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Ryan advises lawmakers to channel President Coolidge & tackle America’s fiscal problems

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By: AIF Staff

This week, American Idea Foundation President Paul Ryan served as a keynote speaker at the Calvin Coolidge Presidential Foundation’s conference entitled: America in Debt. Held at the Library of Congress, the conference gathered a bipartisan array of elected officials, senior leaders in recent Administrations, noted historians, policy experts, and economists for a discussion on how the lessons learned from America’s 30th President, Calvin Coolidge, could help solve our nation’s 21st fiscal challenges.

Concluding the conference with a panel on “Looking to the Future: Solutions to America’s Debt Challenge,” Ryan, along with Steve Forbes and Romina Boccia of the CATO Institute, outlined ways that policymakers can channel Coolidge’s approach to a fiscal discipline and balancing the budget. 

In his remarks, excerpts of which are below, Ryan shared his experiences passing revolutionary balanced budget proposals through the House, making the case for sensible entitlement reforms, and developing a consensus on how to avoid a debt crisis.  

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I sincerely appreciate Amity Schlaes, Bill Beach, and the Coolidge Foundation convening this gathering. It is amazing to see old friends like Congressmen Chris Cox and Jeb Hensarling, with whom I spent years working on these big, fiscal issues.  The numbers have grown since then, but the fact remains that this is the most predictable economic crisis we’ve ever had. 

We all know our debt is out of control. We all see a debt crisis coming. We don’t know exactly when it’s coming due. We don’t know the exact inflection point. If you ask an economist or a bond trader, they will give you different theories, but they all agree America’s fiscal path is unsustainable.

The problem that our nation has is, despite knowing a debt crisis is coming and would do bad things to our economy, our politics remain fundamentally unserious. It’s why I am glad you have focused on solutions today. I am hopeful that Steve and Romina will present some more because we have a backslid on this issue. 

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In the good old days, like just ten years ago, Republicans used to offer comprehensive proposals to solve this problem. During the Tea Party era and after, there were different plans to balance the budget and save our safety net programs on the Republican side of the aisle. In the House Budget Committee, Jeb Hensarling and I helped author proposals every year, from 2007 to 2018, that paid off the debt and strengthened entitlement programs by putting premium support into Medicare and block grants into Medicaid. The proposals showed, using CBO supported baseline-scoring, that America could balance its budget. It took a major lift to communicate these policies and gain the support of our colleagues, but Congressional Republicans have done this before. 

Those budgets had so many different elements to it, but in the interest of time, I’ll try to simplify the equation. 

Basically, entitlement programs are driving out debt. Obviously, the federal government needs a discretionary cap number so there is a clear budget level set, year in and year out, for discretionary spending. Ideally, this topline discretionary cap number is set at the beginning of a year so Congress can have a budget process – and there was a failed attempt at doing that this year – but with that level set, Congress can focus on mandatory spending, which is the heart of the problem. 

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Since we are at the Coolidge Foundation’s Conference, I would argue that many of the debates in America, from around the Coolidge Administration to the end of the 20th century, were debates over policies like the New Deal and the Great Society. At this point, it is safe to say that those debates are momentarily settled. Both parties tend to agree that the social contract, which can be described as health and retirement security and a safety net for those who slip through the cracks, is something America wants, needs, and wants to preserve. 

Neither the Democratic Party or the Republican Party are looking to abolish this social contract. Republicans aren’t proposing to get rid of Medicare and retirement security programs. 

So, knowing there is a consensus on having this social contract and safety net, policymakers need to also accept these programs were designed in the 20th century in a way that is unsustainable in the 21st century. Policymakers should accept that since these programs’ founding, we have had massive advancements in economics and technology, and we should apply those lessons so these programs can continue fulfilling their missions without bankrupting the country. 

