The Ryan Proposal

Once again Paul Ryan has produced a “budget” for the U.S. House, taking aim at entitlement spending and claiming (again) to be making the tough choices that President Obama and the Democrats refuse to make. Does he hit the mark? It really looks like he has come up way short again.

It seems that most everyone agrees that the numbers Ryan produces are ridiculous, and that he has failed to specifically articulate key points in his plan (what tax breaks would be done away with?). That criticism comes not just from the left, but from the right as well. Ross Douthat argues that the numbers are less important than the “political goals” of achieving structural reform in entitlements.

In this sense, liberals are right to highlight their implausibility — but wrong to argue that they discredit the Ryan budget as a policy document.

Douthat concedes on the fact that the budget numbers don’t add up, but credits Ryan with making necessary changes to entitlements. But in fact, as Ezra Klein points out, Ryan’s budget ax is reserved primarily for Medicaid, not Medicare.

Perhaps the simplest way to understand what’s going on in Paul Ryan’s budget, and whether it’s plausible, is to look at page 13 of the Congressional Budget Office’s summary of the Ryan plan (pdf). That’s where the CBO lists Ryan’s assumptions about how future budgets would differ under his proposal and under an alternative, high-deficit scenario. That lets us see where, exactly, Ryan’s presumed savings are. And they’re not, for the most part, in Medicare.

In 2030, spending on Medicare is .75 percent of GDP lower than in the alternative fiscal scenario. In fact, Ryan and the Obama administration have proposed the same rate of growth for Medicare: GDP + 0.5 percent.

It’s Medicaid and other health spending, which includes the Affordable Care Act, where Ryan really brings down the hammer: That category falls by 1.25 percent of GDP. So Ryan’s cuts to health care for the poor are almost twice the size of his cuts to health care for the old.

Ryan’s revenue numbers are simply a joke, with a huge hole in revenues over a ten year period. From Klein:

The Tax Policy Center looked into the revenue loss associated with House Budget Chairman Paul Ryan’s plan to cut the tax code down to two rates of 10 percent and 25 percent. They estimate the changes would raise $31.1 trillion over 10 years, or 15.4 percent of GDP. That’s $10 trillion less than the tax code would raise if the Bush tax cuts were allowed to expire, and $4.6 trillion less than it would raise if all of the Bush tax cuts were extended.

Even with all of the Bush tax cuts extended Ryan comes up real short on the revenue side. Recognizing this Ryan indicates he will “close loopholes” to bring revenues back to the 18.5% of GDP that he thinks he can run government on. It is estimated that he would need to close about $6 trillion in loopholes, or tax expenditures, to hit that number. But alas Ryan refuses to identify which “loopholes” he will close. Will it be the mortgage interest deduction? The Washington Post just ran a story that detailed just how difficult it would be to “reform the tax code through deduction elimination”, an obvious point driven home by the beneficiaries of the deductions with the greatest dollar values.

Finally it takes the right wing Club for Growth to point out what I have been howling about since Ryan’s last budget proposal. Ryan does not produce fiscal balance (by his own measures) until 2040. From the Club for Growth statement:

“Despite containing several important reforms and pro-growth policies, the Ryan Budget falls short in two critical respects. First, it does not balance for decades. Secondly, it violates the Budget Control Act by waiving the sequester,” said Club for Growth President Chris Chocola. “By waiving the automatic spending cuts required under the Budget Control Act, this budget is asking Americans to trust future Congresses to do the hard work later. It is hard to have confidence that our long-term fiscal challenges will be met responsibly when the same Congress that passed the Budget Control Act wants to ignore it less than one year later. On balance, the Ryan Budget is a disappointment for fiscal conservatives.”

As the Club for Growth points out Ryan is in favor of eliminating the budget sequester called for by the failure of the Congressional “Super Committee”. Ryan, like many others, chooses to kick the can down the road, and the Club for Growth called him on it.

The big media types simply refuse to ask the simplest of questions to Republicans: “If you favor a balanced budget, or a balanced budget amendment to the U.S. Constitution, where is your balanced budget proposal? Ryan, like most Republicans, does not really favor a balanced budget. What he and the Party favor is a reallocation of budgetary resources away from the middle class and the poor towards upper earners. That point has never been clearer.

Read the CBO analysis of the Ryan proposal here.

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