The Ryan Plan: Why the "Path to Prosperity" is a Dead End

Last Updated Apr 6, 2011 3:53 PM EDT

Media coverage of Rep. Paul Ryan's budget proposal has largely glossed over a key element of the plan: The "Path to Prosperity," as the Wisconsin Republican calls it, would cut taxes for the rich and for multinational corporations while raising them for the middle class.

The congressman would go much further than simply making permanent the tax cuts for the wealthiest Americans granted by George W. Bush and extended in December by President Obama. Ryan also would lower the top individual and corporate tax rate from 35 percent to 25 percent. And here's where Ryan would get the money to finance this enormous reduction:
A broader base with lower rates is central to a fair, efficient and sustainable tax code, and the economic growth spurred by such a reform is a precondition to �xing the nation's �scal mess.
Translation: The middle class will fund a cut benefiting the richest 2 percent of Americans and big business. Because of course raising taxes on a "broader base" of taxpayers is necessary to balance the huge decrease in federal revenue that would result from reducing rates for the rich. Between 2001 and 2008, tax cuts for the wealthy cost the U.S. Treasury $700 billion. To add further context, between 1955 and 2007 the 400 richest Americans saw the share of income they pay in federal income tax fall from 51.2 percent to 16.6 percent.

The choice: Tax cuts for the few or health care for the many?
Ryan says that in cutting the marginal rate he would also eliminate tax loopholes. But there aren't nearly enough perks in the code to offset the enormous loss in tax revenue. If he's intent on keeping his plan "revenue-neutral," that would mean raising taxes on other people -- and gutting popular health care programs.

The lawmaker is implicitly funding the tax cut by dismantling Medicare and Medicaid, which Americans overwhelmingly want to preserve, along with doing things like slashing college financial aid for low-income students. As The New Republic's Jon Chait points out, that's not something Ryan is keen to emphasize. His plan omits any detailed analysis of how the country would pay for an upper-bracket tax cut. A video promoting the proposal makes no mention of it whatsoever. Says Chait:
Ryan's level of cutting goes far beyond what's needed to preserve those programs, and it does so in order to clear room for a very large, regressive tax cut. He is making a choice -- not just cut Medicare to save Medicare, but also to cut Medicare in order to cut taxes for the rich.
In fact, roughly half of Ryan's spending cuts would go toward financing lower taxes for the affluent. This isn't merely inequitable -- it's also lousy public policy. It would deprive the government of essential revenue while raising taxes on the middle class, whose spending is critical to reviving the economy. And it almost goes without saying that the plan makes a mockery of Ryan's claim to support deficit reduction. The path to prosperity is a road to nowhere.

Image from Wikimedia Commons
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    Alain Sherter is an award-winning business journalist who has written for The Deal, MarketWatch and Thomson Financial Media.

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