I believe there is a lot that technology and the markets can do to help with this, particularly as it relates to health care entitlements. Private competition and choice can do a lot to make these programs work better, deliver better services and lower costs. Congress also should consider converting these programs into effectively, defined-contribution programs that grow at fixed rates. Pick your rate, but this, in and of itself, can wipe out trillions in unfunded liabilities on an accrual basis.

On the policy side, our proposals were clear: Address challenges in Medicare by grandfathering the grandparents. Congress can grandfather existing seniors into the current program, so the government keeps the current promises made to them – promises which are unfundable right now. It can then put reforms in prospectively, for future seniors, allowing these new systems to grow at set rates and harnessing the power of choice, competition, and market delivery systems. 

If programs are growing at fixed rates and utilizing better services and technologies at lower costs, America can avert a debt crisis. The bond markets would reward Congress for the effort, even though the debt would increase as Baby Boomers retire because it will come down once those defined-contribution programs kick in. This trend was always supported in our budgets and shows one way to step in front of a debt crisis and solve this problem. 

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There are a few other closing points: 

First, America can’t solve its fiscal challenges without economic growth. Congress needs to be careful what it does on economic and tax policy because economic growth is critical to fixing our problems. Growth is a necessary ingredient to America’s continued prosperity. 

Second, America needs presidential leadership on this issue. Both frontrunners for the White House are actively campaigning against doing anything on the debt problem. Both Presidents Biden and Trump are campaigning against legislators who propose to solve this problem. This is not helpful and increases the possibility that, after the Federal Reserve is done cutting interest rates and after debt comes due in 1st world countries facing similar demographic issues as America’s, there could be an auction failure. I shudder to think what happens then, but this could happen in the next presidency. Either way, Presidential leadership is likely required to seriously tackle this problem.  

Third, both parties have backslid on this issue in Congress so the most likely way to solve these programs’ looming insolvency and avert a debt crisis is through a Commission. As a former Member, it pains me to abdicate responsibility, but history has shown that a statutory Commission, which has teeth and enforcing mechanisms, is the most realistic way to solve this problem. 

Excerpts: At BPC, Ryan & Jamie Dimon talk about the future of tax reform, fiscally responsible economic policies, & evidence-based poverty-fighting  

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By: AIF Staff

Washington, DC – Last week at the Bipartisan Policy Center, American Idea Foundation President Paul Ryan joined a panel of experts from the private and public sectors to discuss the future of the Earned Income Tax Credit (EITC).

The event, which was the latest in a quarterly series hosted by the American Idea Foundation, featured a wide-ranging conversation between Ryan and JPMorgan Chase CEO Jamie Dimon, moderated by BPC President Margaret Spellings, and remarks from Maryland Comptroller Brooke Lierman.

Former Speaker Ryan and Dimon discussed how to improve poverty-fighting policies like the Earned Income Tax Credit and how to better utilize technology to administer these credits. Ryan touched on his past work to advance pro-growth reforms via the Tax Cuts and Jobs Act and his ongoing efforts to expand the use of evidence-based strategies to fight poverty.

Excerpts of Speaker Ryan’s remarks follow. Video of the event is accessible here. 

Why expanding economic opportunities for working families, via policies like the EITC, matters:

“This is a bipartisan issue. The EITC, which was originally a Milton Friedman idea called a “negative income tax” going back in the day, has had bipartisan roots and it has been proven to be very effective. When I was Chairman of the Ways and Means Committee, I worked feverishly to expand the EITC and a couple of reforms, which we can get into, have yet to materialize, but if you are pushing for a society that is known by upward mobility and you’re striving for equality of opportunity, the best tool that we’ve had in the arsenal is the EITC….

“You don’t think of Congress as this bipartisan place. Most people who watch the news don’t see it that way, but the EITC is [bipartisan], so let’s keep it that way and let’s figure out how we can make it better.”

