This morning I sat down for a chat with Rep. Paul Ryan of Wisconsin, the powerful Republican chairman of the House Budget Committee, in his Capitol Hill office. Here is the first part of the interview:
Are you keeping track of how Occupy Wall Street is trying to shut down the NYSE?
Yeah, I have CNBC up there. [Points to a flat-screen TV suspended above my head in his office.] I always have CNBC on. They keep showing the skycam view of the people down there.
What’s your take now on Occupy Wall Street?
The thing that I think where one hesitates is that if part of this is a cry out against crony capitalism, amen. But if it’s a cry against free-enterprise capitalism, then that’s obviously not a good thing. The movement seems to have degenerated a bit, and I think you see that on TV with people getting hurt and property getting destroyed, with public health problems. … But I don’t spend a lot of my time focusing on it, to be honest with you.
Do you see the anti-rich, anti-business message starting to gain some traction?
There’s far more anxiety in society because the economy is so bad. … It’s easier to find a scapegoat than address the root causes of these problems. But obviously [President Barack Obama] is banking his reelection on this tact. … He doesn’t have a good record to run on. The results are abysmal. He’s clearly not going to triangulate like Bill Clinton because … he’s far more ideological than Bill Clinton was. … So all he’s got left is to take all the anxiety that is building in America and try and tap into it and channel it toward class resentment. These are powerful emotions — fear, envy, anxiety, resentment — very powerful emotions but dark emotions. They are extremely divisive. But it seems to me that’s the plan. … And we need to have an answer for this. That’s why I’ve spent a lot of time thinking about this and researching it. We need to have a vision and speak to the morality of these issues and question the moral premise of redistribution and resentment.
And our answer is upward mobility — not begrudging people who become successful, but making it easier for people to find success, to bring those rungs of the economic ladder within reach of people who’ve never scaled it before. Grow the pie versus redistribute slices of a shrinking pie. That’s what our society has always prided itself on. That’s the American system we’ve had. … It would be a shame to get rid of it and transform it into a social democracy model like you have in Europe, which simply means bitter austerity and shared misery.
What is your issue with the recent CBO study on inequality, which showed the income of the top 1 percent rising 275 percent since 1979, with the middle class up just 35 percent?
Looking at snapshot income ignores the existence of mobility. We want to focus on the speed of mobility. So when you look at income groups divided into quintiles and measure them from 1979 to 2007 … it makes people think that a person stuck in the lowest quintile in 1979 is going to be the same person in the same quintile in 2007. … It ignores the whole notion of mobility, and what we’ve found [via a Treasury Department study] is half the people in the bottom quintile moved up to other ones. Half the people in all income groups moved around to other income groups. So we have a lot of mobility. … Instead of focusing on bringing the top down toward the bottom, let’s focus on bringing the bottom up toward the top. … CBO also shows, if you read the data, that transfer payments have become less progressive and the income tax system has become more progressive. After 1986 tax reform, the top 1 percent paid twice the income tax burden they paid before that law.
Some might say they you are trying to ignore the income disparity issue by focusing just on mobility.
I’m not saying that. They’re numbers, they exist, they’re facts. I am not trying to say ignore reality. I’m just saying look at the complete picture. And the complete picture is that our transfer programs should be aimed at the people who need them, not people who don’t. Our tax system should not have as its primary, guiding principle redistribution. It should have growth as its primary principle so you can accelerate mobility. When you have a tax system aimed at redistribution and narrowing disparities, you end up slowing down growth and slowing down mobility.
But do you seen income disparity as something that needs to be “fixed” in any way.
As a person in government, I don’t see it as my job to try and micromanage the outcome of people’s lives. I see it as trying to advance the premise of equality of opportunity and getting people as much opportunity to improve themselves as possible. … The whole premise of this argument is wrong. The economy is not a zero-sum system. One man’s gain does not necessarily come at another man’s loss. … Wealth is created. Steve Jobs started Apple in his garage not by taking from somebody else but by creating and inventing something. Wealth and growth are organic and don’t necessarily come from somebody else’s loss.
It seems that it’s the bottom fifth where income mobility might be a problem.
Moral relativism has done so much damage to the bottom end of this country, the bottom fifth has been damaged more by the culture of moral relativism than by anything else out there. Is it my job to fix that as a congressman? No, but I can do damage to it. Let’s not ignore it. As a policymaker, I simply make that as an observation, not that I have a bill I can pass in Congress and fix it.
