For Immediate Release: Wednesday, August 29, 2012
Contact: Phoebe Silag or Donte Donald, email@example.com 202-775-8810
From Working Economics, the EPI blog:
by Andrew Fieldhouse, EPI Federal Budget Policy Analyst
Republican vice presidential nominee Paul Ryan (R-Wis.) is not a deficit hawk, and has never been a deficit hawk. In the near-term, advocating accelerated deficit reduction is economically detrimental rather than praiseworthy, but in many circles the “deficit hawk” label is complementarily bestowed upon Ryan for supposedly stabilizing the long-term fiscal outlook. Ryan is hawkishly anti-government spending, except for defense spending, and he falsely conflates domestic spending with deficits and public debt. But Ryan’s purported concern about the deficit is belied by his proposed $4.5 trillion in unfunded tax cuts and reliance on made-up revenue levels to pad long-term budget projections from the Congressional Budget Office (CBO). This isn’t a secret to budget analysts and economists (e.g., Peter Orszag’s recent piece in the Washington Post), but it regrettably continues to be lost on much of the press and punditry.
Take, for instance, last week’s Leader in The Economist, Paul Ryan: The man with the plan, which praised Ryan as “the first politician to produce a plausible plan for closing the deficit, which he did in April last year.” This is an egregious misrepresentation of fact. Ryan’s fiscal year 2012 budget would not have reached balance until somewhere between 2030 and 2040, according to CBO’s long-term analysis, but even this “feat” was falsely predicated on revenue magically rising to 19 percent of GDP—as Ryan demanded CBO assume.
This revenue assumption was belied even by Ryan’s own summary tables, which showed revenue averaging 17.7 percent of GDP over fiscal 2012–2021 (roughly the level raised by current policies). And the Tax Policy Center’s (TPC) independent analysis showed Ryan’s proposed tax cuts reducing revenue by an additional 1.5 percent of GDP, short of unspecified “base-broadening.” Associated debt service would increase deficits by even more.
CBO’s long-term analysis of his fiscal 2013 budget also showed balance reached somewhere between 2030 and 2040, as Ryan awkwardly admitted to Fox News’s Brit Hume; this was again based on pure assumptions (wishes?) of revenue rising to 19 percent of GDP. In this version, Ryan’s own summary tables showed revenue at 18.3 percent of GDP over fiscal 2013–2022—above even what current tax policies would raise. This implicit endorsement of a tax increase would seem to put Ryan in violation of Grover Norquist’s Taxpayer Protection Pledge (it appears Ryan ignored the cost of the business tax extenders in his revenue levels), but I guess that’s a problem for the GOP.
TPC estimated much smaller revenue levels—2.2 percent of GDP less than current policy, or 15.5 percent of GDP over the next decade (assuming the business tax extenders are continued). If entirely deficit financed, these additional tax cuts would add $5.3 trillion to the public debt—exceeding the increase depicted in Ryan’s budget. Furthermore, if defense spending held at Ryan’s proposed levels, domestic spending on everything but Social Security and major health programs would be virtually crowded out of existence (to just over half a percentage point of GDP, less than a tenth of projected levels) by 2050. As for CBO’s long-term analyses of Ryan’s budgets, economist William Gale of the Brookings Institution concluded that “Ryan is gaming the system in creating budget estimates… . This is smoke and mirrors.”
The Economist acknowledged that failure to identify offsets for any of his roughly $500 billion in annual tax cuts is a “worrying gap in Mr. Ryan’s plan,” but simultaneously praised Ryan for advocating comprehensive tax reform and incomprehensibly lauded that Ryan’s “clarity is a virtue.” Ryan is calling for massive tax cuts—he would replace six brackets with just two rates of 10 percent and 25 percent—not tax reform; cutting and consolidating rates while proposing zero accompanying base-broadening in no way constitutes tax reform. As for clarity, TPC’s Howard Gleckman aptly dubbed the budget as filled with “mystery meat.”
Even giving Ryan the benefit of the doubt (assuming base-broadening within a feasible range identified by the Congressional Research Service), his tax cuts would add between an additional $3.0 trillion and $3.8 trillion to the public debt by 2022, pushing debt held by the public between 74.5 percent and 77.6 percent of GDP. (CBO estimated President Obama’s budget would hit a comparable 76.6 percent of GDP—and that’s based entirely on concrete, plausible policy proposals.)
Recasting Ryan as a fiscal conservative rather than a reflection of his budgets also requires a heavy dose of amnesia. Ryan’s 2010 Roadmap for America budget plan would have increased debt/GDP for more than four decades, pushing public debt to over 175 percent of GDP by 2050, according to the Center on Budget and Policy Priorities (CBPP). Ryan voted and staunchly advocated for the deficit-financed 2001 and 2003 Bush-era tax cuts (as Keynesian stimulus, nonetheless) which have added $2.6 trillion to the national debt and will add another $4.3 trillion over the next decade if continued. Ryan voted for 10 deficit-financed supplemental appropriations bills—overwhelmingly financing the wars in Iraq and Afghanistan—over 2001–2010, totaling $736 billion in current dollars.1 Ryan’s 2004 plan to privatize Social Security would have required general revenue transfers to the program more than twice as large the 75-year shortfall it faced at the time, according to CBPP. Ryan voted for the unfunded Medicare Part D drug plan. And so on…
Ryan even lets slip that he’s not a fiscal conservative; as Matt Miller points out, Ryan resorted to supply-side snake oil budgeting in the Hume interview, claiming that “we believe that if we get the economy growing, if we get people back to work, we’ll balance the budget within 10 years.” Sure, chuck that in the catalog of the Bush tax cuts paid for themselves by unleashing growth, government spending cuts grow a depressed economy, markets are perfectly competitive and efficient, and financial institutions are self-regulating. So where’s the clarity and plausibility that The Economist craves? Both are missing from Ryan’s budgets, because Ryan isn’t a fiscal conservative.