First thoughts on Ryan-Murray

Reuters

Senate Budget Committee chairman Senator Patty Murray (D-WA) (R) and House Budget Committee chairman Representative Paul Ryan (R-WI) hold a news conference to introduce The Bipartisan Budget Act of 2013 at the U.S. Capitol in Washington, December 10, 2013.

Article Highlights

  • Republicans may not like Ryan-Murray compromises, but they may vote for it anyway

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  • Five reasons Republicans may vote for Ryan-Murray

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  • Kevin Hassett: Ryan-Murray deal would decrease uncertainty

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Based on the outline that a staffer e-mailed me a couple of hours ago, the Ryan-Murray budget deal makes a trade that most Republicans would likely prefer not to make. It balances higher spending in the near term against longer-term reductions that, combined with increases in user fees, will reduce the deficit over ten years. But since promised future reductions can be reversed, Republicans are being asked to trade certain cuts today for uncertain cuts down the road.

Still, many Republicans might rationally choose to do so, for five reasons. First, the deal is microscopic, so small as to amount to economic rounding error. Second, it reduces government pensions by changing an indexing formula, a method that might have a better chance of sticking than more straightforward reductions, making these future cuts more certain than most. And if the new indexing continues forever, then spending will drop in the long run by much more than it will increase over the next two years. Third, if House Republicans pass this, it will reduce uncertainty and help the economy. Fourth (though this weakens the previous point some), the deal appears not to lift the debt limit, so they can play that game again if they want to. Finally, assuming that the debt-limit increase is not going to lead to another showdown next year, this deal allows Republicans to talk about Obamacare all next year.

For Democrats, who might prefer not to talk about Obamacare next year, and who wanted to increase unemployment-insurance benefits, it seems like a weak deal as well. Such is the fruit of bipartisan negotiation. Given the strong economic data over the past two months, many of them might choose to vote for it in the hope that policy stability will help bolster an already accelerating economy, allowing them to run on a strong economy next year.

There are many people in both parties who have to vote against this deal, but probably enough who don’t to allow it to pass.

— Kevin A. Hassett is director of economic-policy studies at the American Enterprise Institute.

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About the Author

 

Kevin A.
Hassett
  • Kevin A. Hassett is the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (AEI). He is also a resident scholar and AEI's director of economic policy studies.



    Before joining AEI, Hassett was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia (University) Business School. He served as a policy consultant to the US Department of the Treasury during the George H. W. Bush and Bill Clinton administrations.

    Hassett has also been an economic adviser to presidential candidates since 2000, when he became the chief economic adviser to Senator John McCain during that year's presidential primaries. He served as an economic adviser to the George W. Bush 2004 presidential campaign, a senior economic adviser to the McCain 2008 presidential campaign, and an economic adviser to the Mitt Romney 2012 presidential campaign.

    Hassett is the author or editor of many books, among them "Rethinking Competitiveness" (2012), "Toward Fundamental Tax Reform" (2005), "Bubbleology: The New Science of Stock Market Winners and Losers" (2002), and "Inequality and Tax Policy" (2001). He is also a columnist for National Review and has written for Bloomberg.

    Hassett frequently appears on Bloomberg radio and TV, CNBC, CNN, Fox News Channel, NPR, and "PBS NewsHour," among others. He is also often quoted by, and his opinion pieces have been published in, the Los Angeles Times, The New York Times, The Wall Street Journal, and The Washington Post.

    Hassett has a Ph.D. in economics from the University of Pennsylvania and a B.A. in economics from Swarthmore College.

  • Phone: 202-862-7157
    Email: khassett@aei.org
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