Speaker Paul Ryan In The Lion's Den

Speaker Paul Ryan welcomed Speaker al-Jabouri
of Iraq to the Capitol (Source: Speaker.gov)

by Ralph Benko, Contributing Author: A great stage magician will distract his audience with his right hand while performing his conjuring tricks with his left. Washington is nothing if not a magic show. Let me show you what’s really going on while you are distracted by the razzle-dazzle of the admittedly consequential Trump/Cruz/Rubio/Bush/etc. presidential race.

There is an onrushing budget drama in the Congress. You’ll be reading about it, if you have not yet, soon. The key to its resolution lies in the “Kadlec Curve.” Every one tenth of one percent of increase in the GDP brings in, over ten years, $314 billion to the Treasury.

Follow the magician's left hand. What drama awaits us?

The Huffington Post headlines: Paul Ryan Hosts Budget Meeting With House Freedom Caucus. It Didn’t Go Well:

Ryan hosted caucus members around a large conference table in his office to tell them that, if Republicans want to pass appropriations bills this year, they have to accept the budget number that leaders from both parties agreed to at the end of October.

“There’s not a snowball’s chance in hell that I’ll vote for that,” caucus member Mo Brooks (R-Ala.) told The Huffington Post after the meeting.

Brooks wouldn’t go into details about the meeting, but made clear he was unmoved by Ryan’s arguments. Brooks said the government is on a fiscally unsustainable path, and Congress hasn’t helped with Republicans and Democrats agreeing in October to raise the 2017 budget caps by $30 billion.

Brooks said Republicans have to get serious about debt-reduction. The deficit is increasing for the first time since 2009 and the Congressional Budget Office projects spending will outpace revenue by $1.4 trillion in 2026.Full disclosure. Long ago there was a friendly relationship between the young Rep. Paul Ryan and me. And I’m a big admirer of the Freedom Caucus, especially its chairman, Rep. Jim Jordan, and its leading lights such as Rep. Mick Mulvaney.

Further disclosure: I’m an unabashed, card-carrying, member of the Vast Right Wing Conspiracy. I’m enamored both of Speaker Ryan and the Freedom Caucus.

Yet they are at odds. As the old political dodge has it: “Some of my friends passionately support the proposition. Some of my friends passionately oppose it. As for me… I stand by my friends!”

In this case, though, it’s not a dodge. There is a key to leading the Republican House Conference out of the budgetary byzantine thicket (with pockets of quicksand) in which it has been, and remains, mired. And, in my own view, Paul Ryan might be the best qualified Member of Congress — possibly the best qualified elected official in Washington — to find that key … and turn it in the lock.

Ryan got his start in serious politics as a junior aide to the former Congressman Jack Kemp. Kemp, Ryan’s old mentor, represents the gold standard of across-the-board economic growth philosophy and policy. Ryan astutely hired Rep. Kemp’s former chief of staff, Dave Hoppe, as his chief of staff as Speaker. This matters.

Dan McLaughlin, writing in the inimitable RedState, in reviewing Speaker Ryan’s recent speech before Heritage Action:

This frankly sounds to me like a shot across the bow at Heritage Action, Ted Cruz and a lot of the other people on the Right (this website included) who have tried to hold the Congressional GOP accountable for the maneuvering that goes into Failure Theater, and at Cruz’s blasts at the motives of the “Washington Cartel.” Ryan does have a point – if the party is unified behind a goal and moving towards it, we shouldn’t broil people over this or that individual vote. But of course, the whole reason for the broiling is that a lot of people don’t currently trust that the leadership is behind the goals it professes or is actually making any progress in that direction.Key point: “if the party is unified behind a goal and moving towards it….”

What unifying goal might that be?

Equitable prosperity, that’s what.

The key to ending the deficit was found, a few years ago, buried in an appendix to a Congressional Budget Office report by my friend Charles Kadlec. Kadlec, a major supply-side figure, was a former colleague of supply-side icon Arthur Laffer.

As previously I wrote here:

“[T]he impact of growth on the deficits … can be found in Appendix B of The Budget and Economic Outlook: Fiscal Years 2012 to 2022: every one-tenth of one percent increase in the growth rate will reduce the federal budget deficit over the next 10 years by $314 billion.” [Emphasis added.]“The Kadlec Curve.” Every one tenth of one percent of increase in the GDP brings in, over ten years, $314 billion to the Treasury. Holy smokes! That means that bringing America’s growth rate up to the Reagan-Clinton levels of around 4% would bring the US Treasury six trillion dollars over ten years! 2+% greater growth would put Uncle Sam quickly back into surplus.

