Rep. Paul Ryan: the IRS scandal is “just chilling”

Rep. Paul Ryan, 2012 vice-presidential candidate and chairman of the House Budget Committee, appeared on CNBC’s “Squawk Box” Wednesday morning to discuss the IRS scandal, budget issues, and rib sauce:

Yes, Paul Ryan scarfs down ribs slathered in barbecue sauce but still looks like that.  Take a bow, P90X trainers.

Ryan discussed the Republican budget proposal, which despite liberal caricatures of brutal “austerity” would still increase government spending by over 3 percent per year, while achieving a balanced budget in less than a decade.  In fact, with new baseline projections, Ryan thought surpluses that could help pay down the national debt would be within reach.  “We’re not doing tough, hard-core austerity,” he said.  “These things kick in later on down the road.  The kind of ‘spending cuts’ we’re talking about right now aren’t even actually cutting spending, they’re just slowing the growth of spending increases.”

He had an interesting take on the recent reduction in deficit projections, which brought the deficit for the coming year down to $642 billion – outrageous by the standards of any previous Administration, but almost P90X by Obama standards.  “Fannie and Freddie cut a check we didn’t see coming by about $62 billion,” said Ryan.  This was a reference to the unexpected profitability of federal mortgage backers Fannie Mae and Freddie Mac, whose own administrators did not anticipate reporting net income due to the rebounding real-estate market.  Fannie and Freddie are still nowhere near repaying their $190 billion taxpayer bailout, and in fact the terms of the bailout explicitly compel them to recognize net income as return on the taxpayers’ “investment,” not repayment of a loan.

“And, go figure, capital gains went from 15 percent to to 23.8 percent,” Ryan added, referring to the tax increases in the “fiscal cliff” bargain.  “And the people, their behavior adjusted to it – meaning they realized their capital gains in 2012” to avoid the tax hike, producing a “one-off” surge in government revenue.  Echoing Ryan’s warning that the cap-gains revenue surge won’t last, Red Jahncke of the Townsend Group management consulting firm noted in a recent Wall Street Journal piece that Uncle Sam’s income spiked a good $90 billion for the first four months of 2013 – which, added to that $62 billion check from the mortgage corporations, accounts for a great deal of 2013’s deficit reduction.

“So, we got a rush of revenues due to tax policy,” Ryan concluded, “and we got a rush of revenues because Fannie and Freddie cut a check to the government.”  But, according to projections, “we still have deficits that are approaching a trillion dollars by the end of the decade.”

The House Budget chairman professed himself “more concerned about the long term than the sort term,” particularly the “entitlement explosion.”  He warned that “if we just keep putting our head in the sand, then it will be austerity.  What we’re trying to do is prevent and pre-empt austerity.”  He described true austerity as cuts to “programs current people live on, the safety net that seniors use after they’ve retired, in real-time, to respond to the bond markets.  That’s what we don’t want to have happen.”

Ryan prefers reforms that can be phased in, beginning with younger people who are still active in the workforce, before a crushing demographic tidal wave hits insolvent entitlement programs.  He also strongly emphasize the importance of across-the-board pro-growth business tax cuts to achieve sustained economic growth, particularly among job-creating small businesses.

Ryan responded forcefully to the bizarre suggestion that President Obama should be free of congressional oversight because he’s already a “lame duck” who can’t run for re-election.  There certainly are plenty of Administration scandals to investigate at the moment, but these investigations would not preclude other House business, because “we can walk and chew gum at the same time… Our job is to do good policy and do oversight at the same time.”

He described the IRS scandal as “just chilling” and an example of “the arrogance of big government.”  He prefers to handle the matter through Congressional oversight, rather than appointing a slow and expensive special prosecutor.

“We know that the IRS targeted people based upon their political beliefs – and not just Tea Party groups, religious groups as well, that held views contrary to the Administration,” said Ryan.  “We know that the IRS intimidated and harassed donors to conservative organizations.  We know that they leaked sensitive taxpayer information to the public, so that donors could be harassed.  And we know that the IRS misled Congress.  The reason we know about this is because Congress, two years ago, asked the IRS about this.”

He was dismissive of the “low-level rogue employee” theory, although he said he would not draw any conclusions about the ultimate outcome of the investigation.  He didn’t seem very impressed with the Treasury Department’s handling of the scandal, criticizing its “political people” from hiding behind the Inspector General’s audit instead of taking action.  “You should pick up the phone and call the IRS commissioner and say, ‘Is this still happening?  If so, stop it.’  They didn’t do that.”