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Karen Dynan, professor of the practice of public policy at Harvard Kennedy School, welcomed former congressman Paul Ryan into the  at the Kennedy School to discuss the economy and tax reform.

Ryan greeted a familiar audience; his son, a sophomore at Harvard College was there, as was the former director of the Congressional Budget Office—now dean of the Kennedy School. “Do you guys know who Doug Elmendorf is?” he quipped. “Everybody knows Doug, right?”

The Forum focused on the economy. Dynan also is a professor in the Faculty of Arts and Sciences, a senior fellow at the Peterson Institute for International Economics, and the chair of the American Economic Association Committee on Economic Statistics. But she wanted to start the conversation on a different note. At the time of the event, the House of Representatives had yet to elect a speaker, almost two weeks after removing Kevin McCarthy. Dynan asked Ryan, who served as speaker from 2015 to 2019, “Based on your experience as Speaker of the House, what advice would you offer?”

“When you’re speaker, you designate who your successor is going to be. It’s a very private thing. You put a name on a piece of paper, and it’s held in an archive, and then when you're gone, that person becomes a speaker pro tem [meaning for the time being],” Ryan explained. “In this case, it’s Patrick McHenry, chairman of the Financial Services Committee. He was my deputy whip. An institutionalist, who really knows how to run the place. I think Democrats think of him as an honorable person who keeps his word. There is precedence to have that person be empowered to have speaker-like powers for legislative purposes, but not in the line of succession.”

“I think the last resort is to give McHenry the ability to be a speaker for legislative reasons, be able to schedule legislation, bring bills to the floor, run the committee system, but he would not be in the line of succession like the speaker is,” Ryan said. “And he would have that until such time as you can find a speaker or some date certain.”

Moving to the economy, Dynan, noting that the unemployment rate was at a 50-year low, and that inflation was lower than it was during the Reagan era, asked, “What you think is right and wrong about the U.S. economy?”

“First,” Ryan began, “forecasters were wrong that we would be in a recession now. But we didn’t dodge the recession. We delayed the recession or a severe slowdown to probably late next year, meaning Q3, Q4 2024, right around the time for the election.” But he noted, the inflation that is in the headlines is still “pretty ugly,” and voters are feeling the pinch.

“I can’t imagine Jay Powell [chair of the Federal Reserve] is going to get us to 2% inflation in 2024,” Ryan continued. “If he tries, he’s going to crush banks, put us into a recession,” he continued. “I don’t think we’re going to have stories saying we’ve slayed the inflation dragon before the election.”

That led Dynan to ask about the role of economic policy. “Given where we are now, are there some lessons that we should have learned about the fiscal and monetary policy that we have deployed over the last few years?” she asked. Ryan pointed to the national debt, interest rates, and the debt-servicing costs–our ability to “manage this mountain of debt.”

“The real problem,” he said, “is you have terrible politics right now. We have unserious politics, incapable of dealing with the drivers of our debt, which is basically our entitlement programs going bankrupt. There is not a serious political effort to address that. That’s my biggest concern.”

Ryan pointed to the dysfunction of politics. With regard to his fellow Republicans, he said “I think the real reason we are here is that we have this populist running our party right now who is against doing anything important and that’s principled, in my opinion. So, he [McCarthy] is not for doing any of the tough stuff of fixing entitlements because he doesn't think they’re popular, and that to me is the opposite of leadership.”

Referring to Elmendorf’s tenure as CBO director, Ryan noted that when they were working together, the House passed four budgets that reformed entitlements, balanced the budget and paid off the debt. “We reformed the way Medicaid works. We put separate bills in Social Security. We voted on raising the retirement age. We voted on means-testing the benefits. We voted on converting Medicare to a premium support system like the Federal Employee Health Benefit plan,” Ryan said.

“I think economists tend to write papers where we’re laying out some set of policy levers that you could switch on or off and that’s how you would resolve things. But in truth, it’s about making decisions that involve hard trade-offs,” said Dynan.

“Do you think there is a role for elected officials to educate?” asked Dynan. “Yes,” answered Ryan. “We voted for those things and survived our election. But that is not where our unserious populist politics are today. I don't see Congress anytime soon doing what is necessary to avert a debt crisis. The only alternative I think today you have is possibly a commission.”

Ryan offered three ways that could push the economy forward: fix the immigration law to deal with labor supply issues, get a good tax system that is pro-growth–he thinks it is smarter to go after carbon through price signals in the tax code–and use the revenues from that tax system to get entitlements under control and dodge a debt crisis.

Ending on an optimistic note, Ryan was excited to share his work on poverty and economic mobility. “I think we can really turn the corner in many major ways,” he said. "I teach in the Laboratory for Economic Opportunity, which is a lab similar to the work Raj Chetty does at Opportunity Insights.” Ryan also runs the American Idea Foundation, which is focused on poverty economics. “My vocation centers in the poverty space. I believe the field of economics can make a huge positive contribution to bending the curve on poverty and going with what we call evidence-based policymaking.”

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Photos by Martha Stewart