Paul Ryan makes the case for staggering spending cuts

Jonathan Strong Contributor
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Rolling out a plan that is as shocking in how much it cuts as President Obama’s first budget was in how much it spent, Budget Committee Chairman Paul Ryan is laying out a case for huge spending cuts in a new white paper that couches the coming battle in almost apocalyptic terms.

“This generation’s defining moment has arrived,” Ryan says in his conclusion.

At issue is the GOP’s proposed budget, which cuts $5.8 trillion over 10 years, including massive cuts to entitlement programs experts say are driving the government towards a fiscal cliff.

The bold move by Ryan and House Republicans is by far the most significant action they have taken to embrace the wave of political energy over spending issues that propelled them into control of the House in November.

But the budget faces an inevitably harsh reaction in the Democratic-controlled Senate and will have limited implications for what the government actually spends; as Ryan admits, it is a blueprint that begins the discussion rather than a proposal to change the actual law.

“Government at all levels is mired in debt. Mismanagement and overspending have left a nation on the brink of bankruptcy,” Ryan says in “The Path to Prosperity,” the white paper defending his budget proposal.

Ryan undergirds his argument with a series of charts that aim to show how increased government spending, especially from Medicare and Medicaid, are driving massive deficits rather than a lack of revenue from taxes.

One shows that under current law spending by the federal government as a share of Gross Domestic Product (GDP) is slated for a long climb up from around 20 percent to 80 percent in 2080.

Another shows that under current law entitlement spending will, in 2050, eat up all tax revenues if taxes remain level as a percentage of the economy.

Another shows how increases in spending as a share of the economy have outstripped revenue in recent years and will race ahead of it if revenues are kept to the same proportion of the economy in coming decades.

Ryan warns the consequences of higher and higher debt will be dire.

“The recent soverign debt crises in Greece and other highly-indebted European countries provide a cautionary tale of the rough justice of the marketplace – lenders cannot and will not finance unsustainable debts forever, and when they cut up the credit cards of profligate countries, severe economic turmoil ensues,” Ryan says.

The risk is compounded because foreign governments hold much of our debt, Ryan argues.

“The nation’s reliance on foreign creditors has increased dramatically over the past few decades … If foreign investors, especially in foreign governments such as China, they will demand higher compensation to offset the perceived risk of holding U.S. debt – meaning sharply higher interest rates,” Ryan says.

As Ryan concedes, the GOP’s budget is the starting point for a years-long process that would involve major legislation to change entitlement spending, reform the tax code and cut discretionary spending, which, even now, is only 40 percent of federal spending.

“The Path to Prosperity is the groundwork for a serious conversation about the future of this exceptional nation,” Ryan says, “While an important statement of priorities, a budget is merely a blueprint for the actual work of statecraft.”

In the budget process, the House and Senate must agree on the budget, but it is not sent to the president for his signature.

The budget has major implications on spending bills, including setting a “baseline” by which all spending bills are compared to in estimating how much they cost.