On the future of the EITC and the need for technological innovation to improve its effectiveness:

“When I was Ways and Means Chairman, I was not a fan of the lump-sum concept of it where you wait until the end of the year and get a lump-sum. I would rather have it embedded in the paycheck itself so that each pay period you have that higher pay so you can budget more accordingly. It’s impressive that people can pay for one thing [using a lump-sum EITC payment] but it would be better if it was embedded in your paycheck, and you had higher wages that you could recognize. It really demonstrates the “make work pay” notion.

“The reason that we couldn’t fix this when I was running the Committee in charge of this is technology. The IRS and the Treasury literally did not have the technology to be able to do this and as we toyed with the idea, we could have converted it to a Social Security credit but that would have eviscerated the program. So, by now, surely technology can solve this problem and as you look at the digitization of money and the digitization of benefits – and there’s a longer conversation to be had here – I think that’s the key because you can do two things:

  1. Make sure [the EITC] goes to who it needs to, like the 300,000 people in Maryland who qualify for it but don’t get it. I mean, technology could help solve that.
  2. If we have program integrity problems, which are waste, fraud, and abuse, technology can clear a lot of that up and fix a lot of the administrative difficulties that we have….

“There are a lot of things that technology can do to make [the EITC] work better and make it work for cheaper and so that’s something to me that Congress should wrestle with. It is not that controversial, and it will help shrink the score of what it takes to expand this. We have a lot of expiring provisions in tax law in the next session of Congress and there is when you’ll have a churn of tax policy where you probably have an opportunity to make some of these expansions.”

A bipartisan consensus on the need for a social safety net, the debate centers on how best to deliver it:

“There’s a consensus in America. You don’t see it when you turn on the television at night because you have these entertainers in Congress… but we agree on the social contract which was litigated and debated in the 21st century. We want health and retirement security for all Americans. The government is going to provide this, and the question is: How does the government do that? But we all agree on the social contract, and we all want a safety net under which people can get back on their feet. Let’s have a good debate about how this works but we have a remarkable consensus in this country about the social contract of health and retirement security and we all want faster economic growth.”

The role of the American Idea Foundation in advancing evidence-based strategies:

“What my Foundation does is we work with economists at the University of Notre Dame who run 75 randomized controlled trials a year on what we think are successful poverty programs around America. We find out what works so we can then scale and replicate. Government can do that too.

“The last time I was here with Patty Murray, a progressive Democrat Senator from Washington state. We wrote the Evidence Act five years ago. The five-year anniversary was just a week ago. Why I think we’re really on the cusp of something good here is the Evidence Act says that the federal government has to open up its data so that the world, the private sector, the economists and the researchers can look at what does work and what does not work.

“The government, until just very recently, never did this. We would measure success on anything the government does by effort, by how much money are we spending, by how many programs are we creating. We did not look at outcomes and did not look at results. The Evidence Act is turning government to do that and what you invariably find out when you’re measuring yourself on Key Performance Indicators and results like the private sector always has done, you will then get us towards this “results-oriented governing,” which requires the integration of the private sector so we get the best practices.

“We’re kind of on the cusp of a new wing of social science with Evidence-Based Policymaking. We are skating to where the puck is going — I’m a Wisconsin guy so we talk in hockey analogies – but skate to where the puck is going to be, which is: What does work? What are the best practices? Forget about the old-school, government and press release effort [to fighting poverty]. Let’s make sure we are results and outcome based, and I think using the best technology, the best ideas, and testing them via randomized controlled trials and pilot projects can get us to that answer.”

Breaking up the monopoly on poverty-fighting by utilizing RCTs, pilot projects & private-sector innovation:

“[People] used to throw this idea out there which is: The War on Poverty is the government’s responsibility. It’s not yours, just pay your taxes and they will handle it. That didn’t work.

“My point is: Why don’t we decentralize this and make it competitive? Let’s have the private sector and the not-for-profit sector participate with all their sophisticated technology and help us solve these problems and you can do that in government.

