Bailout budget blunder

23 March 2012 By Daniel Indiviglio

Paul Ryan’s new budget takes bold steps to shrink U.S. debt, but makes a troubling error. He suggests that Dodd-Frank’s new mechanism to wind down big banks will cost taxpayers and spur bailouts. This misstep casts doubt on his ability to favor practical solutions over politics.

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Representative Paul Ryan unveiled on March 20 his GOP budget vision, which seeks to cut government spending by $5 trillion over the next decade. It would also scrap the current tax code and simplify both personal and corporate tax rules. Ryan’s proposal addresses several parts of the economy, from healthcare to energy to financial services.

In the plan, he criticizes the Dodd-Frank Act’s non-bank resolution authority, which seeks to wind down large, systemically relevant firms. He asserts that this mechanism will lead to even more bailouts and points to a CBO report that says its cost could be $33 billion through 2020.

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