Everything you know about Paul Ryan’s budget is (probably) wrong

August 29, 2012

Wednesday night is going to be Paul Ryan night. Which means it’s going to be Paul Ryan budget night. Which means it’s a good time to remind you that, if you’re like most people, pretty much everything you think you know about Ryan’s budget is probably wrong.

Here’s what you probably think of Ryan’s budget: It lowers taxes, cuts the deficit and pays for all that by cutting deep into Medicare. Right? Wrong.

Don’t take my word for it. Take Ryan’s word for it. This graph shows what he told the Congressional Budget Office his budget would do by 2030 (see page 13 of this CBO report).

What you’re seeing is different categories of federal spending in Ryan’s budget compared to those categories if we just keep going on the path we’re on.

First thing you should notice: The difference on Medicare isn’t that large. It’s 0.75 percent of GDP. And note that the spending path Ryan wants to hold Medicare to -- GDP+0.5% -- is the exact same spending path that Obama wants to hold Medicare to.

The difference for Medicaid and other health programs -- including the Affordable Care Act -- is much larger. In fact, at 2.25 percent of GDP, it’s three times as large as the cut to Medicare. So that’s the first thing you need to know: Ryan’s main cut isn’t to health care for old people. It’s to health care for poor people.

Ryan’s budget punts on Social Security, so there’s no change there. It's six percent of GDP in either scenario.

But the biggest category of cuts isn’t to Medicaid or Medicare. It’s to everything else, which includes defense spending, infrastructure, education and training, farm subsidies, income supports, veteran’s benefits, retraining, basic research, the federal workforce and much, much more. This category of spending takes cut almost as large as the cuts to Medicaid, Medicare and Obamacare combined.

The thing about these cuts is that they’re not really thought through. Ryan hasn’t said which programs they'll hit. And he doesn’t have some theory about how we can spend less and get more, as he does for Medicare with his voucher plan. He’s just slashing things to make his numbers add up. The Center on Budget and Policy Priorities ran the numbers and said two-thirds of Ryan’s cuts will end up falling on programs for the poor.

The reason he’s got to do that is that Ryan doesn’t raise taxes. But here’s the magic trick of Ryan’s budget, and this is really important. Ryan extends all the Bush tax cuts, and then he adds a bunch of new tax cuts costing more than $4.5 trillion. So how does he pay for them?

He doesn’t. But he told Congress’s budget guys to assume he’d figure out how to pay for them later. To pay for those, you’d need to eliminate almost everything else in the tax code -- the home mortgage interest deduction, the Child Tax Credit, the deduction for state and local taxes, most all of it. Ryan hasn’t named one that he’d eliminate. So there's a mystery $4.5 trillion in tax increases sitting at the center of Ryan's budget promises.

So every time you see anyone say that Ryan’s budget reduces the debt, they’re assuming he really will find some way to pay for his tax cuts. If he doesn’t, then his plan blows a multitrillion dollar hole in the budget, even after cutting all that spending.

Correction: The graph in this post was originally using numbers from 2050, not 2030. Apologies for that. It's since been corrected.

Correction to the correction: The updated graph's Y axis began at 1 rather than 0. I didn't notice until someone e-mailed me about it (thanks, tipster!). That meant the numbers were all correct, but the visual proportions were slightly off. It's fixed now, but quite a bit of graph fail in this post. Apologies.

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