“The point is, if you bring private sector know-how to help us deliver government goals like fighting poverty and delivering government benefits, we can save money and get to the goal faster, but it does require a big political leap of faith for some people who do not think these things should be inherently non-governmental. We still have that problem, so the answer, I think, is let’s try some randomized controlled trials in discrete ways. Let’s do some regulatory sandbox type of ideas to see if [a solution] does work and if this can be proven and built out….

“Let’s start with some tests. You can do them in a state. You can do it in a county. You can do a randomized control trial. You can do a pilot project. Let’s do that, build it out, and take it from there.”

Utilizing Evidence-Based policymaking strategies & private sector know-how:

“The good thing that BPC and other institutes do is they have all this evidence and data. We are actually in the world doing evidence-based policymaking and if we know what works and what doesn’t work, we can get past the ugly politics and get to just executing these proven things that we all now have consensus on.

“You have to accept that the private sector is going to have a big role in this. Why? Because the private sector knows how to do this. They have technology; they’re digitizing; they’re innovating constantly so let’s put that to work and put that intellectual capital toward delivering these government services. Some people are still stuck on this 20th century notion that this is all government and the government is supposed to solve poverty and supposed to deliver health care. It hasn’t. It doesn’t do it well. So, in this 21st century world that we live in with technology and how ubiquitous it is in our lives, let’s use the people who know how to do it to help deliver on these goals.”

Impact of America’s broader fiscal challenges on future economic growth:

“We have tremendous challenges. Our dollar as the world’s reserve currency is under duress even though we are probably the healthiest looking horse in the glue factory. We are in serious trouble of losing that privilege because our debt is out of control. We’ve discussed this here quite a bit, but we don’t have the kind of economic growth we need.

“Economic growth does not solve every one of our problems, but you can’t solve any of our problems without economic growth.

“The good thing is we know the dials that we can turn to get [faster economic growth]. A lot of it is about getting people in the workforce, getting people equipped and so if we can focus ourselves on upward mobility and the skills and tools that they need to live their best lives in a society focused on upward mobility, we can get that bogey.“And so, to me, it is about the things I described. It is about the digitization and the rebuilding of our safety net so that it works in the 21st century to get people working. It is getting the incentives right. It is getting not only our tax policy right but then getting our debt under control. You have to reform entitlements if you’re going to stop this debt crisis and if you’re going to be able to get these programs working the way they’re supposed to in the 21st century.”

Recap: At Bipartisan Policy Center, Paul Ryan, Jamie Dimon & experts discuss expanding economic opportunities

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By: AIF Staff

Washington, DC – Earlier this week at the Bipartisan Policy Center, American Idea Foundation President Paul Ryan joined a panel of experts from the private and public sectors to discuss the future of the Earned Income Tax Credit.

The event, which was the latest in a quarterly series hosted by the American Idea Foundation, featured a wide-ranging conversation between Ryan and JPMorgan Chase CEO Jamie Dimon, moderated by BPC President Margaret Spellings, and remarks from Maryland Comptroller Brooke Lierman.

The dialogue between former Speaker Ryan and Dimon focused on how policymakers and private sector leaders can expand economic opportunities for hard-working Americans, while also touching on the national debt and the impact it will have on economic growth moving forward. The pair discussed how to improve poverty-fighting policies like the Earned Income Tax Credit and how to better utilize technology to administer these credits.

A recap of the media coverage from the event follows.  

Just the News:  Ryan, Jamie Dimon warn U.S. nearing edge of fiscal cliff: ‘Most predictable crisis’

Former House Speaker Paul Ryan and JPMorgan Chase CEO Jamie Dimon are warning the American public and U.S. elected officials that the nation is nearing the edge of its fiscal cliff, calling it the “most predictable crisis” the country faces.

