Paul Ryan Leaves Behind Big Budget Deficits and Ballooning Debt
Beyond failing in his goal to shrink the federal deficit, the House speaker is leaving the budget in a precarious state.
(Bloomberg Businessweek) -- When Paul Ryan became speaker of the House in 2015, the federal budget deficit was $438 billion. He blamed the “failed policies of President Obama” for budget deficits that had exploded to $1.4 trillion in 2009, the year after the Great Recession, though shortfalls began shrinking in the following years and were continuing to fall as Ryan took the gavel.
Today, with Ryan preparing to retire from Congress, the annual federal budget deficit is again approaching $1 trillion. Over his two decades in Congress, the total national debt increased from less than $6 trillion to nearly $22 trillion. Yet the years of his speakership saw no new foreign conflict or recession that forced the government to live beyond its means. The problem was a Republican-led Congress that pushed a small-government agenda only in part. When President Trump took office, he embraced tax cuts but rejected structural spending overhauls. But even he complained about the spending bill Ryan and Senate Majority Leader Mitch McConnell brought him last year, which met Democrats’ demands for more domestic spending to keep up with the $716 billion Republicans pledged for defense in 2019 without imposing discipline in other areas to compensate.
The GOP’s departure from Ryan’s professed brand of conservatism is all but complete, with Republicans often accepting, while occasionally bemoaning, Trump’s withdrawal from fiscal restraint, free trade, and public civility. The increasing rancor of American politics makes it almost impossible to conjure the political courage necessary to make the tough compromises that would reverse these spending trends, which get more complicated to address the longer they continue. “It’s a great irony that not just Paul Ryan but Republicans who claim they care so much about the deficit have now presided over huge increases in the budget deficit,” says Chris Van Hollen, now a Maryland senator, who was the ranking Democrat on the House Budget Committee in 2013, when Ryan was chairman. “It’s going to take, unfortunately, a long time to get back on a path to fiscal sustainability, because they just blew another $2 trillion hole in our debt.”
Legislation passed in fiscal year 2018 accounts for almost half the $973 billion projected budget deficit for 2019, says the Committee for a Responsible Federal Budget, a nonpartisan group. The U.S. gross domestic product is projected to increase 2.9 percent this year, according to Bloomberg data, thanks in part to this debt-financed fiscal stimulus. A growing economy does bring in more tax revenue, but not nearly enough to offset the cost of the tax cuts and additional spending. The world’s other developed countries are using this period of expansion to get their debt under control, says Marc Goldwein, senior vice president and policy director for the CRFB: “The growth of the economy is great—the problem is we’re not taking advantage of the growth to put our fiscal house in order.”
The U.S. financial system can digest a higher debt-to-GDP ratio, because global investors have faith in the Treasury’s assets, Goldwein adds. But markets move fast, and just a slight slip in confidence could become even more dangerous with a heavier debt load. “The best-case scenario is that current deficits are really eating up domestic investment—which they are—and will continue to slow our economic growth. Worst-case scenario or scariest scenario, we’re heading for a debt-driven financial crisis,” he says.
This is the opposite of where Ryan has said he wanted to leave the country after his two decades in Congress. At a December event sponsored by the Washington Post, he stated that his goal in rolling back regulation and rewriting the tax code was to “build up the country’s resilience, its antibodies, its health, its strength.”
Yet even some of Ryan’s own party members warn that the country’s balance sheet is in no shape to cushion a financial crisis, or even a cyclical downturn. Mark Sanford, a Republican representative from South Carolina, grudgingly voted for last year’s tax cuts but has taken the administration to task for abandoning conservative fiscal discipline. Sanford is a cautionary tale for Republicans who question the new GOP orthodoxy of loyalty to Trump: He lost his primary after Trump tweeted his support for challenger Katie Arrington, who’d pledged total commitment to the president’s agenda. (Arrington, however, went on to lose in the general election to Joe Cunningham, a moderate Democrat and ocean engineer.)
“I think it’s the three monkeys in Washington—I hear no evil, I speak no evil, I see no evil—about the reality of $1 trillion deficits that will frankly explode in the economic downturn,” Sanford now says. “The only thing that pulls us back is financial necessity, and I don’t think financial necessity is that far away.”
David Hoppe, Ryan’s first chief of staff as speaker, says Trump doesn’t reason like a typical politician and has no interest in fiscal discipline. Republicans did what they had to do to score wins on tax cuts, rolling back regulation, and confirming conservative judges. Ryan “made a decision, as did Senator McConnell,” he says. “They sacrificed trying to control Trump for trying to do some big things, and I think that’s a balance that one has to look at when one reviews this Congress.”
Not all who placed their hopes in Ryan are willing to be so charitable. “He was dealt a weak hand, and I think he played it mediocrely,” says Jonathan Rauch, a senior fellow at the Brookings Institution. “I’m so conflicted between disappointment and sympathy, and I’m not sure how history is going to judge him, because it’s going to be whiplash between those two poles.”
Ryan has been coy about his post-Congress plans, but he’s pledged to stay engaged on issues such as making entitlement programs more efficient and effective, even if he no longer holds elected office. Lanhee Chen, who was policy director for Mitt Romney’s 2012 campaign when Ryan was on the ticket as the candidate for vice president, says Ryan tried to stay true to his “core values” in a political environment that wasn’t conducive to civility and fiscal discipline. “I think in an ideal world he would have wanted more,” Chen says. “But we don’t live in an ideal world.”
To contact the editor responsible for this story: Jillian Goodman at jgoodman74@bloomberg.net
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