Paul Ryan's budget and the sticking point between the left and right

In their calls for tax reform, Republican Paul Ryan and Democrat Kent Conrad have a lot in common. But the question over tax revenues continues to drive the two sides apart.

Jose Luis Magana/Reuters
House Budget Chairman Paul Ryan (R-Wis.) speaks during a news conference as he unveils "The FY2013 Budget - The Path to Prosperity." with members of the House Budget Committee at Capitol Hill in Washington March 20, 2012. U.S. House Republicans on Tuesday unveiled an ambitious plan to cut and simplify taxes, slash spending and make a new run at overhauling the Medicare health program in a bid to draw a stark election-year contrast between their vision and that of President Barack Obama.

Today House Budget Committee chairman, Paul Ryan (R-WI) unveiled the House Republican budget proposal with a lot of fanfare and his latest snazzy video.  The fundamental structure of the proposal itself is not really “news” in that Ryan has remained consistent to his word that the fiscal situation is a spending-side-only problem and that the level of revenues as a share of our economy should be maintained around its 40-year historical average.

Relating that to the story on the Senate Budget Committee chairman, Kent Conrad (D-ND) which appeared over the weekend in the Washington Post (written excellently by Lori Montgomery), I find it striking that both of the budget chairmen (from the two different houses and two different parties) now talk about tax expenditures as government spending that just happens to be done by poking holes into the income tax system.  In his own budget, Ryan refers to this “spending through the tax code” (pg. 67) and also points out how the rich benefit the most from these “tax subsidies.”  In other words, like Kent Conrad, Paul Ryan recognizes that if we reduced these tax expenditures, we would not be raising taxes as much as reducing spending.

On the other hand, Ryan stresses that his proposal to eliminate these tax subsidies would be “not for the purpose of increasing total tax revenues, but instead to lower rates.”

So, revenues relative to GDP remains the huge sticking point in what would otherwise seemingly be complete bipartisan agreement on the shape of badly-needed tax reform.  How best to break that impasse is the key to making huge progress on deficit reduction.  I think it will have to wait until after the election, however, because for now the Democrats would rather attack the Republicans for their deficit-reduction approach that implies huge, draconian cuts in direct spending and benefits than convince the Republicans to move away from that approach and more toward revenue-raising-but-by-base-broadening tax reform.  And Republicans would rather attack the Democrats for their strategy of  “soaking the rich” (and the “job creators”) than convince the Democrats that broadening the tax base by reducing tax expenditures is actually a progressive (as well as efficient) way to raise tax burdens on the rich.

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