years from now!
Is this how a serious and responsible leader should address the most serious fiscal crisis in this country's history?
Year 2040 is obviously only a cop-out. Given the depth of our indebtedness, it is safe to say that if the spending and debt trends continue, the dollar will have collapsed by the end of this decade, if not sooner. It is enough to look at the climbing price of gold to see just how much confidence the world places in our rapidly failing currency.
Any serious budget cutter would insist that the budget be balanced straight away. If we are to have any chance of averting the impending collapse, it needs to be done now. This may seem radical in Washington, but this is the only way. No over-indebted entity can keep borrowing and hope that things will turn out well in the end.
Government is no exception. It is true that it has more leeway, because it can freely print money with which to paper over its obligations for a time. But this does not solve the problem. It only postpones the inevitable and makes the eventual day of reckoning all the more painful. A good look at The Path to Prosperity makes it distressingly obvious that Congressman Ryan has no intention of taking meaningful steps to address the government's fiscal plight.
Some may find this assessment of Paul Ryan's proposal too harsh or unfair. It is not. Consider these facts.
On page three of The Path to Prosperity Congressman Ryan boasts that his plan will cut "$6.2 trillion in government spending over the next decade compared to the President's budget." The $6.2 trillion figure may seem like an impressive amount, and so it is when viewed in absolute terms. But if you know that Obama's proposed spending was some $46 trillion over that ten-year period, your prospective is bound to change dramatically. The figure only represents 13 percent of the overall amount.
Furthermore, to call these reductions cuts is disingenuous. There is only one overall budget cut in the whole ten-year period, and it is a small one at that. It occurs in the next fiscal year when government spending will decrease by less than $100 billion, which is less than 3 percent of the total budget. Thereafter, government and debt will grow in their usual merry way. When all is said and done, there are hardly any real cuts in Ryan's plan. All it does is to slow down the projected rate of growth by relatively modest amounts.
Ryan's timidity in cutting is due to his fear that the public would not tolerate serious slashing. He is right. The problem is that we cannot cut the budget, because we the people will not allow it. We blame the politicians, but it is actually we who are ultimately responsible. Any politician who proposes serious cuts almost invariably gets voted out. We agree in the abstract that the budget needs to be reduced, but we reject the practical implementation of this idea. It is a bad situation.
The Path to Prosperity, regrettably, probably is more harmful than most proposals of this kind. This is because it is cast in language that creates an impression that it tackles the problem while all it really does is only to further exacerbate it.
Sad to say, Paul Ryan's document is misnamed. Instead of The Path to Prosperity, it should be called The Continued Path to Fiscal Doom.