Wednesday, Dec. 14, 2011

Paul Ryan: The Prophet

Here's a curious fact: in a year of political gridlock, when Congress could get nothing done — not even pass a budget — the most influential American politician was House Budget Committee chairman Paul Ryan. Through a combination of hard work, good timing and possibly suicidal guts, the Wisconsin Republican managed to harness his party to a dramatic plan for dealing with America's rapidly rising public debt. He brought an ugly issue out of the foggy realm of think tanks and blue-ribbon panels and dropped it into the middle of the national debate in time to define the next presidential election. If 2012 turns out to be a clear choice between very different answers to a genuinely important question — instead of the usual vague contest between competing slogans and haircuts — give the credit to Ryan.

The supply-sider from Janesville, Wis., tapped into a deep well of anxiety over trillion-dollar deficits at home and the threat of debt-fueled calamity in Europe. Did he deliver a perfect plan? Not even he claims that. But Ryan, 41, offered a budget that began to convey the scale of change necessary to defuse the American debt bomb: Sweeping tax reform. Unprecedented spending freezes. Most important, a thorough reinvention of federal entitlements.

You could see Washington wince. Plenty of Republicans were miserable about finding themselves steered into casting votes in favor of means-testing Social Security and converting Medicare to a voucher-like program. Democrats howled at the sacrilege and Ryan's refusal to raise income tax rates on the wealthy. Then they realized with delight that Ryan had restored them to their favorite turf: defending Granny from the supposedly heartless GOP. No wonder Republican Newt Gingrich, who touched the third rail of entitlement reform back in 1996 and has the scars to prove it, denounced Ryan's proposal as "right-wing social engineering."

But it was Ryan who watched with satisfaction as his fellow Republicans forced Gingrich to eat his words, and it was Ryan who counted the votes as his party overwhelmingly endorsed the tough budget in both the House and Senate. It was Ryan who brought President Obama down from his cloud of happy talk about windmills and high-speed trains to acknowledge that America has a plateful of peas to choke down after its binge at the dessert bar.

Ryan's success in setting the agenda was a long time coming. The Ryans of Janesville are a prominent family that has made piles of money moving mountains of dirt. Ryan's great-grandfather Patrick started a railroad-grading business with a team of mules in 1884. Today, Ryan Inc. Central is one of the largest earthmoving firms in the country, building everything from home sites to golf courses to landfills to wetlands. Young Paul worked briefly for the family firm in the marketing department, but it was clear from an early age that his real interest was political economics. Steeped in the fiscal conservatism common to business owners, he took his Miami of Ohio economics and political-science degree and moved to Washington.

He soon found himself writing speeches for the cheerful champion of low taxes and free markets, the late Jack Kemp of Buffalo, N.Y. As part of the policy staff at Empower America, an advocacy group founded by Kemp and William Bennett, Ryan worked with Peter Wehner, an official in George W. Bush's Administration. Wehner remembers Ryan as "a remarkable talent — extremely bright, intellectually curious and honest, with a huge appetite for economic data and economic theory. He read everything, digested everything and was able to convert it into language that the rest of us could understand." Wehner admired the fact that Ryan would do menial jobs without complaining — even scissoring newspaper articles for his technophobic bosses well into the Internet age.

Ryan was just 28 when he entered Congress in 1999. The budget was balanced. The stock market was booming. But he was fixated on the impossible arithmetic of the U.S.'s long-term fiscal commitments: health care inflation x (more retirees + longer life spans) = 1 big problem. So he worked his way up the Budget Committee ladder, following advice he was given by the liberal Barney Frank of Massachusetts: the way to have an impact in Congress is to "be a specialist, not a generalist."

From his seat on the committee, Ryan watched his party's leadership inflate the deficit by cutting tax rates like Kemp conservatives while spending like Kardashians. When in 2008 he had reached a position in which he could introduce his own sobering budget resolution, he called it the Roadmap for America's Future. It looked very different from the recent Republican past, and he picked up just eight co-sponsors. Ryan figured that "we just have to persevere on the politics — everyone is so afraid of the politics of these issues." It's fun to cut ribbons on buildings and smile for the cameras while handing out checks. Voting for cuts is no fun at all. "That's why paralysis set in," he says. "And the problems just got bigger."

Undeterred, Ryan ran his road map up the flagpole again in 2010, this time with 14 co-sponsors. That caught the eye of the Tea Party movement, which had loads of energy and was looking for places to channel it. Ryan, now in his seventh term, became an overnight sensation — a darling of Fox News and Rush Limbaugh, with big donors begging him to run for President, while his plan (renamed the Path to Prosperity) sailed through the House with 235 Republican votes. Though it stalled in the Senate, where Democrats have a majority, Ryan's plan won 40 Republican votes.

