Michael Tanner

is a senior fellow at the Cato Institute

There are many reasons for the Republican Party's troubles, including an unpopular war, a sputtering economy, and a long string of corruption scandals. But perhaps most important, the party no longer seems to stand for its core commitment to limited government.

Enter Paul Ryan. Last month, the five-term Wisconsin congressman introduced a comprehensive blueprint for reforming taxes, entitlements, retirement and health care. If Republicans are looking for a road out of the political wilderness, they should pay attention.

Health Care.

Ryan would reform our employment-based insurance system by replacing the current tax exclusion for employer-provided insurance with a refundable tax credit of $2,500 for individuals, and $5,000 for families. This would encourage employers to take the money they currently spend providing health insurance and give it directly to workers, who could then use it to purchase competitive insurance plans.

Ryan would also allow workers to shop for insurance across state lines.

That would mean residents of states such as New Jersey and New York, where regulation has made insurance too expensive for many people, could buy their insurance in states where it costs less. And increased competition would help bring insurance costs down for all of us.


Ryan would modernize the program, giving seniors more freedom to get the type of coverage that fits their needs, while bringing costs under control. He would give every senior an annual payment of up to $9,500 that he or she could use to purchase health insurance. The payments would be inflation protected and adjusted for income.

Social Security.

Ryan would preserve the program unchanged for current recipients and workers older than 55, but allow younger workers to invest part of their Social Security taxes privately through personal accounts. Unlike the present system, workers would own the funds in their accounts, and when they died, they could pass any remaining funds on to their heirs.


Ryan would radically simplify today's complex, cumbersome and bureaucratic tax code by giving filers a choice: They could pay their taxes under existing law, or choose a simplified code, with just two tax rates (10 percent on the first $100,000 for joint filers and $50,000 for individuals; and 25 percent above that). His plan would offer virtually no deductions or exemptions, except for an increased standard personal deduction and exemption of up to $39,000 for a family of four.

He would also replace our current anti-competitive corporate income tax - the world's second-highest, at 35 percent - with an 8.5 percent business consumption tax (essentially a value-added tax), and eliminate taxes on capital gains and dividends. Ryan understands that we must bring our corporate taxes in line with our competitors' if we want to increase economic growth and create more jobs.


Our current level of government spending is unsustainable. According to the Congressional Budget Office, unless we act now, government will consume 40 percent of our national Gross Domestic Product by 2050. That would require a doubling of the tax burden.

Ryan recognizes that Republicans would do better to clean up the mess than to continue tarring their opponents as "liberals," even as they spend money hand over fist.

Ryan understands the Jeffersonian admonition that as government gains ground, liberty retreats, and he has offered a carefully crafted alternative. His plan would give Americans more choices, opportunities, and economic growth. And it would give faltering Republicans a chance to restore their brand.

The only question is: Are they listening?

E-mail Michael Tanner at mtanner@cato.org.