Wonkbook: 4 questions about Paul Ryan's budget

at 07:50 AM ET, 03/20/2012

At 10 a.m., Rep. Paul Ryan will unveil the latest version of the House GOP budget. Expect an ambitious tax-reform plan, a Medicare section that looks more like Ryan-Wyden than like Ryan's previous bid, a roadmap to undoing the defense cuts in the sequester, and lots and lots of graphs.


In a Feb. 16 file photo House Budget Committee Chairman Rep. Paul Ryan, R-Wis., holds up a copy of President Barack Obama's fiscal 2013 federal budget on Capitol Hill in Washington. (Carolyn Kaster - AP)
Can you tell that I'm excited?

But the real question is how the new pieces fit together, and what they do to the overall deficit fiscal responsibility of the plan. For instance:

1) Ryan's original plan avoided raising taxes by implausibly promising to hold spending growth in Medicare and Medicaid to inflation. If costs in either program exceeded inflation, then the beneficiary, or some other actor, paid the difference. Ryan-Wyden aims for the strict, but more achievable, goal of holding spending growth to GDP+1%, at least in Medicare. If Ryan's budget adopts that goal, or something closer to it, a substantial portion of his long-term savings evaporate. So how does he handle that?

2) Ryan's budget includes an ambitious tax reform proposal that takes the tax code down to two rates: 10% and 25%. But he's not expected to say which income levels pay which rates. Moreover, he's expected to say that the plan is revenue neutral because it will include closing tax loopholes, but he's not expected to identify which tax loopholes will be closed. For obvious reasons, a tax reform plan that doesn't explain who will pay which rate and how the lost revenue will be made up is not much of a tax reform plan, and it's not an exercise in making tough choices. But perhaps Ryan will offer more detail than we think.

3) Ryan's original budget cut miscellaneous domestic spending -- so, both the categories contained in the "non-defense discretionary spending" bucket and the lesser known items in the mandatory bucket -- down to a nubbin. That is to say, federal spending on things like education and infrastructure and research would be far, far, far lower than in the future than they are today. If Ryan has to make up savings from the Medicare portion of his budget, is this where he does it? And, if so, how does the government fund, say, roads, in the coming years?

4) Does anything in this budget seriously conflict with Mitt Romney's plans? If Ryan moves to a variant of Wyden-Ryan, for instance, that brings the House GOP much closer in line with Romney's proposed Medicare reforms, which broke with the previous Republican budget by retaining fee-for-service Medicare as an option. Romney has also made some very specific promises on defense spending and, though he hasn't yet explained how his tax plan actually fulfills this condition, holding the tax burden on the top one percent steady. So keep an eye on whether this budget is moving the House GOP towards Romney, or whether it's trying to lay out a more ambitious position that they can bring to budget negotiations with a Romney White House.

As you can probably guess, there will a lot of coverage of Ryan's budget on Wonkblog as the day continues.

Top stories

1) HAPPY GOP BUDGET DAY! "House Republicans, searching for an election-year message amid a muddled political and economic landscape, will introduce a 2013 budget Tuesday that cuts tax rates and provides for just two individual brackets of 10% and 25%. The budget would end the Alternative Minimum Tax, which originally was aimed at the wealthy but ensnares a growing number of middle-class taxpayers each year. The plan would nearly eliminate U.S. taxes on American corporations' earnings from overseas operations...The plan doesn't specify the income levels that would fall into the two brackets, so an independent assessment of its impact on the nation's economy and finances is impossible. GOP leaders say they will keep the government's tax income from plunging by killing an array of tax breaks. But they didn't say what those would be, prompting criticism that they were promising low tax rates without saying how they'd be paid for." Naftali Bendavid in The Wall Street Journal.

The plan will include $261 billion in cuts designed to avoid part of the sequester. "Trying to get their mojo back, House Republicans hope to move quickly this spring with a $261 billion deficit-reduction package to forestall automatic spending cuts next January that would fall heavily on defense. The full details won’t be released until Tuesday morning, but the so-called reconciliation bill is a central part of the GOP’s budget strategy this year. And six House committees are expected to be instructed to report legislation before May that achieves the promised 10-year savings...The House Judiciary Committee, which is charged with coming up with nearly $40 billion in 10-year savings, will use this opportunity to pursue medical liability reform legislation. At this stage, the goal is not to tackle the entire $1.2 trillion in automatic cuts ordered by the Budget Control Act last summer. Instead the focus is on the first round of almost $110 billion in 2013, half of which -- about $54.7 billion -- would come from national defense spending." David Rogers in Politico.

