Mitt Romney's choice of Paul Ryan for VP shows he's serious about protecting our children from the ongoing fiscal child abuse that six decades of Republican and Democratic administrations have taken turns practicing.
Paul is a friend of mine. We've spent time discussing healthcare, banking reform, macroeconomics, and the international economy. We've also discussed family and the country's future. Paul's a truly fine and trustworthy person. He holds the security and well being of our country and our children first and foremost in his mind.
I'm not a fan of everything in Paul's budget proposal. As those of you who follow my writings know, my proposed reforms are the Purple Plans posted at www.thepurpleplans.org. My Purple Health Plan, which I discussed with Paul about a year before he came forth with his Medicare reform plan, is similar in many respects to what he proposed. The big difference is that the Purple Health Plan features what amounts to premium support for a single basic policy for all Americans, not just those now on Medicare. By restricting government support to a single identical plan, it forces insurance companies offering the Basic Plan to compete to sell a uniform commodity, which will make competition really thrive. Importantly, like Paul's plan, the Purple Health Plan provides vouchers based on pre-existing medical conditions. Consequently, it's highly progressive because the poor are, on average, in worse medical shape than the rich.
Progressivity is a key concern of mine. It's also one of Paul's. I think those on the left need to realize that proposals like Paul's Medicare reform, which may, on first hearing, sound highly regressive, may, in fact, be highly progressive.
It's also important to bear in mind that progressivity cuts across generations. What we've set up is a long-term fiscal scenario under which today's and tomorrow's children, who will be mostly poor and middle class, will end up facing huge lifetime tax rates to pay for the benefits now going to today's elderly and baby boomers like myself. Many of the recipients are well off. Think about a child born today who will earn, say, the median wage when she hits the workforce. That child is going to have to pay, under the current system, not just for benefits Warren Buffett has already received from Social Security and Medicare, but also for the future real growth in Warren's Medicare benefits through the end of his days.
When it comes to tax reform, I favor the Purple Tax at www.thepurpletaxplan.org. But this tax shows that you can have a broader base and lower rates and still achieve a more progressive tax system than we now have. Paul's proposed two-rate (10% and 20%) tax reform could, when fully spelled out, turn out to be more progressive than the current system, which is actually much less progressive than most people believe. Governor Romney's low average tax rate is evidence of this.
We should also bear in mind that proposals to reduce or eliminate the corporate income tax are actually highly progressive. The very high mobility of corporate capital suggests that the corporate tax, although it sounds like a tax on the rich who own corporate stock, is actually a tax on workers. The reason is that corporations choose to operate based, in part, on the local tax rates. If the U.S. were to lower its corporate tax rate to zero, as advocated in the Purple Tax Plan, we'd see a huge influx of investment in the U.S., by both U.S. companies moving their overseas operations back home and by foreign companies investing here rather than elsewhere. Such a domestic investment surge would mean more jobs at higher wages for American workers. Alternatively, if we were to triple the corporate tax rate, our paltry 5 percent domestic investment rate (It was 15 percent in 1950.) would surely shrink to zero. No union in the country would, for good reason, advocate such a policy.
In economics, things that sound like NOT X often are X. This is what makes economics such a fascinating subject. It produces counterintuitive results all the time, which, upon reflection, make perfect sense.
My bottom line on Paul Ryan's selection is this. Paul Ryan is a very fine man and should be given a full and fair hearing. The President has done his best to vilify Paul on a variety of public occasions. That's politics. But the President would do well to realize, what Paul knows better than anyone, that our real concern must be the next generation, not who wins the next election, and that the exploding costs of Medicare, Medicaid, and Social Security, for which the President has offered no real reforms, are a grave and present danger to our children.