Paul Ryan will get a new job next year. When he does, he’ll also find himself in the middle of an emerging fight within the conservative movement—one that pits hard-core, traditional supply-siders against so-called “reform conservatives” who are trying to reshape the party’s policies and political posture. How he reacts and adapts will say a lot about the future direction of the Republican Party.
For the last three-and-a-half years, Ryan has been chairman of the House Budget Committee. The perch has been perfect for him. Not only has it given him the ability to shape Republican budgets, year after year. It’s also allowed him to lay out a worldview that earned him a reputation as the party’s most serious young intellectual. When Ryan released his 2012 budget, Yuval Levin, the founding editor of National Affairs and an adviser to Ryan, wrote, “It is the most coherent, responsible, and serious conservative governing document we have ever seen from elected Republican officeholders.”
In his most recent budget, Ryan emphasized his support for a tax reform package that would, among other things, reduce the current seven tax brackets to two, at 25 and 10 percent rates. The dual-bracket structure has long been the dream goal of conservative, supply-side tax reform. It would not just simplify the code, a goal even liberals share. It would also reduce rates on the wealthy. But such a plan could not be revenue-neutral without sharply increasing middle class taxes. It’s a mathematical certainty.Want to keep up with the latest on economic policy? Subscribe to QEDaily
Term limits mean Ryan can’t keep his current chairmanship. And that’s where things get interesting. As a replacement, he’s expected to seek, and to get, chairmanship of the House Ways and Means Committee. That will give him direct jurisdiction over tax reform and, as the Washington Post’s Robert Costa confirmed in a tweet, Ryan hopes to keep pushing the same supply-side agenda. But that’s likely to put him in conflict with the nascent reform conservative movement.
You’ve probably heard of this group. They’re the ones who were the subject of that New York Times Magazine article on Sunday—and who, prior to that, put together a new policy agenda in a compendium called “Room to Grow.” What you may not know is that the chapter on tax reform, written by Robert Stein, represents a substantial departure from agenda Ryan and other supply-siders have been pushing.
The focus of Stein’s chapter is a proposed expansion of the child tax credit, not a consolidation of the existing tax structure. In fact, Stein is critical of rate cutting as a solution to the current tax code’s problems. “Cutting marginal tax rates is not, however, an effective tool for delivering tax relief to the middle class,” Stein writes. “It does very little to lower their tax bills or improve their work incentives.” Stein spends an entire section on “The Marginal Rate Mystique,” arguing that while supply-side reforms were successful when the top rate was 70 percent, such reforms would have limited economic gain now while massively reducing revenues.
Stein’s proposal has the support of not just many reform conservatives, but also some high-profile Republicans in Congress. Senator Mike Lee proposed a similar expansion of the child credit in a tax reform plan last year. Lee, along with Senator Marco Rubio, is refining the plan after the Tax Policy Foundation found that it would increase the deficit by $2.4 trillion. Lee and Rubio don’t necessarily oppose supply-side tax cuts. Lee’s initial proposal did not have to confront the policy tradeoffs inherent in a deficit-neutral tax reform proposal. But the fact that they’re focused on expanding the child tax credit, rather than simplifications, suggests they don’t think Ryan and the supply-siders have all the answers.
The conflict is already starting to play out among conservative intellectuals. You can see it in a recent back-and-forth between Kim Strassel, who is a member of the Wall Street Journal editorial board member, and Ramesh Ponnuru, who writes for National Review and Bloomberg View. Strassel is a supply-sider, which is pretty typical of the Journal editorial page. Ponnuru is a leader of the reform conservative movement. After House Majority Leader Eric Cantor’s shocking primary upset, Strassel took to the Journal pages to denounce "Room to Grow" and advocate for supply-side reforms. Ponnuru responded in kind. “‘Room to Grow’ presents many ideas on how to [reform policy for ordinary Americans],” Ponnuru writes. “A prerequisite, though, is not taking direction from Wall Street—or, in this case, the Wall Street Journal.”
Conservatives may end up reconciling the two sides—by calling for both simplification and a bigger child tax credit, for example, though they may have an issue with deficit neutrality. Note that Levin, having advised and praised Ryan, is also a leader of the reformicon movement. But there are also reasons to think Ryan will have to adapt if he hopes to retain strong support of reform conservatives.
As New York magazine’s Jonathan Chait noted, Ryan barely registered in that Times magazine piece over the weekend. “The most telling thing about the story is the near-total absence of Paul Ryan,” Chait writes. “Not long ago, it would have been unimaginable to read a long story about Republican policy that did not, at least, devote heavy attention to the author of the party’s sweeping vision statement…Now the party continues to head inexorably toward its glorious reform future, and Comrade Ryan is oddly missing from the dais.”
Ryan has long had passionate supporters among conservative intellectuals. Whenever Paul Krugman called Ryan “unserious,” they were often there to defend him. But Ryan is walking into a fight where he may not have the support from a large swath of conservative wonks—and that could put his carefully crafted reputation at risk.