In the fall of 2010 the Federal Reserve was looking for a way to boost the economy out of the Great Recession. By then interest rates were as low as they could go, so the Fed tried another tack: "quantitative easing," injecting $600 billion of new money into the economy by buying up long-term debt.
This brought a protest from Republican U.S. Rep. Paul Ryan. At the time his district was in the doldrums: Racine, Kenosha and Janesville all had unemployment rates of 10% or higher.
The Fed's action, he conceded, would devalue the U.S. dollar, making exports more competitive and helping manufacturers in his district. "But I don't think it's a good tradeoff to do so at the expense of inflation," Ryan declared. "Inflation is a killer of wealth."
Inflation? At the time, America had just experienced its lowest inflation in more than half a century. The 2009 rate had actually been negative, at -0.34%.
As for the horrible impact of quantitative easing, since the Fed began this technique in 2008, inflation has risen by an average of 1.6% in 2009-2012 and has been continuing at the same rate in 2013.
The Fed's actions didn't cause anything near to an inflation problem and probably helped lower unemployment and bring jobs back to Ryan's district. So did anyone in the media get back to Ryan and ask about his doom-saying?
Nope. Because the media's established narrative is that Ryan is a "policy wonk," as he's typically described. He's a "serious-minded policy expert" (according to USA Today), a "top wonk and budget tutor" (Associated Press), a policy "man of ideas" (Wall Street Journal editorial page editor and Green Bay native Paul Gigot), with "budget ideas that are thoughtful and serious" (New York Times).
Partly the reputation may have arisen from reporters who swallowed Ryan's questionable description of himself as more a policy man than a politician. But mainly it's due to his much-discussed economic "road map," released a couple years ago, and re-released recently (PDF) with few changes, as "The Path to Prosperity."
In theory, Ryan's proposal aims to provide a solution to an alleged long-term debt problem the nation faces (though it's actually as low as it was under the first President Bush and projected to drop much lower).
But if that's the goal, Ryan goes about it an odd way, by increasing the debt. Yes, he does suggest spending cuts, but as an analysis by the Center on Budget and Policy Priorities has found, Ryan also proposes a series of huge tax cuts, "nearly $6 trillion in lost federal revenue over the next decade." That includes cutting the top individual tax rate to 25% from 39.6% and cutting the corporate tax rate to 25% (from 35%).
How would he replace this $5.7 trillion in lost revenue? Ryan suggests closing tax loopholes, but offers not one example. By far the most revenue could be gained by ending the mortgage interest and charitable donation deductions, but they are politically popular and unlikely to be eliminated. Even if they were, how much money could thus be raised, and what would be the impact on the economy? Rather important questions, but this serious man of ideas can't be bothered to address them.
There is nothing subtle about this proposal. As a story in Investors.com noted, all federal spending outside of Social Security and interest on the debt "would shrink to 11.2% of GDP, a level not seen since 1948 - before Obamacare, Medicare, Medicaid, NASA, the interstate highway system and almost before the first baby boomers were born. That is nearly 25% below the 14.6% of GDP average over the past 64 years."
This, too, is completely impractical politically and will never be supported by voters or Congress. But that's almost beside the point as Ryan never goes through the countless programs in the federal budget, itemizes the proposed cuts and considers their practical impact. He gives no reason to think these cuts are anything but a fantasy.
The biggest effect of the cuts would be on federal health care programs, which actual wonk and Washington Post columnist Ezra Klein estimates would leave 35 million people without coverage. Assuming they don't get ill and die, they are likely to show up at emergency hospital departments, resulting in the most costly care possible. How exactly does this save money on medical care?
Finally, the plan also eliminates Obamacare but claims the $716 million in savings it generates. That slippery maneuver was roundly criticized during the recent presidential election, but an undaunted Ryan once again included it in his latest budget plan.
If this is a "road map," it is one that's missing most of the cities, highways and exit signs. This is not a serious budget proposal, but a rhetorical document, a work of fervent ideological zealotry.
Bruce Murphy is the editor of UrbanMilwaukee.com.
