Ryan Budget: Better than the Senate's, but That's About It

The GOP FY2014 House Budget Resolution, authored by Paul Ryan, is far better than the budget plan passed this weekend by the Senate, but it's hardly a radical small-government plan of action.  It's telling that the Senate defeated the Ryan proposal along partisan lines, with four of the most conservative senators voting against: Rand Paul, Ted Cruz, Mike Lee, and Dean Heller.

Spending (Outlays)

Ryan's 10-year timeline begins with a 2014 budget of $3.53 trillion.  By 2023, outlays have grown to $4.95 trillion, an increase of $1.42 trillion, up 40.3% over 10 years.  According to Ryan, this represents a 3.4% annual increase, but I'm not sure about his math.  When you plug a base amount of $3.53 trillion at 3.4% for 10 years, compounded annually, into an interest calculator, you get $4.93 trillion, close to Ryan's 2023 budget.  This method, however, incorrectly calculates 3.4% growth for 2014, year zero.  Doing the calculation for 9 years of growth after 2014 results in a 3.8% average annual growth.

In eight of the ten years (2016 to 2022), outlays grow by over 4%, ranging from 4.23% in 2021 to 5.23% in 2022.  U.S. inflation is currently at 2.0%; the average for the last two decades (1993-2012) is 2.5%.

The U.S. population has been growing at 0.8% or 0.9% per year, and, the argument goes, federal outlays must grow by the same percentage.  There's some truth to this requirement -- more people means more Social Security checks.  But I'm not sure this needs to be a rigid ratio -- we don't build 1% more bridges to accommodate 1% more people.

In any case, the Ryan budget adds more than enough spending every year to keep pace with inflation and population growth.

The big problem with all this "responsible, balanced" spending is Ryan's starting point of $3.53 trillion.  The massive spike in spending under Obama -- "emergency spending to avert a worldwide financial meltdown" -- has become the new baseline, accepted even by the GOP.

Some have suggested going back to Clinton-era spending levels (2001 budget: $1.9T).  If we started with spending levels as recent as President Bush's 2009 $3.1-trillion budget -- record-breaking at the time -- and allow it to grow at 3.8% annually, it would lead to 10-year total outlays of $36.9 trillion.  Ryan projects $40.2 trillion in revenue over ten years, which would mean a surplus under this scenario.

If spending remained nominally unchanged from 2014, the ten-year total would be $35.3 trillion.  The 10-year outlays in Ryan's budget are $41.5 trillion.  We could therefore argue that Ryan adds $6.2 trillion in new spending.

Our lazy, dishonest media, however, tell a different story.

CNN: the Ryan budget "cuts taxes while balancing the budget over 10 years by slashing spending by $4.6 trillion."

Mother Jones: "Rep. Paul Ryan's (D-Wisc.) 'new' budget slashes government spending levels to their lowest since 1948, with $4.6 trillion in cuts to things like Medicare, Medicaid and other programs for the poor."

NYT: "By cutting $4.6 trillion from spending over the next decade ..."

This $4.6 trillion number comes from comparing Ryan's budget not to reality (it increases spending), but to the CBO February 2013 Baseline, which lists $46.099 trillion in outlays over ten years.  Patty Murray's Senate budget proposes outlays of $46.362 trillion, so the revised story ought to be that Ryan wants to take $4.9 trillion away from struggling seniors and hungry children.

Revenue

The Washington Post writes that the Ryan budget is based on a "grand misconception, which is that the federal deficit can be set on a path to zero without additional revenue."

Although Ryan proposes simplifying the tax code, he specifies that the changes will be revenue-neutral.  Thus, his revenue figures are identical to the "Current Policy."  In sum, the GOP budget endorses Obama's proposed level of taxation.  In other words, there are no "devastating cuts," and Ryan does not have a grand misconception about the need for "additional revenue."