Are people mobile enough to compensate for unequal income distribution?
I don’t think there is a magic number on some mobility index, but we should continually look to remove barriers to make it easier for people to rise. Our focus ought to be on removing those hurdles. It’s the premise of a central planner to think they can achieve some ideal metric for individual performance in society. That’s not our job.
What do you want to do to accelerate income mobility?
End the corporate welfare and crony capitalism, number one. Number two, have entrepreneur-focused policies. Stop rigging the rules for the powerful and well established. We want to have a tax system that is pro-entrepreneur, pro-small business, and not designed to erect barriers of entry to competitors. On entitlements, means test them. Don’t subsidize higher-income individuals nearly as much as everyone else, scale those back to a safety net.
Let’s talk about the SuperCommittee. Would you be in favor of a tax plan that trimmed deductions and used part of the savings to lower rates and part to reduce debt? Some would score that as a tax hike.
That’s what [Sen. Pat] Toomey theoretically put on the table. You’ve got to measure these things in the context of current law and the current path, which is the top rate goes to 44.8 percent and becomes extremely progressive and just destroys small businesses. … So bringing the top rate down to 28 percent and lower for the rest of the scale is a very good thing. I believe from a dynamic standpoint you’ll raise more revenues. I don’t buy those static analysis models anyway. … It’s as if some cardinal sin has been committed here. What matters is that rates are going down. Everybody believes in broadening the tax base and lowering rates and stop picking winners and losers in the tax code and having a very efficient system. And what Toomey produced is perfectly consistent with that. But we won’t get it because Democrats won’t agree to lower rates because they want this class warfare.
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“For every dollar held by Wall Street, there is one less dollar available top any body else.”
That is so completely idiotic it defies description. However, I don’t blame you personally – this fallacy is drummed into the heads of millions of people daily.
The United States was founded on the principles of self-sufficiency and the pursuit of happiness. This country created the phrase “to make money”. In the Dark Ages of outdated European economic models, money was thought to only be transferable from one entity to another – from the peasant to the landlord, from the landlord to Robin Hood’s pockets, from Robin Hood back to the peasant. America showed the world that this idea is false – value can be added by means of production, and thus money can be created.
Simple example that even a liberal can understand:
If you buy a blank T-shirt for $ 2, and then paint a custom handmade design on it, and sell it for $ 20 – you’ve made a profit of $ 18 (less cost of paint & selling fees)… did you hurt anyone? Did that $ 18 come out of someone else’s pockets? NO. You’ve added value to a product, and you’ve sold it for a higher price. That’s creating value. That’s how it works.
The artist who transforms their talent into entertainment products that people pay for… the contractor who transforms boards and bricks into a house… the steel-worker who transforms raw bars of metal into motor parts… the author who writes a book… they’re all CREATING VALUE and MAKING MONEY.
Do yourself and everyone else a favor, read a book on basic economics, and forget this bullshit of “fixed-size pie” once and for all. It’s simply false.
I find it odd, that Mr. Ryan skirts the entire issue of poverty in the bottom fifth of the population. I find it even more concerning that he uses phrases that he very obviously does not understand to deflect any and all responsibility to the bottom segments of the population.
Moral relativism is the perspective that moral or ethical propositions do not reflect objective and/or universal moral truths, but claim meaning under specific circumstances. In other words, it is the belief that there is no absolute moral guidebook. I think what Mr. Ryan is trying to refer to, without so much as saying so, is that there is a culture of the poor that keeps them entrenched in poverty. A perspective which has long fallen out of favor and places the blame soundly on the individual who is impoverished.
What Mr. Ryan, and other pro-big business politicians need to understand, is that it is not an issue of moving the rungs of the ladder lower, it is an issue of the ladder not having any rungs at the bottom at all. For every dollar held by Wall Street, there is one less dollar available top any body else.
Nonsense. Ryan says that transfer programs should be for people who need them, so what else would you want? There are those who make welfare a way of life and who live off the system because they are lazy or dysfunctional. People who are alcoholics, drug addicted or who do not seek to acquire or maintain marketable skills are going to be very poor. Those who want a better life need to shed the habits and social dysfunction that prevent them from finding employment.
And no, that irrefutable fact has not “fallen out of favor,” except with socialists who want wealth redistribution no matter what the cost or consequences.
I would suggest you see this article: “The Real Cause of the Current Economic Crisis and a Suggested Solution” http://goo.gl/9y8Uf