Paul Ryan’s hypocrisy on Keynesian fiscal policy
Published: Friday, October 26, 2012
Updated: Friday, October 26, 2012 08:10
When Congress has been in session since the beginning of September – 14 days for the Senate and 15 days for the House, one of the primary issues has been the forthcoming fiscal cliff.
The fiscal cliff results from the Budget Control Act, which was passed in 2011 at the height of the debt ceiling crisis. The law provided for a bipartisan debt committee in Congress to find solutions to cut the deficit. If the committee did not find compromise and pass a bill cutting at least $1.2 trillion over ten years, automatic sequestration cuts of $1.2 trillion would be instituted anyway.
Congress, as one would expect, did not reach a compromise and the federal budget is now subjected to these cuts unless Congress steps in.
Both Congressional Democrats and Republicans have balked at the automatic cuts to defense. Rep. Paul Ryan has been especially outspoken. In an interview with CNBC’s Larry Kudlow, Ryan called the cuts devastating and said addressing the fiscal cliff would be the Romney administration’s first priority.
The Romney-Ryan campaign released ads claiming the defense cuts threaten 130,000 jobs. Ryan has said 44,000 are at stake in Pennsylvania alone.
The problem is not the truth of these statements. These cuts certainly will threaten a lot of jobs in a time when our economy is just starting to turn the corner. Some economists have even warned the cuts could lead to a double-dip recession. But this type of rationale goes against everything Ryan has recently claimed about deficit spending and solving our nation’s debt problem.
Since the stimulus passed in 2009, many Republicans have long attacked it as wasteful and inefficient compared to private sector spending. Ryan has called the stimulus a "wasteful spending spree" and a "failed neo-Keynesian experiment."
Usually, this is a valid argument. Government spending often crowds out investment spending by pumping taxpayers’
dollars into private markets.
However, in a recession, Americans as a whole are saving more of their money. Less spending leads to less consumption and fewer jobs. The Keynesian school of economic thought then argues that in order to keep
unemployment from increasing, government should not cut spending and actually increase it in most instances.
This was President Obama’s thinking in 2009 when he passed a bill largely aimed at building infrastructure, providing tax cuts, and giving aid to states with depressed budgets.
Today, Paul Ryan argues we should not reduce the size of the defense budget yet.
After the dot-com bubble burst in 2000, we were left in a recession. Two mostly ineffective stimuli were passed by Bush and there was much debate over a third. Many Democrats in the House were opposed to this stimulus. A second-term Congressman from Wisconsin named Paul Ryan stood before the floor of the House in 2002 and said, "We’ve got to get the engine of economic growth growing again, because we now know because of recession, we don’t have the revenues that we wanted to, we don’t have the revenues we need, to fix Medicare, to fix Social Security. To fix these issues, we’ve got to get Americans back to work."
He also praised past Keynesian spending, saying, "What we’re trying to accomplish here is to pass the kinds of legislation that, when they’ve passed in the past, have grown the economy and gotten people back to work."
When Ryan attacks "neo-Keynesian" policies, one has to wonder who he is really attacking.
Does the Romney-Ryan plan to increase defense spending by $2 trillion through 10 years, even though US military leaders have stated they do not need the funding, count as wasteful?
Does he no longer support the Bush stimuli that he argued for in 2002? Or is he really attacking out of convenience, utilizing Keynesian thinking when beneficial to his party and opposing it when the other party opposes the bill?
This campaign has been filled with attacks on Romney’s constantly changing positions. After others have attacked Romney’s policies, he has reframed the debate by saying the policies attacked are not his, despite the plan already on his website.
Many of us believed that Ryan was a numbers guy – that he has a clear plan and vision for the future. It’s unfortunate that even he has discarded opinions when they are inconvenient.
At least, we can recognize Romney-Ryan for consistency there.