Some critics argue that Ryan's revised tax structure won't bring in enough revenue.  It does take a leap of faith to believe that a very different tax code will bring in identical amounts of revenue, and it's possible that tax revenues might fall short of projections -- we can't predict the future with much certainty.  The attacks, however, are mostly accusations of bad faith.  The New York Times wrote about "sharper cuts to vital services and more dishonest tax provisions."  Republicans know, you see, that they're going to need more money, and they have a secret scheme to raise taxes on the middle class in order to preserve tax breaks for their billionaire cronies.

Deficits

The Ryan budget has been praised by conservatives for reaching "balance in ten years"  (NRO).  Many seize on the idea that his budget "reduces the deficit to zero" or "eliminates the deficit."

The numbers are not that encouraging.  Ryan adds $1.225 trillion in new debt over ten years, on top of the $17.548 trillion we will owe by the end of 2013.  According to Ryan, the interest on this debt for 2014-23 will be $4.540 trillion, 11% of our total spending.

Under Ryan's plan, the federal government would run a deficit every year except for 2023, the 10th year, when outlays suddenly drop from their 4% and 5% increases to a 2.63% increase.  (See how easy it is -- I just called an "increase" a "drop.")

Nothing is done to bring down the national debt, and the zero deficit occurs for one year ten years from now.  Or might occur if projected revenues meet expectations.  As noted, the revenue side of the equation is at best an educated guess.

Granted, Ryan's deficits are small compared to the Senate budget, which will add $5.2 trillion to the debt, and Obama's idea of fiscal stability is adding the same amount to the debt every year.  Apart from the $528-billion deficit in 2014, Ryan's remaining deficits average around 0.4% of GDP and might be manageable -- if we had not already run up $17 trillion in debt.

*

The Ryan budget might have been conceived in the spirit of compromise, recognizing that a budget appealing to conservatives would never pass the Senate or the White House.  Ryan's budget still failed to pass and was condemned widely.  Forbes called it a "Kamikaze budget ... a suicidal attack on federal spending."  DSCC: "appalling," with "devastating cuts."  Rachel Maddow: a "far-right budget plan."

If a document this anodyne provokes such unhinged vilification, how are we ever going to get serious about our unsustainable spending?  Face it: we're screwed.

The GOP FY2014 House Budget Resolution, authored by Paul Ryan, is far better than the budget plan passed this weekend by the Senate, but it's hardly a radical small-government plan of action.  It's telling that the Senate defeated the Ryan proposal along partisan lines, with four of the most conservative senators voting against: Rand Paul, Ted Cruz, Mike Lee, and Dean Heller.

Spending (Outlays)

Ryan's 10-year timeline begins with a 2014 budget of $3.53 trillion.  By 2023, outlays have grown to $4.95 trillion, an increase of $1.42 trillion, up 40.3% over 10 years.  According to Ryan, this represents a 3.4% annual increase, but I'm not sure about his math.  When you plug a base amount of $3.53 trillion at 3.4% for 10 years, compounded annually, into an interest calculator, you get $4.93 trillion, close to Ryan's 2023 budget.  This method, however, incorrectly calculates 3.4% growth for 2014, year zero.  Doing the calculation for 9 years of growth after 2014 results in a 3.8% average annual growth.

In eight of the ten years (2016 to 2022), outlays grow by over 4%, ranging from 4.23% in 2021 to 5.23% in 2022.  U.S. inflation is currently at 2.0%; the average for the last two decades (1993-2012) is 2.5%.

The U.S. population has been growing at 0.8% or 0.9% per year, and, the argument goes, federal outlays must grow by the same percentage.  There's some truth to this requirement -- more people means more Social Security checks.  But I'm not sure this needs to be a rigid ratio -- we don't build 1% more bridges to accommodate 1% more people.

In any case, the Ryan budget adds more than enough spending every year to keep pace with inflation and population growth.

The big problem with all this "responsible, balanced" spending is Ryan's starting point of $3.53 trillion.  The massive spike in spending under Obama -- "emergency spending to avert a worldwide financial meltdown" -- has become the new baseline, accepted even by the GOP.

