Rep. Paul Ryan (R-WI) is a smart, sharp guy. He really is, and his constituents have affirmed that in more than one election. We agree with him that “The US needs low and predictable tax rates, as well as predictable regulations.” He’s well versed in economics, finance, and business, and he knows about Bretton Woods and its collapse in the 1970s. But he often says things that make me wonder if he grasps the significance of that event. From a report of his recent CNBC appearance:
The country needs to do its reform on its own terms or it will be force into a vigilante-led, “Greek-style reform,” Ryan added.
Illinois and/or California might well be forced into a Greek style “internal devaluation” (a very polite way of saying ‘dumping severe adjustment costs on those who are unable to avoid them’). But the U.S. cannot and will not be.
Ryan was mentored by Jack Kemp, one of the original supply siders. He needs to dust off some of Robert Mundell’s writings. A government that issues the non-interest bearing debt used to service its interest bearing debt — something that Greece and other EMU states, state and local governments in the U.S., and all private sector actors cannot do – faces only one constraint, and that’s inflation.