Ryan said interest payments on the U.S. national debt will exceed the entire Pentagon budget within 5 years. Dimon said quantitative easing during COVID cost about $4 trillion, describing it as “fiscal irresponsibility” that has consequences…

“There will be a rebellion and that’s the worst possible way to do it. There’s a cliff. We see a cliff. It’s about 10 years out,” Dimon said during a Bipartisan Policy Center discussion Friday on “Building Greater Economic Security for Working Families.”

“It’s the most predictable crisis we’ve ever had,” Ryan added.

“Exactly,” Dimon replied. “This is about the security of the world. We need a stronger military. We need a stronger America. We need it now.”

Ryan said a “statutory” fiscal commission is the only way to solve the grave financial challenges facing America as it heads toward $35 trillion of debt….Ryan said entitlement program reform must be part of the solution to put America on a sound fiscal path in the next 10 years, but neither President Joe Biden nor former President Donald Trump, the 2024 GOP presidential frontrunner, currently support changes to Social Security, Medicare or Medicaid.

Ryan empathized that a statutory fiscal commission would be the best way for entitlement reform to come to fruition.

CNBC: Improving this tax credit for low- to middle-income families is a ‘no brainer’

The EITC — which provides around $60 billion annually to workers and their families — could be reformed to be more efficient, experts said at a panel hosted by the Bipartisan Policy Center on Friday.

“This is like a no brainer, lift up society,” JPMorgan Chase CEO Jamie Dimon said. “And I would pay for it by taxing the wealthy a little bit more.” Increasing spending on the earned income tax credit would give more money to households and communities, and therefore providing more money for food and children’s education, he said.

“It brings dignity,” Dimon said. “That money will be spent in local communities….”

Approximately 1 in 5 workers who are eligible for the federal earned income tax credit fail to claim it, according to the Bipartisan Policy Center. In addition, there is also a high rate of improper payments, due to the credit’s complex eligibility rules. Having a more efficient system could make it possible to have it so the credit shows up in workers’ paychecks, rather than as one lump sum when they file their taxes, he said.

“I would rather have it embedded in the paycheck itself, so that each pay period you have that higher pay, so that you can budget more accordingly,” Ryan said.

Improved technology could also help get the earned income tax credit to eligible workers who are not currently receiving it, while also making it easier to change the terms of eligibility.

“We have a lot of expiring provisions coming in tax law at the end of the next session of Congress,” Ryan said. “There is where you have churn of tax policy where you probably have an opportunity to make some of these expansions.”

The Well News: Ryan Calls EITC ‘Best Tool in the Arsenal’ for Economic Mobility

According to Paul Ryan, former speaker of the House, on hand at the Bipartisan Policy Center to discuss economic security for working families, the impending reopening of the federal tax code in 2025 may be an opportunity to consider enhancements to the EITC.

“If you are pushing for a society that is known for upward mobility, and you are striving for equality of opportunity, the best tool in the arsenal that we have today is the EITC,” Ryan said.

“This is as much of a no-brainer policy as I have ever seen,” agreed Jamie Dimon, JPMorgan Chase CEO and chairman….

Saying the EITC “has proven to be very effective,” Ryan emphasized that technology is the key to enhancing the program’s efficiency further.

“The reason we couldn’t fix this when I was running the committee that deals with this, is technology,” he said. “By now, surely technology can solve this problem; Can make sure that [the credit] goes to who it needs to go to…Can clear up waste, fraud and abuse.”

Doubling down on his criticism of the Treasury Department’s “terrible data system,” Ryan said that with the right software, EITC could be a “monthly or biweekly” credit “embed[ed] in a person’s paycheck.”

In addition to addressing the shortcomings of the current data systems and software at Treasury, Dimon prefers any updates to the EITC “get rid of the child requirement,” which Ryan has also previously endorsed, and simplifying the credit as a straightforward benefit.

“It is either that or universal basic income. Those are the two debates in front of us,” Ryan said. “Smooth disincentives and focus on individual customized benefits that get people to work.”

Video of the entire panel discussion at the Bipartisan Policy Center is accessible here.