5 Good Ideas in Paul Ryan's Budget

There's plenty of fuel for partisan warfare--but also a few sound ideas.


Republicans either want to wreck the economy or save it.

That's the predictable, polarized view of the new GOP budget unveiled by Rep. Paul Ryan, chairman of the House Budget Committee. Without even knowing what's in the Republican budget, you can safely bet that liberals excoriate it (one interest group calls it a "suicide pact"), while conservatives feel it's the only way out of an economic tailspin caused by President Obama's policies.

[See a collection of political cartoons on the budget and deficit.]

Ryan has certainly offered plenty of fuel for continued partisan warfare. His plan calls for the total repeal of Obama's healthcare reform law, along with tax cuts for the wealthy. He'd reverse planned cuts in defense spending, while intensifying cuts in domestic programs. Ryan also will probably draw the ire of the Occupy Wall Street crowd, as the plan would also repeal some of the new bank regulations passed after the 2008 Wall Street meltdown.

But there are also some sound ideas in Ryan's budget that could help get the economy back on track, given the small probability the plan will ever see the light of day.. Here are five mainstream ideas in the GOP budget proposal:

A simpler tax system. Ryan's budget proposes two marginal tax rates instead of the current six, with fewer loopholes and deductions. The two tiers he proposes—10 percent and 25 percent—are too low to garner bipartisan support. But those could be negotiated upward. And many Americans would get behind the idea of a simpler and fairer tax system that no longer favors monied interests able to lobby and exploit loopholes. The time for tax reform has come, and Ryan's plan is something to build upon.

[Ryan's Budget Plan Could Cause Problems Within Both Parties.]

As for business, Ryan proposes lowering the corporate rate from 35 percent to 25 percent, while eliminating certain energy and farm subsidies along with other kinds of corporate welfare. He'd also enact a "territorial" system that simplifies the way U.S. companies pay taxes on foreign profits. This is all in the realm of possibility. Obama has said he'd support a 28 percent corporate tax rate, as long as it were paired with other reforms. And some Democrats support the territorial system for foreign taxes. Don't look now, but bipartisanship agreement might be forming on what used to be a highly divisive issue.

Shrinking the size of government. Ryan wants to reduce the size of the federal workforce by 10 percent by 2015, mostly through attrition. These days, that's considered a mild cut, with many Americans working at companies that have endured far deeper. Ryan also wants to freeze federal pay until 2015 and require government workers to pay more toward their own retirement plans. Sounds like the private sector.

One thing is missing from Ryan's plan: Dialing back the gold-plated retirement benefits and other outsized perks available to members of Congress. Legislators ought to apply the same standards to themselves before voting to restrict somebody else's benefits.

Cutting government spending. Liberals will continue to hammer the GOP for wanting to cut domestic programs while restoring defense spending that was cut last year. But Democrats ought to acknowledge that many Americans, including a lot of independent voters and even some Democrats, feel government has gotten too big. Plus, many won't be willing to fork over the tax increases that will inevitably be necessary to support the current size of government. Ryan's plan would bring spending down from 24 percent of GDP to 20 percent, which is less draconian than other plans.

[See why Rick Santorum needs big government.]

Economic necessity may ultimately dictate that the government shrinks no matter what. The right way to do it is gradually, with a long-term plan that provides clarity and predictability about what will be cut and when, with Ryan's plan being used as a starting point.

Medicare reform. Ryan deserves credit for being one of the few politicians in Washington willing to propose tangible ways to keep Medicare from bankrupting the country. His plan would reform the program for people 55 and younger. In general, they'd have to pony up more of their own money for coverage and care, with exceptions for the poor. In theory, putting more of the financial burden on patients would make them far more sensitive to cost, and help drive prices down for everybody.

It's not clear if voters would ever tolerate the magnitude of change Ryan is proposing. But he has framed the issues accurately. Plus, the only alternative to reform, at some point, will be higher taxes or deeper cuts in other programs that are just as important. Ryan is right in addressing this as a huge issue that will affect the whole direction of the country, and the need for it to be addressed starting now.

Fixing Social Security. It won't necessarily take a lot. Many analysts think that accelerating planned increases in the retirement age and reducing benefits for wealthy seniors will be enough to make this pension program solvent for the long haul. Ryan wants to address it now and enact reforms soon. Why wait? This is Washington. We need to fight about it for a few years first.

Follow Rick Newman on Twitter @rickjnewman