Does the Ryan budget really reduce the deficit?

August 15, 2012

The Bipartisan Policy Center has an excellent summary of Paul Ryan's budget. But I'm having trouble with this graph:

It's not that the graph is wrong, though the fact that the "Y" axis begins at 15 percent of GDP makes the differences between the plans look more dramatic than they really are. It's that the graph works off the numbers that Ryan provides. But they're not numbers that I'm comfortable using.

The problem is primarily on the tax side. Ryan says his plan will be "revenue neutral" to current policy. That means it will raise about the same amount of money as the current tax code. But it also "repeals the AMT, condenses the rate structure of the individual income tax to just two rates of 10 and 25 percent, and lowers the top corporate tax rate to 25 percent."

In the accompanying text, the Bipartisan Policy Center is clear on what that means. "In order to remain revenue-neutral, nearly every tax expenditure would have to be eliminated." I don't believe that Ryan is going to eliminate nearly every tax expenditure, nor that it would be a good idea if he did.

I'd perhaps feel differently if Ryan had a history of voting to pay for tax cuts, or voting to trim tax cuts that couldn't be paid for. But he doesn't. He voted for the Bush tax cuts without demanding offsets. He voted to extend the Bush tax cuts without demanding offsets. He voted to repeal the House's "PayGo" rule, which says both new spending and new tax cuts need to be paid for, and to replace it with the "CutGo" rule, in which spending cuts need to be paid for and tax cuts don't. And, while he's told the Congressional Budget Office to assume revenue neutrality, he pointedly did not include even a single offset for the tax plan in his budget.

If you assume Ryan's tax plan would not be paid for, then it only raises 15.5 percent of GDP in revenue, and Ryan's plan is the single most fiscally irresponsible plan on the graph.

The question then is how should we in the media report on Ryan's plan? Do we use the revenue numbers he tells us to assume, despite the fact that he offers no path for reaching those numbers, and despite the fact that he and his party have a long history of choosing tax cuts over deficit reduction? Or do we use the policy changes on the page, in which case Ryan's plan is wildly fiscally irresponsible?

I don't have a good answer. I'm not comfortable dismissing what Ryan says he'll do. But I'm not comfortable assuming that he's going to do something he's never done before, that the Republican Party is ideologically uninterested in doing, and that would be nearly impossible to get done. Which is why I'm uncomfortable with the graph, and with the tendency folks have to treat the Ryan budget's deficit reduction as settled fact.

At the very least, people should know that when they hear about the Ryan plan's deficit reduction, those numbers are assuming that Ryan, who has thus far refused to name even one tax break that he would get rid of, has either eliminated almost every expenditure in the tax code, including the capital gains tax break and the home mortgage interest deduction, or he's sacrificed his tax cuts.

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