Fact-checking the Ryan budget plan

at 06:00 AM ET, 04/06/2011


(Joshua Roberts/BLOOMBERG)

 “We need to get rid of all these accounting tricks, all these budget gimmicks, and we've got to attack the drivers of our debt.”

--Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, April 5, 2011

 

 With a snazzy video presentation and a plan long on rhetoric and short on details, Rep. Ryan unveiled his 2012 “Path to Prosperity” budget blueprint Tuesday, setting the stage of a titanic clash of government philosophies. Give Ryan credit for his willingness to offer some bold ideas on spending, including fundamentally changing the venerable Medicare and Medicaid programs — after all, President Obama punted on those issues — even as Ryan refuses to consider any kind of tax increases to deal with the growing budget deficit.

In any case, the Fact Checker doesn’t deal in philosophical questions; we look at cold, hard facts. Ryan on Tuesday suggested he was going to get rid of “these accounting tricks, all these budget gimmicks” in writing his budget plan. So how did he do?  Here are some initial findings.

 

The Facts

First of all, his fancy presentation stacks the deck a bit. His budget presentation shows a scary-looking graph depicting an ocean of red stretching out into the future. The graph is titled, “We are in a Spending-Driven Debt Crisis” and says it is based on “CBO’s Alternative Fiscal Scenario.”  But then when you actually look at one of CBO papers that outlines this scenario, it turns out that the scary scenario is also based on taxes being too low, not just spending being too high. 

 

In fact, taxes are a big part of the problem. The CBO paper assumes, among other things,  the Bush era tax cuts are extended forever (as Ryan proposes to do), the alternative minimum tax that increasingly snares middle-income Americas is indexed for inflation (Ryan says he will deal with this problem) and tax law evolves so that tax revenues remain at 19 percent of GDP (as Ryan proposes to do.)

The alternative fiscal scenario also accounts for other aspects of current law, such as assuming discretionary spending will match the rate of growth of the nation’s economy (gross domestic product). But a large part of the ocean of red comes from the revenue side of the equation, not just the spending side, as Ryan implies.

 Ryan also claims that his proposal has the imprimatur of the Congressional Budget Office. The budget document declares: “According to the Congressional Budget Office, this budget charts a path to complete balance. By 2040, the CBO estimates that this budget will produce annual surpluses and begin paying down the national debt.”

 This seriously overstates the case.

 Yes, CBO has produced a letter in which it plugged various data, plans and scenarios provided by Ryan’s staff into its budget database. But just as Republicans have repeatedly complained about the cost estimates associated with the Obama health law, this document largely reflects the scenarios that Ryan has concocted. There are, for instance, no real revenue estimates, just an assumption that federal revenues will remain at about 19 percent of GDP.

 In fact, CBO included a major caveat emptor: “CBO’s long-term scenarios and the proposal analyzed here are all subject to pressures over the long term that would make them difficult to sustain.” It said that although under Ryan’s plan debt would shrink relative to the size of the economy, Medicare beneficiaries “would bear a much larger share of their health care costs than they would under the current program,” payments to doctors would shrink dramatically, states would have to pay substantially more for Medicaid and spending for programs other than Social Security and health programs “would be reduced far below historical levels relative to GDP.”

 As the CBO dryly put it, “It is unclear whether and how future lawmakers would address the pressures” resulting from Ryan’s plan.

 Indeed, the spending cuts proposed for the nonsecurity discretionary budget seem absurdly low. Obama’s budget would bring such spending to the lowest level since the Eisenhower administration — about 2.8 percent of GDP in 2016 — and that seemed unrealistic. But Ryan would bring it to about 2 percent of GDP by 2016, giving Americans a bare-bones government they have not experienced since before the Great Depression.

 Mysteriously, though Ryan relies on the CBO to vouch for his plan, he appears to ignore CBO estimates that a repeal of the health care law would lead to an increase in the deficit. Instead, a substantial part of his claimed deficit reduction — $1.4 trillion over the next 10 years — comes from repealing the health care law. Where do those numbers come from? Ryan does not explain, and his spokesman did not respond to a query.

 In one of the more dubious assertions, Ryan relies on a report from the conservative Heritage Foundation’s Center for Data Analysis to claim his budget would result in a gusher of jobs. Readers always should be wary when politicians rely on analyses from outside groups, rather than respected government auditors.

 The Heritage uses “dynamic” budget analysis, which assumes such things as lower tax rates and less government spending will result in a burst of economic growth and thus more tax revenues, higher wages and more jobs. There has been a long dispute among economists about the actual effect — and whether it can be accurately measured. At first glance, this Heritage model comes up with some numbers that seem rather strange — in fact, so strange that Ryan does not even claim them in his presentation.

 For instance, the Heritage analysis claims that the unemployment rate would hit 2.8 percent in 2021, which is a rate that has never been achieved. The claim must have been even too much for Ryan, since his budget document only mentions a 4 percent unemployment rate in 2015 — which itself would be a neat trick.

The Pinocchio Test

We have only scratched the surface, but a pattern is emerging. As with President Obama’s budget, the Ryan budget plan relies on dubious assertions, questionable assumptions and fishy figures. The ideas may be bold, but the budget presentation falls short of his claim that he is getting rid of budget gimmicks.

Two Pinocchios

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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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