Chad Stone is chief economist at the Center on Budget and Policy Priorities.
The House will soon pass the budget blueprint of Budget Committee Chairman Paul Ryan's The Path to Prosperity. Budget hawks like Maya MacGuineas, president of the Committee for a Responsible Federal Budget, give the Ryan budget their customary salute for its aspirations to cut federal deficits and reduce federal debt (as a share of the economy). But even they recognize that it does not really advance the ball in addressing the nation's fiscal challenges.
As MacGuineas says, "It is tough to imagine this proposal gaining broad-based bipartisan support, which is what we need to move toward adopting a plan." President Obama's bipartisan National Committee on Fiscal Responsibility and Reform (the Bowles-Simpson Commission) laid down a set of principles "to meaningfully improve the long-run fiscal outlook." The Ryan plan flouts at least two of its key principles for achieving a bipartisan solution: "protect the truly disadvantaged" and "everything must be on the table."
[See a collection of political cartoons on the budget and deficit.]
The Ryan budget aspires to cut the budget deficit (as a share of the economy) from 8.7 percent of Gross Domestic Product, known as GDP, last year to 1.2 percent in 2022. That's the same 2022 deficit that the Congressional Budget Office estimates we would reach anyway if we made no significant legislative changes affecting the budget for the next 10 years (see office's "baseline" projections here).
Policywise, of course, the Ryan budget aspires to pursue a path that's radically different from putting the budget on autopilot. Under current tax law (which calls for all of President Bush's tax cuts to expire at the end of this year), federal revenue would rise from a recession-depressed 15.4 percent of GDP last year to 21.2 percent in 2022. By contrast, the Ryan budget would hold revenue to 18.7 percent of GDP in 2022. Under current law, the Congressional Budget Office projects that federal outlays would fall from 24.1 percent of GDP last year to 22.4 percent in 2022. By contrast, the Ryan budget would cut spending to 19.8 percent of GDP in 2022.
[Read: Conservatives Should Be Wary of Paul Ryan's Budget Plan]
How would Chairman Ryan cut spending that much? Technically, a budget resolution is not a detailed budget. It sets broad spending and revenue targets but does not provide specific program-by-program details about how to reach them. But, on the spending side, the direction is clear—and the results are inevitable. Analysis by my colleagues at the Center on Budget and Policy Priorities shows how seriously the Ryan budget violates the Bowles-Simpson principle of protecting low-income households:
The new Ryan budget is a remarkable document—one that, for most of the past half-century, would have been outside the bounds of mainstream discussion due to its extreme nature. In essence, this budget is Robin Hood in reverse—on steroids. It would likely produce the largest redistribution of income from the bottom to the top in modern U.S. history and likely increase poverty and inequality more than any other budget in recent times (and possibly in the nation's history).
On the tax side, meanwhile, the Ryan budget violates the principle that everything should be on the table; it relies exclusively on spending cuts to achieve its deficit targets. Indeed, it proposes new tax cuts that would cost $4.6 trillion over the next decade (beyond the cost of implementing Chairman Ryan's call to make all of the Bush tax cuts permanent), according to the Urban-Brookings Tax Policy Center. At the same time, he does not provide any details of how he would scale back the tax credits, deductions, and other preferences, known collectively as "tax expenditures" that the plan says it would use to finance those tax cuts.
[Read the U.S. News debate: Do the Rich Pay Their Fair Share in Taxes?]
Chairman Ryan asked the Congressional Budget Office to confirm if his policies would indeed reduce the deficit, and the office obliged by carrying out that exercise in arithmetic. But as the Congressional Budget Office notes,
Those calculations do not represent a cost estimate for legislation or an analysis of the effects of any given policies. In particular, CBO has not considered whether the specified paths are consistent with the policy proposals or budget figures released today by Chairman Ryan as part of his proposed budget resolution.
President Obama's 2013 budget does not set targets for deficit reduction that are as ambitious as the Ryan plan's. But, as a president's budget must, it specifies its proposals in much greater detail. And, as the Congressional Budget Office's analysis of the president's 2013 budget shows—using the agency's own economic projections and estimating techniques rather than the administration's—a combination of revenue measures and spending cuts that does not savage the social safety net can achieve meaningful deficit reduction over the next decade, although the challenge of achieving the necessary further gains in subsequent decades remains daunting.
Clearly, a bipartisan solution to the deficit challenge remains elusive. Unfortunately, the Ryan budget does more to sharpen partisan differences than to move us toward a resolution.
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Reader Comments Read all comments (8)
Miffed Offandpeeved of CA 7:41PM March 22, 2012
Bill Hedges of MO 1:13PM March 22, 2012
Kristen of DC 11:11AM March 22, 2012