Note: From Vlad Signorelli at Bretton Woods Research, analysis of U.S. Rep. Paul Ryan's (WI) drift towards root-canal economics.
Paul Ryan: Most Dangerous Republican at the Margin?
[As the budget debate heats up, Paul Ryan has been arguing that he wants to cut spending significantly to protect the bond market and keep interest rates down. As one worried client mentioned this morning, "[Ryan's] whole worldview seems to have shifted away from Reagan/Kemp/Wanniski to Dole/Bush/whoever.... I guess [John] Taylor is in his ear. Kemp is spinning in his grave." Amen.
Publicly, since the elections, Ryan has clearly abandoned a pro-growth solution for the country's deficits and underfunded entitlements. Instead, he sounds like an old-guard austerian Republican who exaggerates the danger of the federal government's liabilities -- which can easily be paid for if economic growth can be sustainably accelerated by 1%.
Ryan, once the leader of the growth wing of the Republican Party, is no longer its leader. And before a new leader emerges, he may lead other members of the growth wing astray.
Equally important, Ryan's rhetoric and public persona is playing into the hands of Ben Bernanke and the Federal Reserve. After all, it has been Bernanke who has been testifying before Congress since 2009 that the federal government must reduce the deficit or interest rates will rise. We fear that, as the Federal Reserve raises interest rates in the future (which will slow growth at the margin), Republicans will be perceived as the party of spending cuts while the poor and middle class require growth the most. With Democrats ready to emerge as protectors of these segments of the electorate, the image will become a big political liability for the GOP.
Is Paul Ryan the most dangerous Republican today? Sadly, we think so.
The first thing that he can do is to stop listening to the establishment Republican John Taylor, who because of his belief that low interest rates were and still are the reason for a weak dollar and excessive liquidity, would like to see the austerian, interest-rate hiking scenario that we're so worried about. BWR
BWR note: The following recommended reading is yesterday's oped by Robert Reich. The article is important in that Reich is one of the first Establishment Democrats to start portraying current GOP leaders in the House, such as Paul Ryan, to be like the 1995 Gingrich Republicans. With the way that Ryan and company have approached their first month in the majority, this is the parallel that we expect and fear. Of course, while we agree with Reich's criticism of the current spending-cut focus on Capitol Hill, we certainly disagree with Reich's fiscal prescriptions.]
The Obama Budget: And Why the Coming Debate Over Spending Cuts Has Nothing to Do With Reviving the Economy