Ryan introduces his budget on YouTube: http://bit.ly/GBo3cW

@daveweigel: Budget day tomorrow! Remember to bring your cowboy hat and airhorn to work.

@brianbeutler: There aren't very many good plays on the word "budget" are there :(

2) HAPPY (ILLINOIS/REAGAN) PRIMARY DAY! "On the eve of the hotly contested Illinois primary, each of the leading Republican presidential candidates drew inspiration from touchstones of conservatism on Monday and offered himself as the standard-bearer for the right’s fight against President Obama. Mitt Romney traveled to the urban campus where Obama once taught constitutional law to lecture the president on the principle of economic freedom, paying homage to the University of Chicago’s legacy as the intellectual center of free-market economics. A hundred miles west in Dixon, Rick Santorum tried to channel the spirit and vision of Ronald Reagan during a stop in the former president’s boyhood home town, hoping to give his insurgent campaign a last-minute infusion of energy. As they journeyed across Illinois, Romney and Santorum each cast himself as the rightful heir to Reagan’s conservative mantle before voters here have their say Tuesday in what has been a tumultuous and increasingly caustic nominating contest." Phillip Rucker and Dan Balz in The Washington Post.

@fivethirtyeight: This week has been very quiet but behind-the-radar important as far as Romney clinching the nomination.

3) Obama's executive orders are having a limited impact. "Stymied by Republicans, an exasperated President Barack Obama told the nation he would go it alone and use his executive authority to get things done. 'We can’t wait for an increasingly dysfunctional Congress to do its job,' he said in Las Vegas in October. 'Where they won’t act, I will.' But five months and almost three dozen announcements later, a closer look at the We Can’t Wait program shows just how hamstrung the president has been in acting on his own to provide expansive or quick relief to struggling Americans. Some initiatives involve little more than a new website, a pilot program or a brochure. Others are basically repackaged announcements of programs already well under way. Yet others are works in progress, waiting on the government bureaucracy to catch up with the urgency of Obama’s 'we can’t wait' mantra." Carrie Budoff Brown in Politico.

4) Manufacturing is doing even worse than it looks. "During the 2000s, as U.S. manufacturing was transformed by devastating job losses, prominent economists and presidential advisers offered comforting words. The paring of the manufacturing workforce, which shrunk by a third over the decade, actually represented good news, they said. It meant that U.S. workers and factories had become more efficient and that, as a result, manufacturing companies needed fewer people...But a handful of economists are challenging that explanation, chipping away at the long-offered assurances that the state of U.S. manufacturing is not as bad as the jobs numbers make it look. Instead, they say, it’s significantly worse. What caused the job losses, in their view, is less the efficiency of U.S. factories than the failure of those factories to hold their own amid global competition and rising imports. The apparent productivity gains reflected in the official U.S. statistics have been miscalculated and misrepresented, they say." Peter Whoriskey in The Washington Post.

5) The public debate over health reform is ramping up again. "Republicans on Capitol Hill have put together a highly coordinated two-week renewed assault on the health care law, seizing on the legislation’s second anniversary and the next week’s oral arguments before the Supreme Court concerning its constitutionality. On Monday, Congressional Republicans took to the floor of both chambers to denounce the law, presaging a vote in the House this week to dismantle the law’s payment advisory board, the 26th legislative attack on the law in the Republican-controlled House in the 112th Congress...House Democrats and Obama administration officials raced to defend the law and to publicize its benefits. Jonathan D. Blum, deputy administrator of the federal Centers for Medicare and Medicaid Services, said new research showed that more than 5.1 million Medicare beneficiaries had saved over $3.2 billion on prescription drugs because of the new law." Jennifer Steinhauer and Robert Pear in The New York Times.

LONGFORM: Jason Zengerle profiles Paul Clement, the lawyer who will argue against Obamacare in front of the Supreme Court..

@sarahkliff: Get ready for a whole lot of health care rhetoric in the next two weeks, with ACA anniversary 3/23 and SCOTUS 3/26. Who's excited?! #me

@petersuderman: The health law's mandate is a bigger legal and political story. But the Medicaid expansion is the bigger policy story.

