NEED TO KNOW: BUDGET

Out of Balance

Paul Ryan has garnered wide praise for his latest GOP budget. But there’s a problem: It won’t come close to wiping out the deficit.

Rep. Paul Ryan unveils his budget proposal at a press conference on Capitol Hill on Tuesday, March 20, 2012.
Chet Susslin
Nancy Cook
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Nancy Cook
March 22, 2012, noon

COR­REC­TION: An earli­er ver­sion of this art­icle mis­char­ac­ter­ized the type of gov­ern­ment spend­ing that House Budget Chair­man Paul Ry­an has pro­posed re­du­cing to 3.75 per­cent of GDP by 2050.

Rep. Paul Ry­an has long been seen as the Re­pub­lic­an poster boy for fisc­al mat­ters: a vis­ion­ary will­ing to tackle the coun­try’s long-term budget prob­lems. Last year, Time magazine went so far to call the Wis­con­sin­ite a “proph­et” when nam­ing him a run­ner-up to its “Per­son of the Year.” Even the House Budget Com­mit­tee chair­man’s skep­tics ap­plaud him for his cour­age in tack­ling grow­ing en­ti­tle­ment spend­ing. But crunch the num­bers, and his latest plan looks like a lot of oth­er ones.

Ry­an’s fisc­al 2013 budget pro­pos­al seeks huge tax cuts without of­fer­ing any way to pay for them apart from the broad pre­scrip­tion of clos­ing loop­holes and elim­in­at­ing tax havens.

He says his plan would re­duce dis­cre­tion­ary gov­ern­ment spend­ing and oth­er man­dat­ory spend­ing—apart from Medi­care, Medi­caid, and So­cial Se­cur­ity—to 3.75 per­cent of gross do­mest­ic product by 2050. That’s a huge cut that would re­quire pro­grams for the poor, eld­erly, and work­ing class — everything from food stamps to hous­ing as­sist­ance to Medi­caid to job train­ing — to take severe fin­an­cial hits. It would also con­vert Medi­care to a vouch­er-based sys­tem that could push rising costs onto seni­ors. Such moves sound dar­ing in prac­tice but could be hard to pull off without cast­ing the Re­pub­lic­an Party as a mod­ern-day Ebenez­er Scrooge. All to­geth­er, the pack­age hands Demo­crats a po­tent polit­ic­al weapon, es­pe­cially if it doesn’t do what it pur­ports: that is, bal­ance the budget.

Ry­an’s plan would also undo the across-the-board cuts of $1.2 tril­lion from last sum­mer’s debt-ceil­ing deal, with a spe­cial eye to­ward pre­serving de­fense spend­ing. To ac­com­plish this, he would ask six nondefense-re­lated com­mit­tees to find sav­ings. That’s an idea that sounds very much like the route the failed su­per com­mit­tee fol­lowed.

“The House budget res­ol­u­tion pushes the en­vel­ope in every dir­ec­tion. If you aren’t will­ing to be­lieve that every one of these ex­treme claims is go­ing to come true, then the num­bers won’t hap­pen,” says Joseph Min­arik, who was chief eco­nom­ist at the Of­fice of Man­age­ment and Budget un­der Pres­id­ent Clin­ton.

The math doesn’t ap­pear to work in Ry­an’s fa­vor, either. The non­par­tis­an Tax Policy Cen­ter es­tim­ates that his tax cuts would add up to $4.6 tril­lion — and that’s on top of the $5.4 tril­lion in rev­en­ue for­feited through ex­tend­ing the Bush-era tax cuts.

Giv­ing away that much money while lower­ing the cor­por­ate and top in­di­vidu­al tax rates to 25 per­cent would re­quire Con­gress and the pres­id­ent to es­sen­tially do away with tax ex­pendit­ures. These breaks en­cour­age middle-class Amer­ic­ans to buy homes or give char­it­able dona­tions. They al­low people to de­duct state and loc­al taxes or give com­pan­ies a break if they provide health in­sur­ance.

Yet, without tar­get­ing spe­cif­ic breaks, the Ry­an plan looks like a massive money loser for the fed­er­al gov­ern­ment and a win for the wealthy and cor­por­a­tions — op­tics that play in­to Pres­id­ent Obama’s cam­paign drum­beat of eco­nom­ic fair­ness.

Not that this mat­ters to some con­ser­vat­ive Re­pub­lic­ans, who are grumpy that Ry­an’s plan did not go far enough. It caps spend­ing at $1.028 tril­lion, but a fac­tion of the party wanted to cap it at $931 bil­lion.

Still, the plan’s vague­ness hasn’t stopped the GOP pres­id­en­tial can­did­ates from re­sound­ingly en­dors­ing it. “It’s a bold and ex­cit­ing ef­fort on his part and on the part of the Re­pub­lic­ans, and it’s very much con­sist­ent with what I put out earli­er,” Rom­ney said dur­ing a tour of the Google of­fices in Chica­go on Tues­day.

Newt Gin­grich, who last year called Ry­an’s fisc­al 2012 plan a piece of “right-wing so­cial en­gin­eer­ing,” con­jured up enough good­will to call this one “cour­ageous.”

More broadly, Ry­an’s budget speaks to a grow­ing trend in the Re­pub­lic­an Party this elec­tion cycle of cam­paign­ing on the plat­form of fisc­al re­spons­ib­il­ity while of­fer­ing policy pro­pos­als that would in­crease the de­fi­cit.

Like Ry­an, Rom­ney would slash tax rates — so much so that the Tax Policy Cen­ter es­tim­ates that the fed­er­al gov­ern­ment would lose $900 bil­lion in rev­en­ue in 2015 alone, as­sum­ing ex­ten­sion of the 2001 and 2003 tax cuts. Rom­ney sim­il­arly has not out­lined the tax breaks he would elim­in­ate to pay for his cuts.

These policy pro­pos­als sound fine if you don’t like taxes, but they’re hardly con­sist­ent with the tra­di­tion­al Re­pub­lic­an mes­sage of re­du­cing the de­fi­cit, bal­an­cing the budget, and op­er­at­ing on sound eco­nom­ic foot­ing. In­stead, they make vividly clear that right now the party is primar­ily in­ter­ested in shrink­ing the size of gov­ern­ment rather than bal­an­cing the books.

“Bey­ond the GOP base, I don’t see the Ry­an budget play­ing well,” says Alan I. Ab­ramow­itz, a pro­fess­or of polit­ic­al sci­ence at Emory Uni­versity. “It opens up the Re­pub­lic­ans to cri­ti­cism that they’re mak­ing these gi­gant­ic cuts that hurt low-in­come groups while cut­ting taxes primar­ily on the wealthy. Par­tic­u­larly for someone like Rom­ney, this re­in­forces the im­age he already has of a rich guy whose policies fa­vor the rich.”

Go­ing in­to Novem­ber, Ry­an has signaled that he ex­pects the pres­id­en­tial can­did­ates to pay heed to his pro­pos­al and to of­fer up their own choices about the budget and taxes. And some budget ex­perts give Ry­an cred­it for tack­ling Medi­care, a struc­tur­al prob­lem that’s grow­ing in cost re­gard­less of which party con­trols the White House and Con­gress.

“I do give Paul Ry­an two thumbs up as a lead­er for the need to re­form en­ti­tle­ments,” says Maya MacGuineas, pres­id­ent of the Com­mit­tee for a Re­spons­ible Fed­er­al Budget.

Still, with each new budget and tax plan the Re­pub­lic­ans un­veil, they’re chip­ping away at their long-held repu­ta­tion for fisc­al hawk­ish­ness. But that may no longer be the point.

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