Paul Ryan's Class War Budget

A blog about business and economics.
March 12 2013 9:45 AM

Paul Ryan Will Balance the Budget With Class War on Behalf of the Rich

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House Budget Committee Chairman Paul Ryan

Photo by JEWEL SAMAD/AFP/Getty Images

In his Wall Street Journal op-ed laying out the case for the House Republican budget, Paul Ryan contends that "the most important question isn't how we balance the budget." When a politician tells you something he's doing isn't so important, that's probably a good place to look at where the ball's been hidden.

And judging by the budget he just released, the "how" here is pretty darn important. The budget will be balanced, if Ryan gets his way, through a campaign of thoroughgoing class warfare aimed at Americans in the bottom half of the income distribution in order to protect the interests of a small, high-income minority.

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Ryan's plan starts, like all good GOP deficit reduction plans, with a giant tax cut. Specifically, he wants to replace the current progressive rate structure with a two-rate structure—10 percent and 25 percent. If you're currently an individual paying a 39.6 percent marginal tax rate on your income over $400,000, that's an enormous tax cut. If you're currently an individual paying a 25 percent marginal tax rate on your income of $70,000 a year you may wonder what's in it for you here. The answer is, most likely, higher taxes.

We went through this when Mitt Romney and Ryan were running for the presidency, but the proposal here is to make the enormous rate cut for the highest earners affordable through unspecified tax reform. Since the tax reform is unspecified, it's difficult to say exactly what the consequences of it would be. But a 2012 report for Brookings by Samuel Brown, William Gale, and Adam Looney found that Romney/Ryan-style tax reform (PDF) would result in higher taxes for most families earning less than $100,000 a year. I'm sure D.C.'s eager think tankers will be rerunning the numbers on this relative to the updated policy baseline later today, when I'll update you.

Beyond lower taxes on the rich and higher taxes on the middle class, you can expect cuts in programs for the poor. Medicaid expansion? Repealed. The Affordable Care Act is slated to offer sliding-scale subsidies to anyone earning less than 400 percent of the Federal Poverty Level (that's $45,960 for an individual, $78,120 for a family of three) to help you buy health insurance. Ryan's budget would repeal that. For those currently enjoying Medicaid benefits, Ryan will "provide states flexibility on Medicaid"—which is to say, flexibility to rescind your eligibility for Medicaid. If you're on food stamps, Ryan will "allow states to customize SNAP to address the needs unique to their citizens"—which is to say, allow them to cut benefits and eligibility. There's also some Pell Grant cuts in there and, of course, overall cuts to the domestic discretionary budget.

Obviously Ryan's Medicare ideas are important for the long term. But in the 10-year horizon these are the important means by which he wants to balance the budget—lower taxes on the rich, higher taxes on the middle class, less program spending for the poor and the working class. It's a little difficult to say why that would be your policy response to a couple decades worth of rising inequality, which is presumably why Ryan prefers to sweep the question of how under the rug.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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