6) Apple used its dividend announcement to push for a corporate tax holiday. "Apple made an aggressive pitch for a corporate tax holiday Monday, stressing that it plans to keep more than $60 billion parked offshore until Congress makes it easier for companies to bring those profits home. The warning from the nation’s most valuable company came as Apple announced it would pay a dividend to shareholders and buy back stock, moves that will cost about $45 billion over three years. But Apple -- which, like several other Silicon Valley titans, has spent months lobbying for more flexibility to repatriate offshore profits -- said it will rely exclusively on domestic cash reserves for the transactions and will not touch the billions in profits held abroad...Supporters of a tax holiday say that U.S. companies have, according to some estimates, more than $1 trillion held abroad, and that making it easier to repatriate those funds could quickly inject cash into the U.S. economy." Brendan Sasso and Bernie Becker in The Hill.

Top op-eds

1) SEIB: Leading GOP candidates lack solid deficit plans. "Could it have been just a year ago that the political world was seized with reducing the budget deficit and long-term debt--even risking a government default because the two parties couldn't agree on how to deal with this paramount danger?...In a reminder that the problem roars on, Rep. Paul Ryan, the Republican chairman of the House Budget Committee, will propose Tuesday a new budget for next year that reignites the debate in Congress and serves as a reminder of how real the problem remains. But one would hardly know that by the presidential campaign, where deficit rhetoric has faded...More important, the rhetoric is unmatched by sufficiently detailed proposals for actually handling the red ink. Indeed, one hardheaded analysis of candidates' proposals shows how vague some of their deficit-cutting plans are--and suggests some actually would drive up the accumulated national debt significantly." Gerald Seib in The Wall Street Journal.

2) COHN: The Supreme Court's health reform case may affect much more than just health care reform. "Next week the Supreme Court hears oral arguments in the lawsuits challenging the Affordable Care Act. But is it really the 'case of the century,' as pundits have started calling it? It’s difficult to say without knowing the outcome. Presently that distinction belongs to Bush v. Gore, a decision that truly altered history. Just think how the years after 2001 would have unfolded if Al Gore had been president. But Bush v. Gore didn’t change constitutional doctrine...Rejecting the Affordable Care Act could deprive 30 million people of health insurance, weaken the coverage for tens of millions more, and alter one-sixth of the economy. In those respects, obviously, it would be a highly consequential decision. But such a ruling could also have have far-reaching legal effects, the kind Bush v. Gore did not. At least in theory, the court could use this case to redefine the boundaries of federal power, in a way that the courts have not done in nearly a century." Jonathan Cohn in The New Republic.

3) FELDSTEIN: Letting tax cuts expire would push the U.S. back into recession. "The most important cloud on the horizon is the large tax increase that will occur next year unless legislation is passed to block it. The Congressional Budget Office predicts that, under current law, the revenue of the federal government will rise from $2.4tn in the current fiscal year, which ends in September, to $2.9tn in the following fiscal year. That increase of $512bn is equivalent to 2.9 per cent of GDP, bringing federal revenue as a share of GDP from 15.8 per cent this year to 18.7 per cent next year. The higher revenue would reflect an increase in personal tax rates, higher payroll taxes, as well as higher taxes on dividends, capital gains and corporate incomes. Revenue would continue to rise in future years - as a share of GDP it would increase to 19.8 per cent in 2014 and would stay above 20 per cent for the remainder of the decade. A sustained tax increase of that magnitude would push the US into a new and deep recession next year." Martin Feldstein in The Financial Times.

4) CYRAN AND CRANE: The housing crisis is coming to an end. "Six years into the U.S. housing downturn, the worst finally seems to be over. The overhang of inventory is no longer so daunting as population growth and reduced construction continue to cut the glut of unsold homes. Throw in rising employment and improved affordability, and young Americans cooped up with too many roommates or, worse, their parents may finally get a chance to strike out on their own. What may be the beginning of the end of the housing crisis has already boosted homebuilders like Toll Brothers, Lennar and DR Horton, whose stocks have climbed more than 30 percent over the last six months. The 2.3 million existing homes currently on the market would take just six months to offload, the smallest backlog since April 2006, according to the National Association of Realtors. In July 2010, the supply overhang reached more than 12 months." Robert Cyran and Agnes Crane in Reuters.

