Stephen Moore: The Kempian Roots of Ryanomics

By Stephen Moore

President Obama’s campaign is exulting that Mitt Romney’s choice of Paul Ryan as his running mate highlights the contrast of campaign visions about America’s economic direction. They’re right. Mr. Ryan, who I have known for more than 20 years, has made his recent reputation as a budget wonk. But his policy roots lie in the growth and opportunity wing of the GOP.

Mr. Ryan broke into politics in the 1990s at Empower America, where he became a protégé of former Buffalo Congressman Jack Kemp, the pro-growth, pro-trade, pro-immigration leader of the GOP during the Reagan revolution and into the 1990s. Kemp understood, as Mr. Ryan also does, that while spending restraint is important, faster economic growth is a precondition to averting a fiscal impasse. More than anyone else in Washington in recent years, Mr. Ryan has adopted the Reagan-Kemp message.

At Empower America, Mr. Ryan worked with Kemp on issues ranging from enterprise zones for inner cities to school choice. Like Kemp, Mr. Ryan has always made a case that free-market policies benefit minorities and poor people generally who are “capital deprived.” That message has special resonance now given the reversal of minority progress on income growth, and the high black and Hispanic unemployment rates, during the Obama years.

In his first campaign in 1998, a tough year for Republicans, Mr. Ryan beat a liberal woman, Lydia Spottswood—in his southeastern district of Wisconsin that leaned Democratic—by talking to working-class voters about pocketbook issues from taxes to Social Security and trade in an understandable and compelling way.

Mr. Ryan has made clear in his budget and has educated his congressional colleagues that with a growth rate of less than 2% you can never cut government spending or raise taxes enough to balance the budget. At what is now the explicit Romney-Ryan target of 4% annual growth, deficit reduction and fiscal stability would be achievable, and with much less pain and suffering. When I recently asked Mr. Ryan whether 4% growth was reasonable, he responded: “It should be easy. Under Reagan we had growth rates of 7% and even 8%.”

Associated Press/Rick BowmerJack Kemp in 1996.

The centerpiece of Mr. Ryan’s growth plan is a robust tax reform. The Ryan budget would cut the top personal income rate and the corporate tax rate to 25% (10% for the middle class) while eliminating unproductive loopholes that complicate the tax code. Lower tax rates in the 1960s, 1980s, and even in the Bush years (2003-07) accelerated growth.

Where Mr. Ryan diverges from Jack Kemp is on his emphasis on spending restraint, which is in part a function of their separate eras. Federal spending and debt are simply too big to ignore now. The difference between the Obama spending baseline over the next decade and the Ryan baseline is just over $5 trillion. Mr. Obama would allow the debt to grow by $10 trillion over the next decade, while under Mr. Ryan that growth would be cut in half. Mr. Ryan’s House Republican budget would lower the debt as a share of GDP to 50% from 72.5% now, while the ratio rises under Mr. Obama.

The Obama fiscal strategy has taken federal spending from 20% of GDP to 24.1% in 2011, while Mr. Ryan’s budget would slowly return the spending locomotive to 19.8% within a decade. That’s a giant difference.

Mr. Ryan’s budget is also aimed at reducing what he calls “the dependency culture” in Washington. Mr. Obama publicly acknowledges the entitlement time bomb, but his presidency has resulted in expanding dependency on Medicaid, food stamps, unemployment insurance, student aid, mortgage subsidies, and on and on. Fifty-seven percent of American households now receive a government check or service every month.

One big moment for Mr. Ryan came in February 2010. At a health-care summit sponsored by the White House, Mr. Ryan and President Obama debated for several minutes. Anyone who watched the exchange, which became a YouTube sensation, could only conclude that it was the young congressman who had control of the facts about ObamaCare, and Mr. Obama who was on the defensive. This was one of the events that helped make Mr. Ryan a GOP star.

The challenge for Messrs. Romney and Ryan going forward is to articulate their debt-reduction prescriptions without voters fearing they will bear the brunt. That’s why the growth message is so pivotal in this campaign—and why, if there is one complaint to be made about Mr. Ryan, it is that sometimes his message on debt and deficits is apocalyptic.

As dire as the budget and debt crisis is, faster growth will improve the outlook immeasurably and quickly—as we learned in the 1980s and ’90s. Growth causes lower deficits, not the other way around. With faster growth and an increase in employment, the Romney-Ryan plan can balance the budget much faster than can spending cuts alone.

The problem with the Romney campaign so far has been that it only highlights Mr. Obama’s obvious economic failures. The attacks have fed voter cynicism, as revealed in the polls, that it doesn’t matter who wins because the economy won’t get better.

Mr. Ryan has a talent for infusing voters with a sense of optimism that we should as a nation aim higher, that our problems in Washington are solvable with the right policies, and that private initiative and enterprise—not government—will lead us out of the morass.

With Mr. Ryan on the ticket, there will be little doubt that in 2012 Republicans are the party of hope and change, while Democrats have become the policy reactionaries touting a message of fear and the status quo.

Mr. Moore is member of the Journal’s editorial board.