Commentary | Budget, Taxes, and Public Investment

Welcome to Paul Ryan’s House – and budget

House Budget Committee Chairman Paul Ryan (R. – Wisc.) will give the Republican rebuttal following the State of the Union address on Tuesday night. In recent days, GOP leadership has made it unequivocally clear that Ryan is their point man on the economy and the budget, with House Speaker John Boehner saying that he is “pleased that Paul will be outlining a common-sense vision for moving our country forward.”

Ryan’s plan, “A Roadmap for America’s Future,” was first released in January 2010 and outlines his vision for raising taxes on the middle class, privatizing Social Security, voucherizing Medicare, and allowing the national debt to explode in coming decades.

Not until recently, though, was Ryan’s plan paid much heed. Embedded in the new rules passed at the beginning of the 112th Congress was a substantial empowerment of Ryan in his role as House Budget Committee Chairman. On Tuesday, House Republicans will vote to instruct Ryan to cut non-security discretionary spending back to fiscal year 2008 levels or less. The symbolic vote is meant to confer legitimacy; new House rules approved earlier this month gave Ryan “interim” authority to set committee allocations and revenue and spending levels for the remainder of FY2011 without any vote of approval. Using this power, Chairman Ryan is expected to slash the non-security discretionary budget for the remainder of this fiscal year by more than 20% relative to the president’s budget request (the Departments of Defense, Veterans Affairs, and Homeland Security will be exempted).

How is that for transparent budgeting? No debate, no floor vote, no conference between the chambers – just a unilateral decision from one member of one chamber of Congress. For all intents and purposes, the new rules approved a numberless budget resolution that had not been written.  Senate appropriations bills exceeding the levels set by Ryan could be ruled out of order in the House, essentially allowing the House Budget Committee chairman to hold the government’s operating budget hostage to his preferences or face a government shutdown.

The new rules included other provisions expanding the power of the House Budget Committee Chairman. For starters, the budget reconciliation process, a parliamentary procedure that limits debate and can thus circumvent filibuster votes in the Senate can now be used to move legislation that increases the deficit. Through the 1990s, reconciliation instructions (which originate from the budget committees) were intended and used as a tool to reduce deficits. In the early 2000s, the reconciliation process took a U-turn and was used to pass legislation first draining surpluses and the then increasing deficits. Notably, reconciliation was used to pass the unpaid for Bush-era tax cuts, which the Center on Budget and Policy Priorities notes added $2.6 trillion to the public debt between 2001 and 2010.

After watching surpluses turn to chronic deficits, the 110th Congress in 2007 ruled that budget resolutions would be out of order if they included reconciliation directives that would increase the deficit. But now that rule has been reversed, and Ryan has the power to pass a budget resolution instructing sweeping, unfunded tax cuts.

The budget committees also enforce Pay-As-You-Go (PAYGO) rules that were instituted to prevent new legislation from widening deficits or squandering surpluses.  Until recently, any piece of legislation increasing mandatory spending or decreasing revenue had to be fully offset with spending cuts and/or tax increases to ensure deficit-neutrality (unless granted an emergency designation). Under the new House rules, PAYGO has been replaced with a bizarre Cut-As-You-Go (CUTGO) rule, which requires that new mandatory spending be offset only by spending decreases and explicitly exempts all tax cuts from requiring offsets. While Senate PAYGO rules and statutory PAYGO would still prove an obstacle for unpaid tax cuts, the recent tax compromise reminds us that these too can be circumvented for politically sensitive votes; the evisceration of the House PAYGO rules removes one of the few barriers protecting against larger structural deficits.

Democratic control of the Senate will check some of the new powers of Chairman Ryan (although we are in for an ugly fight with uncertain outcomes when it comes to appropriations levels), but it’s a dangerous precedent to set and could spell disaster down the road. Under the new House rules and leadership of Chairman Ryan, it will be easier to pass massive unfunded tax cuts, easier to slash domestic investments, harder to pass routine legislation that tangentially increases mandatory spending, and impossible to use sensible reform of wasteful tax expenditures as offsets for public investments.

These new rules move us one step closer to Chairman Ryan’s budget vision.  A new Economic Policy Institute briefing paper “Paul Ryan’s Plan for Millionaire’s Gain and Middle-Class Pain” exposes that the Ryan Roadmap would dismantle social insurance programs, raise taxes on the middle class, and transfer wealth from the middle class to corporations and millionaires. The Roadmap veers back to the failed Bush-era economic policies of cutting taxes for the wealthy while neglecting the middle class and defunding national investments. It even proposes an increase in taxes on the middle class, the elimination of corporate taxes, privatization of Medicare, and the partial privatization of Social Security.

The Roadmap contains many unpalatable provisions unlikely to clear a 60-vote threshold in the Senate, so the reconciliation process provides an easier route for Ryan’s drastic proposals to dismantle the major entitlement programs. Halving taxes on millionaires and eliminating corporate taxes would result in a significant drain on revenue, but that would not be a problem under the new House CUTGO rules. And rolling back non-security discretionary spending for the rest of the fiscal year was just made a lot easier. Welcome to Paul Ryan’s House – and budget.

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