Some have suggested going back to Clinton-era spending levels (2001 budget: $1.9T).  If we started with spending levels as recent as President Bush's 2009 $3.1-trillion budget -- record-breaking at the time -- and allow it to grow at 3.8% annually, it would lead to 10-year total outlays of $36.9 trillion.  Ryan projects $40.2 trillion in revenue over ten years, which would mean a surplus under this scenario.

If spending remained nominally unchanged from 2014, the ten-year total would be $35.3 trillion.  The 10-year outlays in Ryan's budget are $41.5 trillion.  We could therefore argue that Ryan adds $6.2 trillion in new spending.

Our lazy, dishonest media, however, tell a different story.

CNN: the Ryan budget "cuts taxes while balancing the budget over 10 years by slashing spending by $4.6 trillion."

Mother Jones: "Rep. Paul Ryan's (D-Wisc.) 'new' budget slashes government spending levels to their lowest since 1948, with $4.6 trillion in cuts to things like Medicare, Medicaid and other programs for the poor."

NYT: "By cutting $4.6 trillion from spending over the next decade ..."

This $4.6 trillion number comes from comparing Ryan's budget not to reality (it increases spending), but to the CBO February 2013 Baseline, which lists $46.099 trillion in outlays over ten years.  Patty Murray's Senate budget proposes outlays of $46.362 trillion, so the revised story ought to be that Ryan wants to take $4.9 trillion away from struggling seniors and hungry children.

Revenue

The Washington Post writes that the Ryan budget is based on a "grand misconception, which is that the federal deficit can be set on a path to zero without additional revenue."

Although Ryan proposes simplifying the tax code, he specifies that the changes will be revenue-neutral.  Thus, his revenue figures are identical to the "Current Policy."  In sum, the GOP budget endorses Obama's proposed level of taxation.  In other words, there are no "devastating cuts," and Ryan does not have a grand misconception about the need for "additional revenue."

Some critics argue that Ryan's revised tax structure won't bring in enough revenue.  It does take a leap of faith to believe that a very different tax code will bring in identical amounts of revenue, and it's possible that tax revenues might fall short of projections -- we can't predict the future with much certainty.  The attacks, however, are mostly accusations of bad faith.  The New York Times wrote about "sharper cuts to vital services and more dishonest tax provisions."  Republicans know, you see, that they're going to need more money, and they have a secret scheme to raise taxes on the middle class in order to preserve tax breaks for their billionaire cronies.

Deficits

The Ryan budget has been praised by conservatives for reaching "balance in ten years"  (NRO).  Many seize on the idea that his budget "reduces the deficit to zero" or "eliminates the deficit."

The numbers are not that encouraging.  Ryan adds $1.225 trillion in new debt over ten years, on top of the $17.548 trillion we will owe by the end of 2013.  According to Ryan, the interest on this debt for 2014-23 will be $4.540 trillion, 11% of our total spending.

Under Ryan's plan, the federal government would run a deficit every year except for 2023, the 10th year, when outlays suddenly drop from their 4% and 5% increases to a 2.63% increase.  (See how easy it is -- I just called an "increase" a "drop.")

Nothing is done to bring down the national debt, and the zero deficit occurs for one year ten years from now.  Or might occur if projected revenues meet expectations.  As noted, the revenue side of the equation is at best an educated guess.

Granted, Ryan's deficits are small compared to the Senate budget, which will add $5.2 trillion to the debt, and Obama's idea of fiscal stability is adding the same amount to the debt every year.  Apart from the $528-billion deficit in 2014, Ryan's remaining deficits average around 0.4% of GDP and might be manageable -- if we had not already run up $17 trillion in debt.

*

The Ryan budget might have been conceived in the spirit of compromise, recognizing that a budget appealing to conservatives would never pass the Senate or the White House.  Ryan's budget still failed to pass and was condemned widely.  Forbes called it a "Kamikaze budget ... a suicidal attack on federal spending."  DSCC: "appalling," with "devastating cuts."  Rachel Maddow: a "far-right budget plan."

If a document this anodyne provokes such unhinged vilification, how are we ever going to get serious about our unsustainable spending?  Face it: we're screwed.