5) HOLTZ-EAKIN AND SMITH: Health reform has little to do with fixing cost shifting. "The Obama administration defends the mandate on the ground that a person's decision to not buy health insurance affects commerce by materially increasing the costs of others' health insurance...In reality, the mandate has almost nothing to do with cost-shifting. The targeted population--the young, healthy and not poor who choose to forgo coverage--has a minimal role in the $43 billion of uncompensated health-care costs. In 2008, for example (the latest figures available), the Department of Health and Human Service's Medical Expenditure Panel Survey showed that the uncompensated care of the mandate's targeted population was no more than $12.8 billion--a tiny one-half of 1% of the nation's $2.4 trillion in overall health-care costs. The insurance mandate cannot reasonably be justified on the ground that it remedies costs imposed on the system by the voluntarily uninsured." Douglas Holtz-Eakin and Vernon Smith in The Wall Street Journal.

Swedish folk interlude: The Tallest Man on Earth plays "Love Is All" live on KEXP.

Got tips, additions, or comments? E-mail me.

Want Wonkbook delivered to your inbox or mobile device? Subscribe!

Still to come: The Fed may finally have a full board soon; women pay more than men for their health insurance; an insider trading bill's progress has stopped; the House GOP gears up for another push against the EPA; and a sloth hosts some marmosets.

Economy

Confirmation hearings for Fed nominees start today. "The Senate Banking Committee is scheduled to begin confirmation hearings on Tuesday for Mr. Stein and former private-equity executive Jerome Powell, President Barack Obama's nominees to fill two vacancies on the Fed board. Both men are considered unlikely to push the central bank in novel directions, according to current and former colleagues, students and others familiar with their work. Senate approval of the pair isn't assured, though that has little to do with the nominees themselves. Senate Republicans were infuriated when Mr. Obama made four government appointments during Congress's winter break, bypassing the Senate approval process. That could cut into the goodwill Mr. Obama hoped to foster by nominating a Republican, Mr. Powell, along with a Democrat, Mr. Stein. But if confirmed, the two would bring the central bank's board back to full capacity for the first time since April 2006." Kristina Peterson in The Wall Street Journal.

The Senate is looking to strengthen a start up bill. "A decade after the dot-com bubble popped and Enron became synonymous with spectacular fraud, Congress is on the verge of scrapping numerous safeguards against investment fraud and allowing some small companies to sell stock to the public with minimal disclosure or oversight...The bill does include some curious elements, beginning with its definition of an 'emerging business' as one with annual revenue of up to $1 billion or has no more than $700 million in publicly held stock. At an S.E.C. forum in 2010 on small-business capital formation, one of the top recommendations from small-business experts was to set a limit of $250 million in public stock for companies to qualify for small-business exemptions from many securities regulations. A Senate amendment sponsored by Jack Reed, Democrat of Rhode Island, would set the limit at $350 million of annual revenue." Edward Wyatt in The New York Times.

Technological cover interlude: Two musical Tesla coils play "Sweet Home Alabama."

Health Care

A 1942 Supreme Court decision is at the heart of the current health reform case. "If the Obama administration persuades the Supreme Court to uphold its health care overhaul law, it will be in large part thanks to a 70-year-old precedent involving an Ohio farmer named Roscoe C. Filburn...The 1942 decision against him, Wickard v. Filburn, is the basis for the Supreme Court’s modern understanding of the scope of federal power. It is the contested ground on which the health care case has been fought in the lower courts and in the parties’ briefs. And it is likely to be crucial to the votes of Justices Anthony M. Kennedy and Antonin Scalia, who are widely seen as open to persuasion by either side...Both supporters and opponents of the health care law say the decision helps their side, and for three days starting next Monday, it will be at the center of the arguments before the Supreme Court about the law’s constitutionality." Adam Liptak in The New York Times.

Women are still paying more than men for health insurance. "Women still pay more than men for the same health insurance coverage, according to new research and data from online brokers. The new health care law will prohibit such 'gender rating,' starting in 2014. But gaps persist in most states, with no evidence that insurers have taken steps to reduce them. For a popular Blue Cross Blue Shield plan in Chicago, a 30-year-old woman pays $375 a month, which is 31 percent more than what a man of the same age pays for the same coverage, according to eHealthInsurance.com, a leading online source of health insurance. In a report to be issued this week, the National Women’s Law Center, a research and advocacy group, says that in states that have not banned gender rating, more than 90 percent of the best-selling health plans charge women more than men." Robert Pear in The New York Times.

