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The Math Behind the GOP Goal of Balancing the Budget in 10 Years The Math Behind the GOP Goal of Balancing the Budget in 10 Years

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The Math Behind the GOP Goal of Balancing the Budget in 10 Years

The plan spearheaded by Paul Ryan could prove to be an ingenious move for his party – or a disaster.

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Rep. Paul Ryan, R-Wis., says he won't change the tax code to raise new revenue. (AP Photo/Mary Altaffer)(AP Photo/Mary Altaffer)

Rep. Paul Ryan’s most recent spending proposal—the aggressive one for which liberals caricatured him as a granny-killer—promised to balance the federal budget in less than 30 years. That, the Wisconsin Republican now says, was not enough. With the blessing of the House leadership, his proposal this spring is designed to get the job done in just 10 years. It’s either an ingenious way to cast the GOP as the party most able to straighten America’s ledger, or a nightmare that will thwart the party’s makeover and alienate midterm voters.

Here's what closing the deficit would involve:

 
  • Roughly $4 trillion would need to be lopped off from spending during the next decade, according to Tuesday’s estimate from the Congressional Budget Office. That figure would rise considerably if Congress undoes the $1.2 trillion sequester cuts slated for March 1.
  • The size of government could be shrunk radically by eviscerating nondefense discretionary spending on programs such as education, food stamps, transportation, and housing assistance. That would create a government much leaner than Americans are used to. But this sector will account for just $5.9 trillion in outlays over the decade, so any sizable cuts, let alone $4 trillion, would be excruciating.
  • Ryan could make larger cuts to Medicare than he has previously proposed. An approach put forth by the conservative Heritage Foundation would involve changing the benefits for current recipients and those slated to enroll in the next 10 years, not just for younger Americans. Heritage estimates that distributing vouchers to buy private insurance, rather than providing defined government benefits, would save $400 billion over 10 years (still only 10 percent of what Ryan needs). “Do we as a nation want to grandfather in the grandparents, or do you go to premium support much quicker?” asks Alison Fraser, a scholar at Heritage. There is a danger for Ryan, though: He pledged on the campaign trail last fall not to tweak Medicare for those near retirement, so shifting gears could jeopardize his presidential or congressional leadership hopes.
  • Fuzzy math and budget gimmicks — moves that both parties have used over the last few years — are an option if Ryan were to reject the other two choices. He could propose big tax cuts, as he did in the past; deep spending cuts; and tweaks to Medicare that wouldn’t cause a riot among seniors. Then, he could assume that such cuts would unleash so much economic growth that—presto, change-o—revenue rises, economic output increases, and the deficit disappears. This time around, Ryan’s growth assumptions may be even more dramatic than before, predicts Paul Posner, former director of federal budget and intergovernmental relations at the Government Accountability Office. The chairman might repeal the Affordable Care Act in his draft, for instance, yet still count the law’s savings. Or he could assume that shifting Medicaid to a block grant rather than an open-ended entitlement program would save $600 billion. Those little assumptions, Posner adds, make big differences.

Already, Republican aides say that balancing the budget in 10 years will not be as tough as it seems. The annual deficit shrank in 2013 to $845 billion after several years of exceeding $1 trillion. That’s the lowest level since 2008. And federal revenue is slated to rise by 25 percent (about $665 billion) over two years, thanks to the higher taxes from the fiscal-cliff deal and a slowly improving economy. The growth in health care spending has slowed, too. Medicare outlays grew by just $16 billion in 2012, the slowest rate of growth since 2000, according to CBO. All of this gives Ryan a better starting point, but he’ll still need to figure out how to phase in any spending cuts toward the end of his 10-year window so that they don’t undo the fledgling economic recovery.

One thing Ryan can’t use to erase the deficit: new tax revenue. Although he declined to comment for this story, he has said he won’t revise the code to raise more money. “The president got his additional revenues, so that’s behind us,” he said during a January appearance on Meet the Press. “Spending is the problem.” It should be doable, GOP House aides contend. The tricky part, one says, was constructing a budget from scratch after Republicans won the House majority in 2010. This year’s draft will simply refine and tweak that path.

Of course, sunny optimism won’t convince Ryan’s doubters until he releases his budget this spring. And even then, questions will remain. Budgets can call for spending or revenue targets merely as a percentage of economic growth, without delving into which agencies or functions would shrink. They can stand more as declarations of political vision than actually policy plans. Of course, vision won’t close the deficit. But it’s good to know where your leaders stand.

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