The unrealistic assumptions behind Paul Ryan’s budget numbers

Original Link: http://www.washingtonpost.com/blogs/ezra-klein/post/the-unrealistic-assumptions-behind-paul-ryans-budget-numbers/2011/08/25/gIQAEZrePS_blog.html

By Ezra Klein



There’s an important disclaimer in the very first paragraph of the Congressional Budget Office’s analysis of Paul Ryan’s budget plan.

The calculations presented here represent CBO’s assessment of how the specified paths would alter the trajectories of federal debt, revenues, spending, and economic output relative to the trajectories under two scenarios that CBO has analyzed previously. Those calculations do not represent a cost estimate for legislation or an analysis of the effects of any given policies. In particular, CBO has not considered whether the specified paths are consistent with the policy proposals or budget figures released today by Chairman Ryan as part of his proposed budget resolution.

Translated out of CBO-ese, what that means is that CBO hasn’t looked at whether Ryan’s budget will achieve the results Ryan says it will. Rather, it looked at what will happen assuming Ryan’s budget achieves the results that Ryan says it will.

On the third page, CBO writes, “Chairman Ryan and his staff specified rules by which revenues and spending would evolve.” They then detail what those rules were:

Ryan tells CBO to assume his tax plan will raise revenues to 19 percent of GDP and then hold them there. He tells them to assume his Medicare plan will hold cost growth in Medicare to GDP+0.5 percentage points. He tells them to assume that spending on Medicaid and the Children’s Health Insurance Program won’t grow any faster than inflation. He tells them to assume that all federal spending aside from Medicare, Medicaid and Social Security will fall from 12.5 percent of GDP in 2011 to 3.75 percent of GDP in 2050.

It’s that last assumption, perhaps, that shows most clearly how unlikely Ryan’s specified budget path is. He’s saying that in 2050, spending on defense, on food stamps, on infrastructure, on education, on research and development, on the federal workforce, and everything other non-entitlement program combined will be less than four percentage points of GDP.

Consider that defense spending has never fallen below three percentage points of GDP, and Mitt Romney has promised to keep it above four percentage points of GDP. Ryan has not outlined a realistic goal.

Ryan isn’t alone in directing the CBO to assume some level of success for his policies. Politicians from both parties routinely specify spending limits and then brag about the results. But Ryan’s budget is unusual in the numbers of rules it specifies, and the level of success it assumes for its policies.

And the savings he touts — which, as you can see in the graph atop this post, are quite dramatic — rely on the level of success he assumes. If he can’t bring all non-entitlement spending down to 3.75 percent of GDP, and he can’t keep Medicaid to inflation, then he can’t achieve the deficit reduction he’s promising.

”If the president put out a budget with this level of detail and these kinds of assumptions,” says Michael Linden, who directs tax and budget policy at the left-leaning Center for American Progress, “people would be up in arms about how ridiculous it is.”