If you want to see House Budget Committee Chairman Paul Ryan sanctimoniously excuse himself and his friends for missing the most predictable economic crisis in the history of the world, you now have the opportunity: In a YouTube video produced by his staff, Ryan tells viewers that the crisis called by the collapse of the housing bubble caught “us” by surprise.
Well, it didn’t actually catch us by surprise. Some of us had been warning about the potential damage caused by the collapse of the bubble since 2002. We repeatedlytried to warn of the dangers of the housing bubble in whatever forum we had.
It was easy to see that the housing market was hugely over-valued and that at some point it would collapse, just as the stock bubble had collapsed in 2000-2002. It was also easy to see that its collapse would have a devastating impact on the economy.
The bubble was driving the economy both directly by propelling a construction boom and indirectly through the impact of housing bubble wealth on consumption. When the bubble burst, there would be nothing to replace this bubble driven-demand. It would be necessary to run the sort of large government budget deficits that we have seen the last four years in order to sustain the economy and keep unemployment rate out of the double digits.
All of this was 100 percent predictable and predicted. However Representative Ryan wants to give himself the blanket “who could have known” amnesty because he and his Wall Street friends chose to ignore the people who were giving the warnings.
Ryan should apply a variation on the sanctimonious lines in his video to himself:
“Imagine being warned about an economic crisis that would throw more than 10 million people out or work and cause millions to lose their home and doing nothing. Imagine that our politicians in Congress and the White House chose to do nothing while there was still time because it would have been bad politics to upset the Wall Street banks who were making so much money. They instead chose to ignore the warnings. That is immoral.”
While some of us were putting in overtime and missing sleep to try to warn about the dangers of the housing bubble, Representative Ryan and his cronies were whining about a budget deficit that was almost non-existent. The budget deficits that the government was running in the years just before the collapse of the housing bubble were less than 2.0 percent of GDP. The debt-to-GDP ratio was actually falling. We could have run deficits of this magnitude forever.
After contributing through his negligence to the worst economic crisis since the Great Depression, Representative Ryan has the gall to imply that the people who don’t like his plan are immoral. While we don’t yet know the specifics of his new plan this year, we do know what he put on the table last year.
According to projections from the Congressional Budget Office, that plan would haveraised the cost to the country of buying Medicare-equivalent insurance policies by $34 trillion over Medicare’s 75-year planning period. It also would have led to huge cuts in Medicaid, denying health care to children as well as other budget cuts that would have worsened the situation of low and moderate-income children.
And to offset these cuts Representative Ryan promised big tax breaks to corporations and the richest people in the country. His budget lowered the tax rate on both to just 25 percent.
If we can skip the sanctimony let’s just say what every budget wonk knows to be true. We don’t have a budget problem; we have a health care cost problem. If per person health care costs in the United States were in line with those in any other wealthy country we would be looking at huge budget surpluses, not deficits.
The answer lies not in cutting back and/or eliminating Medicaid and Medicare, but in fixing the health care system. That’s the simple truth and to try to contend otherwise is immoral, Representative Ryan.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.
This article originally appeared on The Guardian.