JONATHAN COHN APRIL 29, 2011
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Discussion of the House Republican budget has focused mostly on the privatization of Medicare, the block-granting of Medicaid, and the repeal of the Affordable Care Act. And that’s appropriate, given the magnitude of the changes and widespread impact they would have. But those proposals are obscuring some other proposed shifts that, in any other context, would be plenty troubling for their own sake. This week I'll highlight five of them. So far, I've written about radical changes to the Supplemental Nutritional Assistance Program (SNAP), changes in the eligibility age for Medicare, a crucial weakening of financial reform, and a neglect of infrastructure. Today I conclude by assessing just how much the Republican budget would actually reduce the deficit.
One reason you hear so many people describing the House Republican budget as “brave” and “serious” is that it would dramatically reduce the deficit. Yes, it would take health insurance away from millions of people, unravel the safety net, and allow America’s infrastructure to deteriorate further. But at least it would substantially improve the government’s fiscal outlook.
And yet that's not as true as you might think, particularly in the first decade. When House Budget Chairman Paul Ryan unveiled his proposal, he announced that it would reduce government spending by $5.8 trillion and reduce deficit spending by $1.6 trillion in its first ten years. But Ryan included in his spending reductions the savings from ending the wars in Afghanistan and Iraq.
That's fine; I think we all hope that prediction turns out to be true. But those savings have nothing to do with what Ryan is proposing specifically. (Or, if you want to get technical about it, those savings should be added to Obama’s budget and the current baseline, as well.) Once you adjust for that fact, it turns out the Republican budget would reduce spending, relative to current policy and expectations, by only $4.5 trillion.
“Only” is a slightly misleading term here, since $4.5 trillion dollars would still represent a large spending cut. But wait! The House Republican budget also calls for tax cuts—$4.2 trillion of them. In other words, the tax cuts in the House Republican budget would very nearly offset the spending cuts, leaving just $380 billion in additional savings over ten years.
The Center on Budget and Policy Priorities, among the first (if not the first) to point this out, produced the graph below to illustrate the effect:
By the way, this more modest deficit reduction would mask a very large redistribution of wealth--and not the kind Republicans always accuse Democrats of trying. The tax cuts, which include reductions in the top rate, would overwhelmingly benefit the rich. The spending cuts, which include a huge reduction in Medicaid spending, would primarily affect the poor.
So calling the House Republican plan a deficit reduction scheme is a very misleading description of its likely effect for the first decade. You're better off calling it a regressive redistribution plan that happens, as a side effect, to reduce deficits by a small amount. Or you can just call it "flimflam," like Paul Krugman did.
The caveat to all of this--and it’s a big one--is that the numbers look different after ten years. On paper, as best as I can tell, the House Republican budget really would produce substantially more long-term deficit reduction than the current baseline. But that’s because the Republican budget envisions massive reductions not only in Medicaid but Medicare, as well. It also relies upon unspecified tax reforms that will raise some revenue.
As many critics have noted, the harsh impact of the Medicare and Medicaid changes, in particular, call into question the future political viability of those proposals--much more than, say, the political viability of delivery reform now now in place because of the Affordable Care Act. And there's a reason those tax reforms are unspecified: To get the revenue figure they want, they'd probably have to rely on bogus growth projections. As Krugman says, it's the equivalent of another "magic asterisk."
Update: The Center on Budget has since updated its estimates, based on revisions that House Republicans made to the budget after it proposal. The effect is a substantial increase in the amount of deficit reduction the budget would produce in the first ten years, relative to the original amount, although it's still a modest amount. I've updated my item to reflect that. I've also added material explaining why, in the long run, the budget's projection on tax reform are highly dubious. Oh, and I changed "billion" to "trillion" in the third paragraph. Thank you to reader "janus" and Twitter follower @swiftj for pointing out the error.
9 comments
**"When House Budget Chairman Paul Ryan unveiled his proposal, he announced that it would reduce government spending by $5.8 trillion and reduce deficit spending by $1.6 trillion in its first ten years. But Ryan included in his spending reductions the savings from ending the wars in Afghanistan and Iraq.** So that means that anyone who voted for the Ryan Plan must support ending OIF/OND/OEF within 10 years, right?
- Konstantin
April 29, 2011 at 2:04am
That's a...um...serious typo at the end of that fourth paragraph there. Probably should get on fixing that.
