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By Luigi Zingales

A Capitalism for the People: Recapturing the Lost Genius of American Prosperity

Eye on the News

Luigi Zingales
The Ryan Reset
Mitt Romney’s selection of the Wisconsin congressman as running mate has made the 2012 presidential race a fundamental clash of ideas about America’s future.
August 29, 2012

Mitt Romney should be grateful that party nominating conventions have not been abolished, as some commentators argue they should be. Without the Republican National Convention, Romney would have lacked a national stage on which to introduce his campaign’s greatest asset: vice presidential nominee Paul Ryan.

Before this week, Romney had spent months casting November’s election as a fundamental choice between two different views of America. Yet most voters would have been hard-pressed to identify the nature of this difference. Romney’s image as a technocratic problem-solver resembled President Obama’s, and the two candidates seemed to differ on little except whether or not to raise taxes on the top 1 percent of earners. When he announced his selection of Ryan as his running mate earlier this month, Romney finally began to change that dynamic. And now that Ryan and his ideas have made it into millions of American living rooms, Romney may be poised to reconfigure the race. For the first time, American voters not only have a good sense of who Ryan is, but more importantly, what his choice as VP nominee tells us about Mitt Romney’s agenda.

Ryan has done more than any congressman to warn the United States about the unsustainability of the nation’s fiscal path. Of course, with negative real interest rates on government debt, it’s easy to dismiss this concern—and several leading economists, Paul Krugman among them, have argued that the federal government should spend even more while money remains cheap. These pundits remind me of the left-leaning economists who gave spendthrift Italy similar advice as late as 2009. We know what happened there: the market woke up to the Italian fiscal mess, and now even the most draconian budget cuts seem insufficient to fix that mess. What happened in Italy can happen here.

And yet, as we know, few politicians have paid anything more than lip service to the looming fiscal calamity in the United States, let alone proposed the harsh medicine necessary to remedy it. Ryan has. It’s easy to nitpick Ryan’s “Path to Prosperity” plan—that it spends too much on defense, say, or that it doesn’t specify clearly enough where all the budget cuts it calls for should come from. But Ryan’s plan is notable for proposing hard choices for those on both sides of the political aisle.

From the moment Romney named him as his vice presidential selection, Ryan has been subject to attacks exceeded in intensity perhaps only by those directed at Sarah Palin four years ago. Whether casting him as a fanatical devotee of Ayn Rand or a Catholic zealot, Ryan’s opponents have sought to paint the Wisconsin congressman in extremist hues—particularly as it regards the function of government in American society.

But Americans are learning that Ryan is no cold-hearted, anti-government ideologue. His budget proposals make clear that his objective is not to dismantle the American safety net: “In a free society built on entrepreneurial risk-taking and hard work, such protection provides insurance against the vagaries of life.” His argument, rather, is that we need to bring an end to the corporate-welfare system that wastes billions in company subsidies, agricultural subsidies, and bailouts, all of it fostering corruption and cronyism. Ryan opposes these subsidies, not only because they waste taxpayers’ money, but (more importantly) because they create perverse incentives: they encourage businesses to lobby Washington for preferential treatment rather than to compete in the global marketplace.

Ryan’s view of a limited but effective government that ensures a level playing field without interfering in the competitive process is antithetical to Obama’s enthusiasm for industrial policy, which tries to pick winners and losers according to the preferred goals of government bureaucrats. Ryan understands that the fundamental question is whether America should move forward in the global marketplace or retrench, protecting U.S. firms from competition but at the expense of our economic future.

With Ryan on the ticket, Romney’s campaign has found the clear rationale that it had lacked previously. Romney seems finally to have understood that running against Obama’s health-care reform or the president’s poor stewardship of the economy, or even on his own proven managerial talent, would not be enough. He needed to run for something.

Now he has articulated a vision of America worth fighting for: a nation that believes in fiscal stability, not fiscal profligacy; that believes in the power of the free-enterprise system, not government bureaucrats; and that seeks to restore American exceptionalism and avoid a Southern European-style, crony-capitalism. With Paul Ryan at his side, Romney has made 2012 a fundamental election for America’s future.

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