Ryan’s Budget Plan Is Ridiculous, But It Could Shift the Debate
Ezra Klein has helpfully assembled a summary of the Ryan GOP budget. As you can see, while everyone’s talking about the privatization of Medicare and block-grant of Medicaid, there are plenty of other pieces worth discussing here even without any of that. Ryan would reduce discretionary spending to pre-2008 levels and freeze it for five years. He would repeal the Affordable Care Act and Dodd-Frank entirely. He would block grant the food stamp program, giving a set amount of money indexed to inflation, regardless of economic conditions. He would eliminate all changes to Pell Grants, kicking them back to 2008 levels. And he would use the savings from all that to make the Bush tax cuts effectively permanent, but actually do worse than that, by changing the tax code to lower the top individual and corporate tax rates to 25% and making up the revenue on the poor.
So this is a pretty pathetic budget. And it also happens to be a complete fiction. The numbers are not to be trusted at all. Ryan assumes $1.4 trillion in savings from health care repeal when the Congressional Budget Office scores repeal as increasing the deficit. He uses “dynamic scoring” to perpetuate a fiction that tax cuts will increase tax revenue. He sets unrealistic spending caps without determining how to get there or how future Congresses not bound by his budget will abide by them. Worst, he assumes a world-historical low unemployment rate based on a Heritage Foundation study that claimed the Bush tax cuts would lead to the same kind of prosperity (hint: they didn’t). Indeed, by 2021, Ryan assumes a 2.8% unemployment rate, which is how he achieves the revenue needed to make the numbers work. Included with this projection is an implausible housing boom. Jim Tankersley and Katy O’Donnell, middle-of-the-road journalists, say in their headline that the plan “pushes optimism to the outer limits.”
Where would that spectacular growth come from? Based on an analysis provided to Ryan by the Heritage Foundation, a conservative think tank, it would come from the liberating effects of lower taxes and less government debt.
But the forecasted growth is so high that it falls on the outer edge of what most economists say is plausible—or even desirable—for the next decade […]
“They don’t have a strong track record of their projections matching reality when it comes to these kinds of scenarios,” said Heather Boushey, senior economist at the Center for American Progress. In particular, Boushey called the math behind projections of massively increased housing investment “fuzzy” given the realities of the market.
“I just don’t see how you spark a boom in housing,” she added. “Would that be good for the U.S. economy? Would that be at all likely? I think the answer to both questions is no.”
As long as everyone’s throwing around the word “serious,” this is the least serious budget proposal in recent history. It’s made up of unicorns and rainbows. That’s aside from the fact that kicking 32 million Americans off their health insurance is fundamentally immoral.
Now, I have a whole host of quotes from press releases from Democrats railing against this proposal. “After promising to listen to the American people, the House Majority has instead ignored them,” said Sherrod Brown. “Dismantling Medicare while giving bonus tax breaks to the very wealthiest in America is what may pass for bold in Washington, but in Oregon it is unacceptable,” said Jeff Merkley. “Shutting down government is apparently not enough, now Republicans have taken aim at shutting down Medicare as we know it,” echoed Patty Murray. “He provides dramatic tax cuts for the wealthiest, financed by draconian reductions in Medicare and Medicaid. His proposals are unreasonable and unsustainable,” said Kent Conrad, of all people. Max Baucus went so far as to say this plan wouldn’t happen on his watch. (Joe Lieberman found it courageous.)
But I’d rather look at observable reality. With respect to the current budget debate, Republicans initially called for $33 billion in cuts, and then upped the number. Democrats eventually met them “halfway” by… offering $33 billion in cuts. Republicans said no, wanting more, and now Democrats are positioning themselves as the serious people by offering an imitation of the Republican budget. You can see exactly the same dynamic at work here. The Ryan deficit reduction plan goes beyond the Bowles-Simpson cat food commission plan. So you can absolutely see the Democrats counter-offer with… Bowles-Simspon.
I wouldn’t be surprised if, a year from now, it’s broadly agreed that the main thing Paul Ryan’s budget did was persuade Democrats — and perhaps some Republicans — to adopt something pretty close to the Fiscal Commission’s recommendations (which are currently being turned into legislation by a bipartisan group of senators).
There are real similarities between the two plans. Perhaps most importantly, the Ryan budget and the Fiscal Commission rely on similar mechanisms to reduce the deficit: They both cap stuff. But the Fiscal Commission’s caps are more flexible and fair than those in the Ryan budget; the Fiscal Commission makes revenues part of the solution, where the Ryan budget includes a deficit-busting tax cut; and the Fiscal Commission doesn’t try to sneak an ideological wish list into law under the cover of deficit reduction.
The cat food commission plan is actually one giant magic asterisk, with caps standing in for the plan. But it’s now the serious bipartisan baseline. Democrats will get enormous pressure to embrace a fallback response to Ryan. He may not get his ideological pony plan, but he’s shifted the debate in Washington so that a not-that-less ideological plan, from two enemies of the social safety net, becomes the reasonable compromise.