- janus
April 29, 2011 at 7:36am
What made the Ryan flimflam possible is, of course, Bowles-Simpson, which also would drastically reduce income tax rates for the wealthy in return for reducing or eliminating so-called tax expenditures (i.e., deductions). But experience tells us that, once reduced, income tax rates are next to impossible to increase whereas tax expenditures grow like kudzu. Bowles-Simpson is no less a flimflam than Ryan.
- rayward
April 29, 2011 at 8:00am
As should long since been obvious to anyone paying attention, the Republicans don't actually give a damn about the deficit and haven't since 1980 when Reagan was elected. That's why they blithely created huge new structural deficits under Bush. The deficit they created is merely the occasion for an extreme redistribution of wealth from the bottom to the top, nothing else. Republican deficit talk is pure snake oil, a scam. I agree with rayward that the shocking BS plan gave the Republican scan additional legitimacy. Bowles should never show his face in public again.
- roidubouloi
April 29, 2011 at 8:39am
I'll third that. The further reduction of tax rates for the rich, while raising them for the middle class and the poor, was exactly why I called the Bowles-Simpson plan a blueprint for dismantling the republic. It takes a lot to shock me these days, given the appalling state of our politics, but the sheer gall necessary to publicly propose that plan with a straight face did manage it.
- janus
April 29, 2011 at 9:06am
Any Democratic budget proposal that uses the Bowles-Simpson plan as a starting point will be a catastrophe. Now we're being told by some pundits that our only hope will be the plan being formulated by the so-called Gang of Six. What odds would you like to give me that their plan won't be another atrocity weighted in favor of the rich.
- DAVIDDREIER@EARTHLINK.NET-old
April 29, 2011 at 9:38am
As long as "tax cuts come first", then "savings come later", you can tell it's more Republican smoke-and-mirrors that will simply INCREASE the deficit. Nice to have the numbers confirmed however.
- AllanL5
April 29, 2011 at 10:06am
Someone should call Ryan's office right away. I'm sure he'll be upset when he finds out he has been lying to us.
- Nusholtz
April 29, 2011 at 11:34am
Hilarious, Nush. Seriously, though, aren't we all getting a bit sick of having to respond to policies like this... rejoinder after rejoinder, using logic and sound forecasting, in an effort to counter with reason a gop policy formulated with a dearth of that same logic so obvious in its idiocy as to be laughable? The plan, if you can even call it that, is MORONIC, a failure with even base arithmetic, shameful in its combination of Heritage Foundation propaganda with GOP fictional dream stats (take a gander at the Heritage-generated unemployment figures the "plan" conjures), and almost purposeful in its utterly wicked combination of cuts to the needy and beneficence to the wealthy. It might make for good villainy, but its so over the top in its combinatiuon of dumb, silly, and insensitive it's doesn't even make for good parody. The new Atlas Shrugged which somehow made it to the silver screen is Citizen Kane by comparison. If they were to somehow distill Ryan's plan and have it presented by the evil conniving republicans in a film, you would shake your head at such a ham-fisted attempt at bad-guy painting. Hand the Ryan character a white cat to stroke and have have Michael Meyers spoof it up, and you might have something. Yet we continue to counter this crap with serious, thoughtful response. Why? Because he's the (current) darling of the media, who refuse to point out the obvious, that his plan is not only idiotic and cruel, it would - literally - accomplish nothing he intends? When will we finally see the media serving one of its most basic functions, putting aside its desire to be SO far and SO devoid of appearing biased that they collectively finally get around to the creation of a smell-test for new policy initiatives (and "new" candidates, like that world class jackass Donald) wherein we can finally begin hearing things like "We here at brand x news always strive to present to you the news in unbiased format, and to this end we have, at times, perhaps gone a bit far in trying to find the good in even the most insane of public policy initiatives. This new plan of Ryan's, however, is for us a bridge too far. This plan is an utter mess, a blatant attempt at bringing, Golem-like, the most vile republican fantasies into reality and like the golem of folklore will result not in any good bewing accomplished but in the wanton destruction of everyhing good that lies in the path of these shamelessly self serving, utterly conscious-free, greedy, uncaring, malicious, malevolent and derelict puppet masters who are concerned not for the only care of their fellow man but for only the appropriation, consolidation, and dispensation of power and wealth. More after this from our friends at Ben & Jerry's. Back in a sec!" This is what we need. A national smell test. John Stewart, writ large Enough, already.
- Tristan
April 29, 2011 at 1:54pm