A appeals court upheld the government's authority to require graphic cigarette warnings. "A federal appeals court Monday largely upheld the U.S. government's authority to regulate tobacco products, including requirements for stronger, graphic warnings on cigarette packs. The decision by the Sixth U.S. Circuit Court of Appeals, based in Cincinnati, backed most of a decision by a lower court in Kentucky. That court had ruled that most provisions of a 2009 law giving the Food and Drug Administration the authority to regulate tobacco were legal and didn't violate tobacco companies' free-speech rights. The decision also upheld the lower-court ruling favoring the tobacco industry, allowing the use of color in tobacco advertising to continue. Last month, a federal judge in the District of Columbia came to the opposite conclusion on the label requirements, ruling that the proposed labels violated companies' free-speech rights." Jennifer Corbett Dooren in The Wall Street Journal.

Domestic Policy

An insider trading bill has come to a standstill. "A bipartisan bill on insider trading that had been steamrolling through Congress has ground to a halt. The Senate and House last month overwhelmingly approved different versions of the Stop Trading on Congressional Knowledge (STOCK) Act. Lawmakers from both sides of the aisle predicted some version of the bill would reach President Obama’s desk swiftly. But what had been a legislative locomotive is now attracting something quite common in an election year: finger-pointing. Democrats in the House and a senior Senate Republican want provisions on political intelligence added to the bill. House Republican leaders, who scrapped that part of the legislation, say it’s up to Senate Majority Leader Harry Reid (D-Nev.) to make a decision of whether to go to conference or pass the House-passed version. Reid, meanwhile, isn’t saying much." Molly Hooper in The Hill.

Adorable animals being adorable together interlude: Some marmosets hang out on top of a sloth.

Energy

Congressional conservatives are trying to give transportation policy back to the states. "Congress may be on the road to re-upping the transportation bill, but there’s still a cadre of lawmakers who say it’s not too late to get the federal government out of the road-building and gas tax business. If anything, some Republicans say they are excited about finally getting some votes on what has long been a conservative dream. Sen. Jim DeMint (R-S.C.) got a vote last week on his amendment to the Senate-passed bill that would send many transportation policy and funding decisions back to the states. The amendment was the first time in years senators got a serious chance to weigh in on the issue, and 30 senators (all Republicans) supported the long-shot attempt. A second devolution offering from Sen. Rob Portman (R-Ohio) failed but also got 30 votes. In the House, GOP Reps. Tom Graves of Georgia, and Jeb Hensarling and Kevin Brady, both of Texas, hope to vote on a similar amendment whenever the House takes up a highway bill." Adam Snider and Burgess Everett in Politico.

The House GOP is planning a new attack on EPA rules. "House Republicans are planning new legislation to thwart Environmental Protection Agency rules that they argue could worsen rising gasoline prices. While details remain scarce, the new bill could provide Republicans a rallying point for continued attacks on the White House's energy and environmental policies. 'House Republicans are working on legislation to ensure Congress and the American people have a clear understanding of the impacts of EPA’s rules on gas prices before the administration can finalize certain regulations,' said Charlotte Baker, a spokeswoman for House Energy and Commerce Committee Chairman Fred Upton (R-Mich.). 'More details about the legislation will be forthcoming.' An environmentalist said the various rules in the House GOP’s crosshairs might include EPA’s planned 'Tier III' vehicle emissions and fuel standards, which are aimed at curbing ozone, particulate matter and other types of pollution." Ben Geman in The Hill.

An energy efficiency program is under fire. "A $5 billion federal program designed to reduce electricity bills for low-income households sometimes funded shoddy work that left homeowners worse off, according to a congressional report released Tuesday. The report from Republicans on the House Oversight and Government Reform Committee offers new details on a program that other government auditors have cited for management problems. The findings were likely to spur criticism of the Department of Energy program and the 2009 economic-stimulus law, which gave the program funding equal to more than 11 times its previous annual budget of $450 million. The Republican report said the program 'represents the kind of failure that materializes when you have an economic stimulus strategy contingent on asking the federal bureaucracy to absorb billions of dollars when the structural infrastructure to administer, disseminate and manage that influx of new money is not put in place.'" Ryan Tracy in The Wall Street Journal.

@elisefoley: They can take our lives, but they can never take our FREEDOM TO USE ENERGY-INEFFICIENT LIGHTBULBS.

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.

 
Read what others are saying

    Most Read: Business

    DJIA
    -0.22%
    S&P 500
    -0.20%
    NASDAQ
    0.14%
     Last Update: 10:54 PM 08/22/2014

    World Markets from      

     

    Other Market Data from      

     

    Key Rates from