The political impossibility of the Ryan-Romney budget

You are better off believing in the tooth fairy than the Republican pair's economic strategy.

Pain has no political constituency.

This fundamental rule of American politics (and democratic systems more generally) points up the difficulty of enacting or sustaining public policies that leave large numbers of citizens worse off. Politicians dread casting votes on legislation that will impose costs on any significant group of constituents, lest the opposition seize on the issue in the next election. Austerity policies typically spell defeat for the political party or coalition that imposes them (see Greece). Given the political consequences of inflicting pain, many of the key budget prescriptions embodied in the budget plan developed by Representative Paul Ryan and now effectively endorsed by Mitt Romney will never be realized in practice.

Political parties that run on a “cod liver oil” platform face a critical obstacle on the campaign trail. They can always be undersold in the competition for votes by other parties that offer voters instead the proverbial spoonful of sugar. The political challenge entailed by recommending policies that promise pain becomes more acute if the danger that the pain is designed to avert lies far off in the future.

In 1984, Democratic presidential nominee Walter Mondale vividly demonstrated the lesson that pain is a losing political proposition. He believed that the American people would accept the hard truth that tax increases were the only solution to the large federal deficit generated by the tax cuts pushed through by the Reagan administration. In his acceptance speech at the Democratic convention, he delivered the bad news directly:

“Whoever is inaugurated in January, the American people will have to pay Mr. Reagan’s bills. The budget will be squeezed. Taxes will go up….Mr. Reagan will raise taxes, and so will I. He won’t tell you. I just did.”

Mondale’s candor earned him no credit among the American people. With barely 40 per cent of the popular vote, he lost 49 states. (If Reagan had decided to campaign in Minnesota, Mondale’s home state, the Democrat might have lost all fifty.)

Another episode from the Reagan era demonstrates a more palatable approach to allocating pain. In 1981, recognizing that Social Security would soon face a short-term funding shortfall, Reagan appointed a bipartisan group, the National Commission on Social Security Reform (called the Greenspan Commission after its chair, Alan Greenspan) to review the program and its finances. The commission recommended a series of changes that included increased taxes and reduced benefits. Congress in 1983 approved recommendations that yielded $168bn to assure that the program would remain solvent. The solution set borrowed from both parties, including increasing in the retirement age and raising the payroll tax ceiling on higher income workers. Importantly, the commission gave both parties political cover, and the bipartisan support effectively removed the issue from the 1984 campaign.

But the conditions that made possible the 1983 compromise have proven harder to replicate over time. Barack Obama sought to lay the groundwork for a similar bipartisan approach when he appointed the National Commission on Fiscal Responsibility and Reform (usually referred to after its co-chairs as Simpson-Bowles). Rather than embrace the report, however, lawmakers in both parties shunned it. Among the obstacles were a more sharply polarized political context and the lack of urgency inherent in the underlying problem. Any long-term debt crisis involves a distant threat, quite unlike the immediate problems facing Social Security in the early 1980s.

If we apply the lessons from these episodes to the Ryan budget, certain conclusions follow. First, so long as the Democrats control one of the main policy branches of the national government (the White House, the Senate, or the House), the plan will go nowhere. Indeed, that is the best of all worlds for the GOP, because then Republicans don’t have to answer for the consequences. Second, were the Republicans to sweep the 2012 elections, they might enact the features of the plan attractive to their core constituents — cutting discretionary expenditures for the poor and lowering taxes. The result would be a larger federal deficit and a worsening of the future debt problem. Third, Republican lawmakers would likely defer proposed changes in Medicare and changes in the tax code (such as eliminating popular deductions) intended to offset tax cuts. These unpopular moves would leave them politically vulnerable in 2014. To enact them could spell a quick farewell to majority status for the GOP.

Republicans know this. Many are already scared to run on the Ryan scheme to replace traditional Medicare for those under the age of 55 with vouchers that cannot possibly cover the same level of services. That Medicare poses a danger to the federal government’s solvency as baby boomers retire may be true, but proposing to slash Medicare spending still makes for bad politics. (And the Republican ticket appreciates the politics, too, witness the Romney-Ryan attack on Obamacare for allegedly cutting Medicare.) Nor will the Republicans’ Orwellian efforts to package the reform as a plan to protect and enhance Medicare work. In a contested information environment, efforts to reframe the terms of debate don’t work.

