By: AIF Staff
Earlier this week, American Idea Foundation President Paul Ryan took part in a bipartisan panel discussion hosted by the Brookings Institution’s Hamilton Project. The conversation, entitled Resilience After Recession: The Emerging Landscape for American workers and families, centered on how the COVID-19 pandemic has exacerbated economic disparities and how policymakers can ensure that workers, families, and children have the support necessary to thrive and prosper.
Along with experts and thought-leaders from across the ideological spectrum, Speaker Ryan shared his thoughts on the Democrats’ proposed reconciliation package and discussed provisions of the legislation that will, and in some cases, will not, assist lower-income Americans in successfully navigating the post-COVID economy. He also touched on how evidence and data provide opportunities to cut through partisan gridlock that is leaving too many Americans struggling economically.
Concerns with the Democrats’ reconciliation bill and its potential economic impact:
“It should come as no surprise that I think this reconciliation bill would be a big mistake for a couple of reasons, but I’ll try to say something positive about it at the end.
“Number one, I think it’s going to do a lot of harm to our economy. Just with these tax provisions alone, you’re going to reignite inversions. You’re going to bring the business tax rate for corporations and pass-throughs back to the highest in the industrialized world when you add state taxes on top of it. As a result, you’re going to make American workers and companies much, much less competitive.
“New inversions are going to start. You’re going to slow down job growth and slow down economic growth and at a very basic level, where we should start with is [agreeing] that we want economic growth. You cannot have upward mobility without economic growth. I like the fact that our labor markets are tight, but I want to make sure that we have jobs that can pull people into the workforce at higher-paying jobs and that depends on economic growth. If you make it harder for the job-producers and smaller businesses to expand and grow, as this bill does, then I think you’re going to be self-defeating in that area. Then the fiscal effects from this, you take a look at this bill, and I spent my career doing reconciliation, it’s kind of a fiscal train wreck.
“The Democrats are disguising the true cost of the bill and they’re disguising how much money you’re going to actually raise in revenue from the pay-fors, so I don’t think it is paid for and it’s going to give us a huge fiscal headache. Our debt and deficits are going to get out of control. This will put pressure on our dollar as a world reserve currency and our economy is going to slow down with bad tax policies.
“If we lose sight of the debt and deficits and the cost of financing our social contract, it becomes really difficult to finance and think of the social chaos and the political chaos that would occur with a debt crisis. First, let’s focus on getting this economy growing and, like I said, before COVID, the bottom two quintiles of income earners were getting the biggest wage increases they’ve ever had, so we had real standard of living increases.
“In addition to this, I think this [reconciliation bill] is going to increase inflation in the economy. I think a lot of these spending programs will convert inflation from what was hopefully temporary to more structural, so I think this bill is going to give us the wrong kind of pressure on inflation. I think that the reconciliation bill would be a big mistake.
Finding specific policies within reconciliation that both parties can embrace:
“Let me try and find something positive to say about it: I think the Earned Income Tax Credit (EITC) reforms are good reforms and that is something I’d like to see both parties embracing. I tried doing an EITC expansion for childless adults and I think that’s just a no-brainer. The data is really clear on this….
“We also need to have it embedded in the first paycheck on a monthly basis. There’s a systems problem at Treasury that we need to overcome but the Childcare Tax Credit and the EITC should not be a lump sum at the end of the year, it should be embedded in the paycheck. I think that’s something that everybody should come together on because the data is really clear that that really works.
“There are some discrete points I think that could be passed and that people on both sides could embrace, but I just think the reconciliation bill, particularly because the tax policy and the fiscal time-bomb and nature of these entitlement programs will actually give us a worse situation and slow down economic growth.”
What policymakers can do to ensure a more robust and equitable economic recovery:
“One thing I think we should focus on is data. My foundation is focused on making sure that the Evidence Act is well executed. The Office of Management and Budget is leading on this and I think there’s a lot of room to improve data collection, especially since COVID, because blue collar workers were harmed so much more than white collar workers.
“And so, I think there’s a lot of room for data collection and room to improve the evidence around these policies around workforce training. There are a lot of workforce training programs out there, but the problem is we haven’t really tracked the evidence of success. There are some that have been done using randomized control trials (RCTs) that show where success can be had, so my argument at this moment is: Let’s use data to find out what works and to find out what doesn’t work. I think there’s an opportunity to follow the data.”
Rethinking and customizing our social insurance system:
“I think in the 21st century with data and digital advances and with the economics field that we have currently, we can re-think how we design our social insurance system. I mean, look at my own experience with EITC and just trying to make it monthly. I didn’t have any problems with my side of the aisle. I didn’t have any problems with Democrats. I couldn’t do it because the federal government just couldn’t do it. This stuff is just ridiculous.
“And so, I really believe we need to rethink the way our systems work and the way we design our benefits. We just paint everyone with the same brush. We treat everybody the same and as a result of this bad macroeconomic policy, we have bad micro-economic policies with benefit offsets and with benefit cliffs and that really sets people back.”
The need to modernize the social safety net:
“We have a 20th century social insurance system that we need to turn into a 21st century social insurance system… I really do think our entire social insurance safety net is due for an overhaul. It should be based on data, based on evidence, based on what is proven to work, and yes, we should do some experimentation. We should run some RCTs across the board but I think adding new programs on top of old failed programs and hoping that it’s going to be done differently or produce new results is just not going to work and is the same mistake that we’ve been making.
“Frankly, given what we have in technology, in data and analytics, and in digital technology, I really believe we can streamline our social insurance system with an eye toward proven methods of upward mobility to help those people who historically have not gotten ahead. I think the pandemic hurt the least among us the most and I think Michelle was right about the post-2008 recession, it was the wealth effect by the Federal Reserve which helped people at the top do extremely well and we had stagnation below that because of bad fiscal and regulatory policy.
“I think there are better policies to get us faster economic growth, faster wage growth, better living standards, but throwing on top of it brand new ideas that are untested and putting them on top of a creaky social insurance infrastructure from the 20th century that is not meeting its potential, I just don’t think it is a smart move and I think it’s going to give us a huge debt hangover. I think it’s going to be bad for our economy.
“I would take today’s technology, overhaul the social insurance system, focus on getting the incentives right, the benefit mixes right, and the thing that always bothered me when I studied all of this stuff is the benefit offsets….
“I think there’s a way of dealing with the benefit cliffs so you can customize benefits on a per person basis using technology and using good economics so that it always pays to move ahead. You’re always making sure that the benefit mix – whether it’s job training, childcare, transportation, I’m in Wisconsin so heating, is designed properly so that a person is always on the curve on the way up and you don’t have all these benefit cliffs knocking them back. That’s what I would be focusing on right now to try and build a 21st century social insurance system that is durable, effective, and by the way, affordable, and that doesn’t bankrupt the country.”