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Paul Ryan on CNBC’s Kudlow Report: This is President Obama’s Fourth Straight Budget Flop

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February 14, 2012 | comments

Larry Kudlow: Welcome back to THE KUDLOW REPORT. I'm Larry Kudlow. All right, President Obama sent Congress his 2013 budget proposal yesterday. GOP House Budget Chairman Paul Ryan has already said the President's budget ensures a debt crisis and decline. He called it failed leadership. Here now for his first TV interview since the President's budget release is House Budget Chairman Paul Ryan, Republican from Wisconsin. Mr. Chairman, welcome back, as always. I want to talk about some budget details, but let me just get your overview. You're calling it: debt crisis and decline. Tell us why.

Congressman Paul Ryan: Well, it's not an America built to last. It's an America drowning in debt, Larry, because it's a fundamentally unserious budget. The President literally is just punting on the issues. This is really more of a campaign document than a credible fiscal solution to our big budget problems. The president is claiming that this is a $4 trillion deficit reduction package; but when you strip out all the accounting tricks and all the budget gimmicks, he's increasing spending by $1.5 trillion and increasing taxes by $1.9 trillion for a measly $400 billion of deficit reduction over a 10-year period, where he proposes to spend $47 trillion. Under the status quo, the debt is expected to rise 78 percent. Under this budget, it rises 76 percent. {It’s}unserious.

And the problem we have, Larry, is at this moment in our history we're on the verge of our own debt crisis. This is when we need leadership and it's when we can least afford to have a President who is just walking away from this. It's the fourth year of trillion dollar-plus deficits with the President's fourth budget, and that's why we say it's just not serious.

Larry Kudlow: Well, what I don't get is he says he's cutting the deficit by $4 trillion, but when you look at the numbers from his own table, the deficit rises by $6.7 trillion and spending rises by $47 trillion. This is over the 10-year window.

Congressman Paul Ryan: Right, Larry.

Larry Kudlow: Now let me just ask you, you mentioned the almost $2 trillion of tax hikes, we refered to this earlier in the show. There's about $350 billion of business tax hikes of offshore profits tax hikes. And then you got the repeal of the Bush tax cuts. You got a payroll tax cut is in here someplace. But everything else, capital gains, dividends, banks, oil and gas companies, millionaires, everything--how can that grow the economy? You're a growth guy. You're a supply sider. I don't understand how that grows the economy.

Congressman Paul Ryan: Well, it doesn't grow the economy because the effective top personal income tax rate goes to 44.8 percent in 2013 and you and I both know, Larry, that eight out of 10 businesses in America, they file their taxes as individuals, as Sub-S's, LLCs, partnerships. So we're going to tax our most success job creators, where most--more than half our jobs come from in America at about 45 percent next year?

You know, overseas - which in Wisconsin means Lake Superior - the Canadians, they're dropping their tax on their businesses to 15 percent. The Chinese are at 25. The Irish are at 12.5. And President Obama is saying we're going to tax all these successful small businesses at about 45 percent? And even taking these tax increases, just those Bush tax cuts, the top two rates, that pays for something like 12.7 percent of his deficit spending. The so-called Buffett Rule, it only pays for like 6.7 percent of his deficit spending. So put aside all the economic damage that these tax increases do to capital and business formation and small businesses, it doesn't even come close to paying for his spending binge that occurs over this entire period of time.

Larry Kudlow: Are there any spending cuts, any legitimate spending cuts in this budget?

Congressman Paul Ryan: Well, no. He increases spending by $1.5 trillion. If you take a look at his entire budget package, it's a net spending increase so no, he's not cutting spending. You have to net these things out. He really cuts defense big time, but the spending increases on domestic spending more than overcompensate these deep cuts to defense, and so it calls for a net increase in spending.

Larry Kudlow: I thought there was like $350 billion of additional so-called stimulus spending in this budget. Is that true? Is that hidden? I mean, that's what I think I've found.

Congressman Paul Ryan: No, it's in there. That's in there. Like I said, there’s a lot of domestic spending increases so that this budget is a net spending increase. 

Larry Kudlow: All right. So let's go back to basics. Let's go back to big picture. You have warned for the last several years... You call yourself a second generation supply sider. I love that. And you have said that the debt bomb from overspending and the bankrupt entitlements, that the debt bomb is going to turn into a tax hike bomb and that is going to sink us. I'd like you to elaborate on that and tell me, if you will, what you're going to do about it when you propose your budget in about a month's time.

Congressman Paul Ryan: All this current borrowing is just tomorrow's tax increases or tomorrow's inflation. So either we're going to crank up taxes or the Fed is going to monetize it, and I don't want to see either of those things happen because that's the end of American prosperity. That's a managed decline agenda and the problem is, every time you don't do something to fix this problem, it just gets that much worse. Ask the Greeks.