The same holds for the unspecified revenue increases that the Ryan plan expects to realize from reforming the tax code. At a time when the federal government already takes in much less than it spends, the GOP budget formula seeks lower tax rates and an end to taxes on capital gains. The plan in its pure form offers more than $4trn in tax cuts over the next decade. Finding the revenue to offset such a loss runs afoul of political reality at every turn. End the home mortgage interest deduction? The one for state and local taxes? How about putting a stop to charitable deductions? These moves amount to political suicide. Yet nothing less could close the gap between revenues and expenditures entailed by the Ryan budget (or the Romney tax plan proposed during the primaries).

In the end, then, the politics of pain mean that anything resembling the Ryan-Romney budget approach will become another exercise in supply-side economics — the discredited faith that cutting taxes sharply enough will generate so much economic growth that total revenues will increase. The Republicans can deliver the tax cuts and some spending reductions targeted at the most vulnerable, who are also the least organized and powerful in our politics. But for those who think the Ryan budget represents a serious approach to the long-term federal debt problem, believing in the tooth fairy is a better bet.

Andrew Polsky is Professor of Political Science at Hunter College and the CUNY Graduate Center. A former editor of the journal Polity, his most recent book is Elusive Victories: The American Presidency at War. This post originally appeared on the OUP blog here.

Mitt Romney and Paul Ryan arrive at a campaign rally in Powell, Ohio. Photograph: Getty Images

Andrew Polsky is Professor of Political Science at Hunter College and the CUNY Graduate Center. A former editor of the journal Polity, his most recent book is Elusive Victories: The American Presidency at War.

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Why Theresa May won't exclude students from the net migration target

The Prime Minister believes the public would view the move as "a fix". 

In a letter to David Cameron shortly after the last general election, Philip Hammond demanded that students be excluded from the net migration target. The then foreign secretary, who was backed by George Osborne and Sajid Javid, wrote: "From a foreign policy point of view, Britain's role as a world class destination for international students is a highly significant element of our soft power offer. It's an issue that's consistently raised with me by our foreign counterparts." Universities and businesses have long argued that it is economically harmful to limit student numbers. But David Cameron, supported by Theresa May, refused to relent. 

Appearing before the Treasury select committee yesterday, Hammond reignited the issue. "As we approach the challenge of getting net migration figures down, it is in my view essential that we look at how we do this in a way that protects the vital interests of our economy," he said. He added that "It's not whether politicians think one thing or another, it's what the public believe and I think it would be useful to explore that quesrtion." A YouGov poll published earlier this year found that 57 per cent of the public support excluding students from the "tens of thousands" target.

Amber Rudd, the Home Secretary, has also pressured May to do so. But the Prime Minister not only rejected the proposal - she demanded a stricter regime. Rudd later announced in her conference speech that there would be "tougher rules for students on lower quality courses". 

The economic case for reform is that students aid growth. The political case is that it would make the net migration target (which has been missed for six years) easier to meet (long-term immigration for study was 164,000 in the most recent period). But in May's view, excluding students from the target would be regarded by the public as a "fix" and would harm the drive to reduce numbers. If an exemption is made for one group, others will inevitably demand similar treatment. 

Universities complain that their lobbying power has been reduced by the decision to transfer ministerial responsibility from the business department to education. Bill Rammell, the former higher education minister and the vice-chancellor of Bedfordshire, said in July: “We shouldn’t assume that Theresa May as prime minister will have the same restrictive view on overseas students that Theresa May the home secretary had”. Some Tory MPs hoped that the net migration target would be abolished altogether in a "Nixon goes to China" moment.

But rather than retreating, May has doubled-down. The Prime Minister regards permanently reduced migration as essential to her vision of a more ordered society. She believes the economic benefits of high immigration are both too negligible and too narrow. 

Her ambition is a forbidding one. Net migration has not been in the "tens of thousands" since 1997: when the EU had just 15 member states and the term "BRICS" had not even been coined. But as prime minister, May is determined to achieve what she could not as home secretary. 

George Eaton is political editor of the New Statesman.