The editor’s opinion from Marketplace, Northeast Wisconsin’s business magazine. (Obligatory disclaimer: Most hyperlinks go to outside sites, and we’re not responsible for their content. And like fresh watermelon, peaches, pineapple, grapefruit, tomatoes and sweet corn, hyperlinks can go bad after a while.)

May 22, 2008

Ryan for President

Wednesday's Wall Street Journal featured an absolutely brilliant column by U.S. Rep. Paul Ryan (R–Janesville), a demonstration that not all Republicans are merely Democrat Lite — wanting the same programs as Democrats, but slightly smaller with slightly less taxes.

Ryan is one of the seemingly few politicians to realize the demographic time bomb that awaits a country that fails to do anything about how entitlement spending is gobbling up larger portions of the federal budget and the economy. By the time Ryan's children reach his age, 38, to fund Social Security, Medicaid, Medicare and other government functions "will require more than doubling the average tax burden of the past 40 years just to keep the government afloat. Continuing down this path will eventually strangle our economy."

So how do you change that? With "A Roadmap for America's Future," which deals with the entitlement crises and our hideously complicated tax system:
  • A refundable tax credit of $2,500 for individuals and $5,000 for families to pay for health insurance, which would take ownership away from the government and businesses to individuals.
  • Convert Medicare for those younger than 55 to an annual payment of up to $9,500 (the amount based on income) to purchase coverage, and allowing states flexibility to alter their Medicaid programs to fit the states' individual needs.
  • Giving workers younger than 55 the option to invest more than one-third of their Social Security taxes into individual accounts.
  • Give taxpayers a choice to use the present tax system or a two-level tax system, featuring larger standard deductions and personal exemptions, a tax of 10 percent on income of up to $100,000, and a tax of 25 percent above that level. ("Income" would not include capital gains, dividends or estates.)
  • Replace the corporate income tax, which Ryan notes is second highest in the industrialized world, with a business consumption tax of 8.5 percent.
The details obviously are subject to the political process. I quibble only with the last point, which I would change to "eliminate the corporate income tax." It is, as we all know, not a tax paid by businesses; it is passed on to consumers, which is one reason why the corporate tax rate has grown to the second highest in the industrialized world — like sales taxes, it isn't apparent to the consumer, but the consumer is paying it nonetheless.

The business consumption tax plan is probably in there so that Ryan can say this: "Based on the analysis of government actuaries, this plan is projected to make the Social Security and Medicare programs permanently solvent. It will lift the growing debt burden on future generations, and hold Federal taxes to 18.5 percent of GDP," which is actually less than the historic tax level of 19.5 percent of GDP, regardless of tax rate structure.

The Social Security and health insurance initiatives are particularly laudable. Social Security is a giant ripoff for those of us in our 40s or younger, who face the likely scenario of having no Social Security at all when we reach retirement age, since it will start to pay more out in benefits than it collects in taxes in just nine years. Even if that weren't the case, Social Security is still a giant ripoff since there is no property right to Social Security — we get it, or not, at the whim of the government. (Since I began working, my age for eligibility has been increased from 65 to 67, and it's likely to increase further.) As has been pointed out more than once, any investment company that set up a retirement fund as Social Security is set up and funded would be in prison. Similarly, the health insurance market would work much better if individuals had the ability to change coverage and insurers as easily as we can change our car insurance, but that doesn't happen in a market where third parties pay for coverage.

"Levels of projected debt threaten to bankrupt the country, there are trillions of dollars of unfunded liabilities in the government’s major benefit programs, and Americans face an accelerating erosion of their health care and retirement security," says Ryan. "This will burden not only the Federal Government, but the U.S. economy as well, threatening its ability to continue raising standards of living, or to compete successfully in an increasingly international marketplace. This is a future in which America's best century is the past century. Unless we act."

On May 15, Karl Rove wrote a Wall Street Journal column, "The GOP Must Stand for Something." The federal and state Republican Party has done a great job standing only for their own power and reelection prospects, and it has gotten them to lose control of Congress and one house of the Legislature, with prospects for November looking even worse than they were two years ago. Republicans are preferable to Democrats when they act like Republicans and support Republican themes, not when they are Republicans In Name Only. The purpose of being in politics should be to improve things, not to have power, and that is something many Republican leaders appear to have forgotten.

The Republican Party's greatest success of the 1990s was the Contract with America, which spelled out what the Congressional GOP stood for. It was so successful that it led the way to 12 years of Republican control of Congress, despite a popular Democratic president opposing all its tenets, and despite its main author, former House Speaker Newt Gingrich, leaving the house in 1999. Even in the cynical sport of politics, ideas mean something. Ideas got Ronald Reagan elected in 1980, and ideas got Republicans Congress in 1994.

Ryan's plan is what the Congressional GOP and presidential candidate John McCain should stand for. And Wisconsin Republicans need to come up with a similar roadmap to deal with Wisconsin's fiscal challenges, including some of the highest taxes in the country and our own deficits.

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