the national interest

Paul Ryan’s War on the Safety Net Failed Because Democracy Worked

House Speaker Paul Ryan, delivering his farewell address. Photo: C-SPAN

In a valedictory address filled with his familiar smarmy evasions, retiring House Speaker Paul Ryan backhandedly acknowledged one important truth. “Solving this problem will require a greater degree of political will than exists today …” he said. “I acknowledge plainly that my ambitions for entitlement reform have outpaced the political reality and I consider this our greatest unfinished business.” And, “Our problems are solvable if our politics will allow it.”

The through-line in these confessions is that politics has thwarted Ryan’s ambitions. Politics is indeed the central antagonist in his ideological program, which the foundational texts in Ryan’s political education all grapple with. The novels of Ayn Rand, which Ryan worshipped, treat politics as a struggle to liberate the heroic makers from having their property seized by the inferiors who outnumber them at the polls. Supply-side economics, which Ryan also absorbed at a young age, proposed an answer: what Jude Wanniski, a founder of the creed, called “the theory of the two Santa Clauses.” The theory held that Democrats appealed to the public with popular social spending, and Republicans could only compete by offering tax cuts in return, matching or exceeding the opposing bid. Austerity and fiscal responsibility — “green eyeshades” politics, he dismissively called it — would never work.

Ryan began his career straightforwardly advocating the Santa Claus answer. As a young backbencher, he demanded the George W. Bush administration run larger deficits, dismissing the “green eyeshades” economists who thought the massive debts rolled up under Bush were as large as the markets could tolerate. But then, when the Obama administration took office, inheriting trillion-dollar deficits, Ryan seized on the chance to rebrand his ideas. He would now be a crusader against deficits and debt. This was a new path to his libertarian utopia.

Ryan insisted the country faced a civilizational crisis so terrifying it must tear down the social safety net, no questions could be asked. Somehow the magnitude of the crisis did not permit any compromise at all — Ryan diligently spurned any bargain with the Obama administration. If the debt crisis was resolved, after all, it would reduce the pressure he needed to override political opposition and stampede the country into his preferred solution.

Ryan hoped that full Republican control of government would give him his chance. But politics intervened. Attacks on the most established social-insurance programs, like Social Security and Medicare, already lay so far out of reach that his party did not dare attempt them. Ryan did attempt to repeal Obamacare, but this effort proved toxically unpopular, contributing to the enormous losses his party suffered in the midterm elections. Even a tax cut, which he managed to pass, hurt Ryan’s party. The unpopularity of the tax cut was so severe that President Trump was forced to promise before the midterm elections that he would soon introduce a new tax cut that really would benefit the middle class. (He never did, of course.)

That tax cut, the one legislative success in his fiscal plan, has become the centerpiece of his legacy. Ryan’s office has produced a slick, six-part video hagiography devoted to the passage of the $2 trillion corporate tax cut. In keeping with the need to craft a narrative of struggle, it presents the plan as a struggle against the status quo. Ryan calls his project “tax reform,” when of course he gave up on the goal of tax reform — which means eliminating loopholes and preferences in the tax code — and instead settled for tax cuts. “Every once in a generation,” Ryan says on camera, “you can convince politicians that the general interest of these reforms needs to prevail over the special interest.”

Ryan no doubt believes his tax cuts advanced the general interest, which he equated with liberating owners of capital from the burden of redistribution. But of course the passage of the tax cuts came at the demands of the party’s donor class, which threatened to withhold donations if Republicans did not deliver them their promised tax cuts. What Republicans passed was a helicopter drop of cash onto K Street.

Ryan insisted the first-order effects of his tax cuts (a reduction in taxes owed by owners of business) would be tiny, and the second-order effects (encouraging more business investment and growth) would be large. Instead, the opposite has occurred. The first-order effects have been huge: Corporate tax revenues have plummeted and the deficit has grown, which is almost unprecedented at such a late stage in the business cycle. The second-order effects appear miniscule. Predictions that corporations would repatriate cash from overseas have fallen far short of the promises (as Bloomberg reports today.) Corporations have used the tax cuts to buy back their own stock, simply enriching themselves with little spillover effect:

Photo: CNN

Economist Jason Furman shows that wages have remained unchanged. What has increased is after-tax profit.

Illustration: The Wall Street Journal

The story of Paul Ryan is that of a man who set out to radically change the role of government in public life, and eventually settled for dumping hundreds of billions of dollars on the wealthiest people in the country and hoping for the best. “I’m not one of these big-ego legacy guys,” he said last month with characteristic humility, well before unveiling of the six-part video treatment of his legacy.

Ryan’s valedictory address was filled with earnest declarations that America’s problems — the ones Ryan believes in, like overly generous social insurance, rather than other problems, like climate change — can be solved. He did not explain how. In the end, politics thwarted most of Ryan’s vision and punished his party for the steps it took in his direction. Politics defeated Ryan, and the country is immensely better off for it.

Ryan’s War on the Safety Net Failed Because Democracy Worked