David Gregory: Chairman Ryan, let me start with you. This question of austerity in Europe. They had failing economies, nearly depressed economies, the answer throughout the region was to slash their budgets. Has it failed?

Paul Ryan: Well, no, David. I would say they’ve also raised taxes. They have — this is a cautionary tale of what happens when politicians who make a lot of empty promises end up running out of the ability to borrow money at cheap rates and now their broken promises. It’s a cautionary tale of what will happen to us if we stay on the path we’re on. We’re saying let’s get on growth and off austerity. Get our borrowing under control, heading tax reform for economic growth and presenting medicare, social security and medicare from going bankrupt. That prevents austerity. The president, his budget, the fact the senate hasn’t done a budget in three years puts us on a path like austerity.

So – Paul Ryan blames Europe’s situation on them having raised taxes.  Except – the issue with Europe has very little to do with raising taxes at all.  Raising taxes on the middle class during a time of fiscal contraction is not a good idea.  The middle class is much more likely to be living paycheck to paycheck or with small reserves.  They use the vast majority of the money they earn in any given year.  The wealthy on the other hand – HOARD wealth.  The issue in Europe is there are 17 countries in the EU who use the Euro currency.  There are 9 countries in the EU that issue their own currency.

The countries that issue their own currency are doing far better economically than are the countries that are not minus Germany which is the dominant economic engine in Europe (source).  Those countries are able to inflate their currency as needed to take pressure off the economy as needed to address a growing debt burden.  What has been happening to Europe has created a deflationary and burdensome effect on most member states since the vast majority of them no longer control their own currencies.  You can find a list of all the member states of the European Union and the currencies they use HERE.

But Europe did impose harsh austerity measures on it’s people and had they not raised taxes – they would have had to cut spending on social services even more.  The correlation to Europe’s approach to solving their fiscal problems is very, very similar to what the Republican party has proposed that we do in the U.S.  The only difference is that we would have to cut our entire safety net.  And make no mistake….raising taxes or eliminating the safety net…..they’re both bad options unless you’re talking about raising taxes on people who have a certain amount of wealth because they are able to get by without a problem during these hard times.

Paul Ryan says – “let’s get on growth”.  Of course – his prescription for growth is a 40% tax cut for billionaires.  No – seriously.  Now – he says…we’ll just take away the deductions and loopholes but as anyone knows who has some sense of policy and common sense…we did that in the late 80′s.  We reduced rates with the promise of a more fair, flatter tax code and what happened?  The deductions and loopholes came back in a couple of years and the richest among us paid less in taxes than in any time in modern history.  That’s the game.  If Republicans were serious about it – they would support a MINIMUM tax rate on millionaires.  But they do not wish to do this…because then – there would be no way to get around the bullshit they’re peddling.

And what’s he is saying is that we need to impose austerity today so we don’t have to impose austerity tomorrow.  Well – we do need to do something about the long term deficit but we know the fiscal contraction that Paul Ryan speaks of will only further lead to a European style double dip recession.  The only real way to resolve the budget problem is to get to full employment.

Paul Ryan: Well, it’s as if our approach is draconian or something. What our budget does is growing spending on average by 3% a year for the next ten years versus president’s Obama’s approach which is to grow spending by 4.5% over the next ten years. We’re not really cutting spending, we’re simply slowing the rate of increase. To your earlier question, can you cut spending without jeopardying the economy the answer clearly is yes. If we fix the programs that are the drivers of our debt we reduce a debt likelihood. We bring borrowing down which opens up certainty to investors. More to the point we should budget to fix this problem. Dick and the folks over in the senate, they haven’t passed a budget in three years, David. How can you send signals to investors,  families, the american economy that we’re going to prevent a debt crisis, European-like austerity if we’re not even willing to pass a budget to deal with these issues for three years.

The Republican approach is draconian in terms of where it cuts….it doesn’t address the debt problem because for every $ it cuts in spending ….it cuts in taxes for the wealthiest.  So – the net-net is a transfer of wealth even more towards the richest Americans.  President Obama’s approach is to raise taxes on only people making over $1 million a year to prevent these draconian cuts.  The reason the budget grows 3% in his proposal is because they’re still proposing huge spending increases in the military budget and their plan to change Medicare is a slow drip to privatization so as not to freak out would be Seniors.

10 years from now – Medicare would be tremendously different for Seniors but today…it doesn’t hurt.  So – their plan allows for spending increases in the military budget…tax cuts for the rich and a slow drip for Medicare….and that’s the majority of the budget when you factor in the interest on the debt.  The only major program not included in his discussion is Medicaid which is being significantly cut.  So…for the rest of the smaller programs like food stamps, Pell Grants, assistance for battered women etc – those are all going to get cut significantly.

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