What we're going to do is we're going to actually propose and pass a budget again. I know that sounds novel these days, but we have a law that says we have to pass a budget by April 15th. The Senate has ignored that law in 2010. They ignored it in 2011. Now they say they're going to ignore it again in 2012. We're not, because we think it's our moral and legal obligation to pass a budget. We're going to pass a budget to get these entitlements under control, to get this debt under control, to keep our debt from getting at these catastrophic levels, and we're going to propose fundamental tax reform, broaden the base, lower the rates.

Our budget that we passed last year said top rate of 25 percent for businesses and individuals; a territorial tax system so we don't get into this repealing, deferral and double taxing American companies; and we get rid of all the loopholes and deductions. You can raise the same amount of revenues for the government in a far more pro-growth, efficient way, and you'll get a growth dividend, which we don't even count, of more prosperity, more jobs, more upward mobility. That combined with spending cuts, spending controls and entitlement reforms dodges the bullet of debt and gets us back on the path to prosperity. And that's precisely what we're going to do.

Larry Kudlow: You're going to propose that as part of your package on Medicare reform knowing that this is all about election year jockeying, the president's budget is election year political. They will come after you. Will you put it in your budget again? 

Congressman Paul Ryan: I don't know the answer to that because we haven't written the budget yet, and it is a collaborative effort. I write it with my colleagues so I don't know the answer to that question yet. What Ron Wyden and I were trying to do, we are trying to show that there is room for a bipartisan consensus on how to save and shrink the Medicare, how to keep the guarantee for current seniors and have a program that younger people can actually rely on. Because right now Medicare is making $37 trillion in empty promises to current and future seniors, and the President's law puts this new sort of rationing board in charge of putting price controls on Medicare, which leads to denied care. His budget-- the only other spending cut he calls for, which obviously, as I said, is a net spending increasing in budget-- but his only other spending cut really of significance is just more Medicare rationing, just another half a percentage point by his board for them to decide how to twist the screws on Medicare. We're going to reject that. And we believe that there's a bipartisan consensus emerging here on how to save and strengthen Medicare.

Larry Kudlow: But I want to ask you, you want to slash spending. You want to reform the entitlements and so-forth, and yet we had a report earlier tonight, the Conference Committee on the Payroll Tax Holiday, Republicans are signing off on $100 billion payroll tax holiday without paying for it. Without paying for it. Doesn't that undermine the credibility of the great noble thoughts that you are telling us about?

Congressman Paul Ryan: Well, I think it's really unfortunate that the President and the Senate-- remember, these are three-way negotiations and the House Republicans are one are just one part-- insist on no “pay fors”. They insist on not paying for this thing at all. They're going to pay for what they call the doc-fix and the Unemployment Insurance. I do have trouble with what you just has said though, but actually, because this finances Social Security and if you don't cover that, then you're just harming the Social Security trust fund. So I have a problem with that. But the frustration should not be with House Republicans, we've paid for this. We passed a payroll tax extension with spending cuts to pay for it. It's the Senate and the White House that literally refused to do anything like that, so that's the pickle that we find ourselves in.

But the broader issue here, Larry, is we have put out specifics on spending cuts, on entitlement reforms, and tax reforms. The Senate, they're not budgeting. They didn't budget two years ago and a year ago. They're not budgeting this year.

The President for the fourth year in a row gave us trillion dollar deficit budget and a budget that literally does not propose to do anything to fix this fiscal crisis, save these entitlement programs, and prevent a debt crisis. That to me is a huge abdication of leadership at a moment in our country's history when we need it so badly.

Larry Kudlow: Let me ask you one last one, Mr. Chairman Ryan. Who on the campaign trail--who's running that has your ideas? You want to stop the entitlement society. You want to stop the debt bomb. You want to stop the tax bomb. Who do you reckon is carrying your message on the campaign trail?

Congressman Paul Ryan: You know, I'm going to give you the kind of a dodgy answer. They're all getting better on this, Larry. I think they're all getting better.

We want an upward mobility society. We don't want a safety net that turns into a hammock that lulls people into dependency in this country. We want people to get up on their feet and grab that higher rung of the economic ladder. We believe in upward mobility. We don't believe in class division. We believe in growth and prosperity, helping people when they are down on their luck get back on their feet, and pro-growth economic policies that put America in the lead, that make us competitive, that stop tearing people down in this zero-sum thinking. We reject it. I think our nominee, whoever it's going to be based on what all these guys are saying, are going to be great stewards of this message because we're backing them up here in the House.

Larry Kudlow: All right. House Budget Chairman Paul Ryan on saving America. Thank you, sir. Appreciate it very much.

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