Democrats were likewise galvanized. "One of the worst things to happen to this country," Senate majority leader Harry Reid declared it. A "path to poverty," House minority leader Nancy Pelosi preferred. The President invited Ryan to sit front and center for an April 13 speech outlining his own budget priorities. Also invited were Democrat Erskine Bowles and Republican Alan Simpson, co-chairs of a bipartisan commission on fiscal reform. The President's staff, Ryan says, "led us to believe" that the speech would be a first step toward a compromise that would put the budget on firmer footing. Instead, Ryan walked into an old-fashioned setup: Obama delivered a blistering denunciation of Ryan's plan in full-throated campaign mode. Points of agreement were ignored, points of disagreement highlighted, even distorted. "I don't think there's anything courageous," Obama charged, "about asking for sacrifice from those who can least afford it." It was at about that moment, Ryan realized, that he and his plan had become a central issue in the 2012 elections. "That's when the lightbulb went off," Ryan explains. "They were constructing a political plan."

The points of agreement are worth noting, even if the politicians won't do it. Ryan's dramatic proposal would not have gained any traction if it did not address a widely acknowledged problem: over the next two generations, the U.S. government is on track to spend many tens of trillions of dollars more than it plans to raise. Unless changes are made, that will force so much borrowing that interest payments alone will sink the federal budget.

That dismal prospect has been with us for years but was always distant enough to make it easy for most people to ignore. That was before the economy went haywire and Greece, Spain and Italy turned into cautionary tales. "I used to talk about the problems we would have in 10 years. That was before the recession." Now, Ryan says, "The experts are telling us the point of no return is two to five years out, maybe just two or three. Everything is moving faster, pushing us closer to the cliff."

Most experts also agree on the list of tools available for closing the debt gap. Raising taxes, cutting spending — or some combination of both. Inflation can be another tool: when it goes up, the value of existing debt goes down. For example, $100 borrowed in 2000 is worth less than $80 now, thanks to inflation's slow erosion. Speed up that erosion a bit and debt melts away. There's a downside, though: savings melt away too.

The last tool is everyone's favorite because it's all pleasure and no pain: economic growth. If the $15 trillion U.S. economy grows by 3% rather than 2% per year, after a decade that extra percentage point will mean almost $2 trillion extra in the national wallet each year. But how do you get faster growth? That question is the big enchilada, and if Ryan has his way, it's the one voters will answer next year. In broad terms, today's conservatives believe that relatively low taxes, low government spending and low inflation are the seeds of higher growth rates. Republicans had a chance to test this theory during the George W. Bush years but skipped the low-spending part. In contrast, today's Democrats — again, speaking broadly — believe higher taxes on the wealthy can fund federal investments that promote economic opportunity and innovation.

For all the rhetoric about greedy skinflints and wild-eyed socialists that we're likely to hear next year, the real dispute over our fiscal future boils down to which tools to use and how aggressively to use them. Ryan opened the bidding by drawing nothing from Column A and trillions from Column B. His proposal called for tax reform but not higher tax revenues. On the other hand, Ryan would freeze all nonsecurity discretionary spending. Washington would stop running Medicaid, the program for indigent patients. Instead, the federal government would send checks to the states to set up their own programs. Though his plans don't specify changes to Social Security, Ryan favors payments based on need rather than preretirement earnings. And future retirees (people under 55 now) would buy their own health insurance, only partly subsidized by the government. Medicare in its current form, which pays doctors and hospitals directly for services, would go away. Here again, Ryan would provide larger subsidies for poorer patients.

There's a lot for Democrats to attack in that plan. As the saying goes, everything in the federal budget is there because someone likes it. But Ryan believes talking about dramatic change is the first step toward "detoxifying these issues." He says, "People are waking up, turning on the TV, seeing their states struggling with debt problems, seeing Europe implode, and they are realizing that something different needs to happen."

When I visited him at his Washington office shortly after Thanksgiving, the usually clean-shaven Republican was still sporting a goatee from deer-hunting season. He's an outdoorsman, which he gets from his mother, and a fitness buff, unlike his dad. Ryan was a teenager when he found his father, a Janesville attorney, dead of a heart attack in his 50s; his grandfather also died young of a heart attack. Ryan seems determined to break the grim history. Congressional staffers have voted him the Hill's No. 1 gym rat.

Asked why he didn't put his hat in the ring, Ryan answers, "I have the policy ambition. I just don't have the personal, political ambition" that it takes to be President. "You have to want it so badly in your heart, your mind and your stomach. I don't have that fire in my gut."

What Ryan had this year was the courage to look the future in the eye. It is a seer's work to glimpse around the corner and sound an alarm. And in a democratic republic, it is the job of voters to choose a path away from danger. Ryan would say that all he has done is sound the alarm. The hard work — and some hard years — remains, because for all the shocking and unsettling changes embodied in Ryan's proposal, it wouldn't balance the federal budget until 2040. The prophet of 2011 will be 70 years old.