Paul Ryan Echoes Niall Ferguson

Paul Ryan to the rescue in terms of the government shut down?! I’ll leave it to others to make the political point – he is throwing the anti-Obamacare Tea Party agenda under the bus in favor of the good old fashion Romney more tax cuts for the rich. After all, the first two paragraphs of his latest rant is wasted on blaming the President for not negotiating. But should we not have seen this coming given the latest nonsense from Niall Ferguson? Consider Ryan’s dire warning:

The Federal Reserve won't keep interest rates low forever. The demographic crunch will only get worse. So once interest rates rise, borrowing costs will spike. If we miss this moment, the debt will spiral out of control.

OK – Ryan did not get into the numbers over whether interest expenses are 8% of GDP or 8% of tax revenues. But Ryan and Ferguson are on the same page as to how to lower future deficits:

the discretionary spending levels in the Budget Control Act are a major concern. And the truth is, there's a better way to cut spending. We could provide relief from the discretionary spending levels in the Budget Control Act in exchange for structural reforms to entitlement programs. These reforms are vital. Over the next 10 years, the Congressional Budget Office predicts discretionary spending—that is, everything except entitlement programs and debt payments—will grow by $202 billion, or roughly 17%. Meanwhile, mandatory spending—which mostly consists of funding for Medicare, Medicaid and Social Security—will grow by $1.6 trillion, or roughly 79%. The 2011 Budget Control Act largely ignored entitlement spending. But that is the nation's biggest challenge.

Gee whiz – Social Security cuts and scaling back Federal spending on health care, which was the fiscal part of the Romney-Ryan 2012 campaign. How well did that campaign work out? And why do we need to cut entitlements? Ryan repeats his desire for even lower tax rates than we got by making the Bush tax cuts permanent. Finally, Ryan like Ferguson must have missed what the latest from the CBO said why their forecast of the future debt path deteriorated:

Federal revenues under the extended baseline are now expected to be substantially lower in coming decades than CBO projected in 2012 (see the top panel of Figure A-2). By 2023, revenues are projected to be 2.8 percent of GDP lower than projected in the 2012 analysis: 18.5 percent of GDP rather than 21.3 percent ... Noninterest spending under the extended baseline is now expected to be lower in coming decades than CBO projected in 2012 (see the middle panel of Figure A-2). Specifically, noninterest spending in 2038 is projected to be 1.4 percent of GDP lower than in the 2012 analysis.

Even though Romney-Ryan lost the election in 2012, they have won in terms of getting spending cuts to pay for making the Bush tax cuts permanent. But they want even more spending and tax cuts and are mad that President Obama is not capitulating again.