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The Trail: 2012 Presidential News from the Field / Campaign 2012

The Ryan Budget: By the Numbers

How the GOP VP pick's proposal would shape fiscal policy.

Vice presidential running mate Rep. Paul Ryan, R-Wis., gives the thumbs-up at his a welcome-home rally on Sunday in Waukesha, Wis.(AP Photo/Jeffrey Phelps)

photo of Katy O'Donnell
August 13, 2012

(SEE ALSO: The Obama Budget: By the Numbers)

TAXES: Rep. Paul Ryan's plan would consolidate the current six individual income tax brackets into two, set at 10 percent and 25 percent, though the plan isn’t clear on how those rates would be applied, income-wise. He insists the plan will be revenue neutral -- that the government will not lose any money coming into its coffers -- because he would scrub the complicated tax code of unspecified breaks and subsidies. The biggest 20 breaks -- including the exclusion of employer health insurance and the massively popular mortgage-interest deduction -- make up 90 percent of the $1.1 trillion in revenue lost each year to the roughly 200 “tax expenditures” currently on the books.

This is where the criticism that Ryan would raise taxes on the lower and middle classes in order to cut them for the rich comes into play: Many of the top breaks benefit the middle class along with the wealthy, and the one that almost exclusively benefits the wealthy, the lower 15 percent capital gains rate for returns on investments, is one Ryan has made clear he wouldn’t touch -- and might even lower more dramatically. Republicans point out that since 50 percent of people do not pay income taxes, they will not be affected by the removal of expenditures, even though 11 percent of the breaks go to lower-income individuals

 

Ryan also would repeal the alternative minimum tax -- a tax originally intended to ensure that the wealthy pay a minimum amount that both sides now concede ensnares middle-class payers -- rather than continue short-term fixes, as Congress traditionally does at the end of the year. On the corporate side, Ryan would lower the rate from 35 percent to 25 percent and exclude foreign income.

He promises to keep federal revenues consistent with the historical average of 18 percent to 19 percent of gross domestic product; they are currently expected to comprise 15.8 percent of the economy this year, largely because of the weakened economy.

SEQUESTRATION/LONG-TERM DEFICIT REDUCTION: Ryan has never supported the defense part of the automatic spending cuts spurred by the failure of the “super committee” of 12 members of Congress who were supposed to find $1.2 trillion in deficit reduction over a decade. The across-the-board spending cuts -- or “sequesters” in Washington-speak -- set to go into effect at the start of 2013 would be evenly split between defense and nondefense spending and total $1.2 trillion.

Ryan’s budget farmed out instructions to other committees to replace the 10 years of defense cuts by cutting additional domestic spending. The cuts to “mandatory spending” -- spending on things such as health care that do not get passed each year by Congress -- would reach the vicinity of $250 billion over 10 years.

Domestic cuts next year alone in “discretionary” spending -- the spending passed each year by Congress for programs to keep the government running --would hit $27 billion, in order to offset the increase in defense spending and still cut the overall budget for the year.

Democrats’ position is that while both parties are in favor of replacing across-the-board cuts with more considered policy, Republicans’ shift of money from domestic programs to defense amounts to targeting the most vulnerable members of society, since savings would be wrung from programs such as food stamps.  

DEFENSE: He would not only void the scheduled cuts, but increase defense spending for the next year by $8 billion, to $554 billion, excluding war spending.

SOCIAL SECURITY: Like President Obama, Ryan stayed away from Social Security reforms. His 2008 plan included suggestions, but he dropped them after hearing concerns from fellow GOP House members.

HEALTH CARE: The House-adopted package of long-term budget reforms counts more than $150 billion in spending cuts for health care programs over the next decade, mainly through the implementation of malpractice reform and defunding of many large parts of Obama’s health care law.

MEDICARE: There would be no change for anyone enrolled before 2023 -- one of the reasons many of the budget’s hypothetical savings wouldn’t kick in until after the 10-year period by which budgets are usually measured. After that, the eligibility age would increase gradually until it reached 67 in 2034. The budget Ryan produced this spring would introduce a competitive-bidding system and would allow seniors to choose between traditional Medicare and a subsidy from the government to purchase a private plan. Last year, there was no option to maintain traditional Medicare’s fees for services. It’s a concession Ryan made when he crafted a new Medicare plan with Sen. Ron Wyden, D-Ore., last December. The cost-growth formula is also more generous this year than it was last year, but the over-all reform plan is still the most dramatic approach currently in circulation.

MEDICAID: Ryan's plan would convert Medicaid to a block-grant system administered by the states and cap spending growth at a rate determined by inflation and population growth. It would undo rules from the health care law requiring states to keep everyone who received Medicaid benefits in 2010 on support through 2014 and void scheduled expansion of coverage for most non-elderly people with incomes less than about 140 percent of the poverty level. It would also limit the taxes states can charge Medicaid hospitals and doctors and the extra Medicaid payments for hospitals that treat large numbers of uninsured patients.

PROGRAMS THAT HELP THE POOR: The package would cut an additional $50.4 billion over 10 years from non-Medicaid programs that help the poor. It would eliminate a block grant designed to send federal funding to state social services programs; end yearly increases in funding for food stamp education programs and end the increase in food stamp money included in Obama’s stimulus. If the package were implemented, it would also be harder to qualify for food stamp assistance. Some of that money has now already been spent, so the $50.4 billion figure is now slightly high, but these cuts are a huge issue for Democrats, so expect to hear a lot about them.

FEDERAL EMPLOYEE PENSIONS: By raising the amount that federal employees contribute to their pensions and eliminating supplemental benefits given to early retirees until they reach the Social Security retirement age, the package would generate more than $80 billion.

FINANCIAL-SERVICES REFORMS: The package counts $35 billion in savings from easing up financial regulation included in the Dodd-Frank reform law. Ryan would also gradually phase out government control of Fannie Mae and Freddie Mac.

ENERGY POLICY: Ryan's plan would significantly weaken energy regulation, decrease funding for the Environmental Protection Agency, lift bans on projects like the Keystone pipeline, and end the Energy Department's loan guarantees. 

 

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