“House Republicans have a plan to change course. On Tuesday, we're introducing a budget that balances in 10 years — without raising taxes.”
— Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, in a Wall Street Journal opinion column, March 11, 2012
Not long ago, the federal government used to have just five-year budgets. That was reasonable and realistic, because it gets pretty hard to predict the course of the economy more than a few years into the future — and tax revenues and government spending are heavily dependent on whether the economy is booming or not.
But that all changed in the mid-1990s, when House Republicans vowed to balance the budget in seven years. Then-President Bill Clinton countered with a 10-year balanced budget plan — and the country has been stuck with the concept ever since. (Just to show how ludicrous a 10-year plan is, the Clinton budget ended up balancing much sooner than predicted because of unexpected capital gains revenue.)
So now the current crop of House Republicans has unveiled a budget plan that they claim balances in 10 years. Let’s leave aside the plan’s various gimmicks for a moment and examine how this is possible, when just two years ago the House Republican plan predicted huge deficits — nearly $400 billion — at the end of the 10 years.
Was this really done without raising taxes?
Comparing the 2014 budget plan with the 2012 and 2013 GOP plans is instructive. There are much heavier cuts in government spending in the 2014 plan, as a percentage of the gross domestic product, but there are also big gains in revenue.
The 2012 plan kept revenue at a 10-year average of 17.7 percent of GDP; the new plan pegs it at 18.8 percent of GDP. When you compare the eight years that overlap in the two plans — 2014 to 2021 — the revenue totals are nearly $1.1 trillion higher in 2014 than in 2012.
The same pattern emerges when you compare 2014 with the 2013 plan. Over nine years of overlap, there’s more than $1 trillion more in revenue in 2014.
Ryan, speaking to reporters Tuesday, acknowledged that he had kept the tax revenue generated by the “fiscal cliff’ deal a couple of months ago, which raised taxes on wealthy Americans. What is less well-noticed is that Ryan also pocketed the taxes raised by the president’s health-care plan, a.k.a. “Obamacare,” while at the same time pledging to repeal the law to generate significant budget savings. As we noted this week, the health-care law includes about $1 trillion in taxes.
You have to look hard to find this detail. The 2014 budget document simply shows a line of zeroes for new taxes (table S-2). But the current budget plan is missing the harsh complaints in previous years about the “job-destroying tax hikes” in the health-care taxes.
Here’s what the 2012 budget plan declared as part of its summary: “Keeps taxes low so the economy can grow. Eliminates roughly $800 billion in tax increases imposed by the President’s health-care law.”
Instead, the 2014 plan merely says that repeal “turns off the new gusher of taxpayer money for those special interests that were powerful enough to ensure themselves a seat at the table when the 2,700 page law was being written.” The problem with the health-care taxes apparently is not that they are job-killers, but that they are being used for the wrong purposes; there is no explicit pledge to repeal them.
In other words, the new Ryan budget plan incorporates not only the fiscal cliff tax hikes but also the revenue generated by the health-care plan — all for future use by the tax-writers on the Ways and Means Committee as they seek to overhaul the tax code.
“You are correct that revenue levels in the House Republican budget reflect current law,” said Conor Sweeney, spokesman for the Budget Committee. “Chairman Ryan has made clear that a balanced budget within 10 years is a more realistic goal as a result of this higher revenue level.” He added: “The difference is not how much revenue we raise, but how the revenue is raised: through the current code or a reformed code?”
Sweeney emphasized that “there are no proposed tax increases in the House Republican budget.” He said that in previous years, crafting a baseline for revenues was difficult because of expiring tax provisions. “There is no complication this year: Current tax policy is the same as current tax law,” he said. “That is the baseline from which we draft a budget.”
The Pinocchio Test
Ryan, in his opinion article, is clearly trying to draw a contrast with Senate Democrats, who will unveil a budget Wednesday that includes more taxes. He certainly is not proposing a new tax increase.
But it’s a stretch to say that the Republican budget plan was balanced “without raising taxes,” since he’s banking on revenue that he once rejected — such as the health-care taxes — to achieve theoretical balance.
Check out our candidate Pinocchio Tracker