Rep. Paul Ryan's manifesto to remake the tax system

Rep. Paul Ryan's manifesto doesn't do away with the social safety net, yet it stays true to the libertarian notion that the best government is that which governs least.

The key to Ryan's do-over is acknowledging that America will never eradicate the welfare state entirely for the simple reason that Americans don't want to eradicate the welfare state entirely. The Roadmap explicitly declares that the social safety net — in the form of health and retirement benefits — for those "suffering hard times" is something Americans want to keep. On this and other fronts, the document is a monumental concession to political reality.

However, the Roadmap goes on to insist that we cannot help the neediest if we continue treating all but the very rich as if they are needy too — and sometimes even the very rich! Vast numbers of middle-class people are increasingly dependent on government. Sixty percent of Americans get more from government than they pay in taxes, and President Obama's policies will move that closer to 70%. It is unsustainable. According to the Congressional Budget Office, our debt-to-GDP ratio will pass Greece's 113% in 16 years. By 2040, our debt will equal 223% of gross domestic product, by 2060, 433%. Of course, the nation would undergo a massive financial collapse long before then as bond markets rioted in protest.

In short, we are heading toward an iceberg. The correct argument isn't whether we should turn before we crash and sink, but in what direction should we turn? Obama's answer has been to ask a special commission to make a lot of recommendations after the midterm elections. Until then, he's been shouting "full steam ahead."

Ryan's response is that anyone who can help paddle us out of dangerous waters should do so. Those who cannot will be taken care of. The aim is not eradicating government but streamlining so that it can fulfill its core functions and forcing it to live on revenues of about 19% of GDP (the post- World War II average) so we don't tax and spend ourselves into fiscal oblivion.

But the transition is as evolutionary as can be expected given the need for revolutionary change. The tax code is simplified, plugging loopholes and saving Americans billions in tax-prep labor. Under the Roadmap there are two tax brackets, 10% and 25% and no special deductions except a tax credit for purchasing healthcare. But if you're hooked on the current system you can still file under the old rules. Likewise, if you're over 55, you can stay in the current Medicare system. Everyone else gets a means-tested voucher (i.e., poor people get a bigger subsidy). The aim is to force consumers to care how much their healthcare costs and force providers to compete. Non-defense discretionary spending is frozen for 10 years and corporate and capital gains taxes would be replaced by an 8.5% value-added tax.

http://www.latimes.com/news/opinion/commentary/la-oe-goldberg-roadmap-20100720,0,4806100.column

Rep. Paul Ryan's manifesto to remake the tax system

Rep. Paul Ryan's manifesto to remake the tax system

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