Not incidentally that level of economic growth would be something like ten times as beneficial to the private sector … very much including roaring job creation and upward income mobility for median families. Win win.

Economic growth is key. How to get there?

One of Paul Ryan’s hallmarks is his pragmatic conservatism. Another is his inclusivity. Equitable prosperity, and restoring the primacy of the enterprising, does not call for grandiose propositions. That said, of the five major drivers of economic growth, the budget is the most intractable. So let’s pivot, first, to the tractable policies.

Ryan already has laid down a significant marker in his bringing to the House floor Rep. (now Ways and Means Chairman) Kevin Brady’s Centennial Monetary Commission. This is legislation, championed by the Conservative Action Project, advanced to Committee passage by Chairman Jeb Hensarling, that was co-sponsored by many members of the Freedom Caucus: Chairman Jim Jordan, and Freedom Caucus bright lights Reps. Mick Mulvaney, Raul Labrador, Louie Gohmert and David Brat.

Ryan’s leadership got the Commission legislation passed late last year. It now is under Senate consideration. That’s a bragging point for Speaker Ryan with the Freedom Caucus and in his district. Ryan’s continuing advocacy for the Commission, even after passage, would not be wasted.

While I (as was Jack Kemp) am a notorious classical gold standard advocate we gold standard advocates — Lewis E. Lehrman, Steve Forbes, and many others — carry a legitimate burden of proof. The Commission presents as the ideal way to sort out the optimal monetary policy — the Taylor Rule, NGDP targeting, or the classical gold standard — to find the optimal one for getting working family incomes rising again. Ryan can win points for pushing for its enactment. And there is more.

There is a way forward, out of box canyon that did in the good John Boehner (about which I here had warned). Ryan looks like he is riding into the same box canyon. Let’s ride out together.

The way out is to reach into the same source from which Ryan drew the Centennial Monetary Commission. Once upon a time, before he chaired Ways and Means, Rep. Kevin Brady chaired the Congressional Joint Economic Committee.

I described the JEC as “Congress’s arguably most important inner think tank” and praised Mr. Brady for having “surrounded himself with a team of advisors sophisticated in economic policy and wise in the ways of Washington.”

The Brady Brain Trust — the epitome of equitable prosperity policymakers including, among others, National Economic Policy Director Doug Centilli, world class economists Robert O’Quinn and Jeffrey Schlagenhauf, communications virtuoso Alvin Felzenberg — left a rich legacy of legislative proposals perfectly suited to the conservative governance philosophies both of Speaker Ryan and the Freedom Caucus.

Still waiting action are the Brady Brain Trust’s “Maximizing America’s Prosperity Act,” a potent way of putting strong guardrails around federal spending, even better than Gramm-Rudman, and “Smart Regulation,” a solid way of holding federal regulations to a rigorous cost/benefit analysis. Both policies should be welcome both to Ryan and the Freedom Caucus. They offer a principled way to resolve the coming showdown.

To come to peace both with Republican Regulars and with the Freedom Caucus … all Speaker Ryan needs to do is to dip into the rest of the treasure chest bequeathed by Brady’s JEC Brain Trust. This would "unite the Tribes" and push America onto the right track both by fueling growth and preventing irresponsible spending.

Speaker Ryan — one of the kindest, most conscientious, most inclusive men in politics — now is entering the Lion’s Den. There is a way out. That way forges a clear path to get America moving again. It is a way, not incidentally, that the presidential aspirants would do well to adopt.

The Kadlec Curve — “every one-tenth of one percent increase in the growth rate will reduce the federal budget deficit over the next 10 years by $314 billion” — is the most promising available counsel both to eliminate the deficit and restore equitable prosperity. It can be done by combining the Centennial Monetary Commission, Maximizing America’s Prosperity Act, and Smart Regulation. (Tax reform and expanded free trade also would be beneficial.)

By putting America back on a great growth path Speaker Ryan could play the critical path role in propelling America to equitable prosperity, tame the lions of the Freedom Caucus, turn the federal deficit into a surplus, and advance Jack Kemp's aspirations for prosperity for America and the world. By reaching more deeply into the legacy of the Brady Brain Trust Paul Ryan also just might lay groundwork for his own future ascent to the Oval Office.
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Ralph Benko is senior advisor, economics, to American Principles in Action's Gold Standard 2012 Initiative, and a contributor to the ARRA News Service. Founder of The Prosperity Caucus, he was a member of the Jack Kemp supply-side team, served in an unrelated area as a deputy general counsel in the Reagan White House. The article which first appeared in Forbes.

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