Paul Ryan’s Magical Fantasy Budget
by Benjamin Studebaker
So Mitt Romney has chosen Paul Ryan to be his running mate in the US Presidential election. It is a very telling choice. As regular readers will know, Mitt Romney proposed a tax policy that was more or less mathematically impossible without inflicting severe tax penalties on the bottom 95% of tax payers. It just so happens that Paul Ryan is guilty of precisely the same magical thinking. Let’s explore.
As readers of yesterday’s post (The Romney Tax Plan and “Media Bias”) already know, Mitt Romney proposes large tax cuts, but also promises that these tax cuts will be “revenue neutral”–meaning that they will pay for themselves. The means by which the cuts were to pay for themselves was via “base broadening”–the elimination of loopholes and deductions. Romney, however, promised not to eliminate loopholes that incentivised investment, and this left his with a rather small pool of loopholes to eliminate, most of which helped the poor and middle classes. The result was a budget that, in order to be soluble, would involve tax increases on the bottom 95% of Americans, with the top 5% receiving a cut.
Since 2008, Paul Ryan has proposed the “Roadmap for America’s Future Act”, popularly known as “The Ryan Budget” once a year. Every year it has failed to become law. So what was in this budget?
Once again, our hard-working, non-partisan, painfully scrupulous friends at the Tax Policy Centre ran their analysis. Here’s what they had to say:
TPC projected the tax cuts in Ryan’s budget would add $4.6 trillion to the federal deficit over the next decade, even after extending the 2001/2003 tax cuts, which would add another $5.4 trillion to the deficit.
Ryan argues that eliminating or scaling back deductions, credits, and exclusions ought to be part of the GOP fiscal plan. But he won’t say how.
So there’s a 4 and a half trillion dollar gaping hole in the Ryan budget created by his tax cuts that are supposed to be solved by eliminating deductions and closing loopholes–“base broadening”. Sound familiar? It should. It is more or less how the Romney tax policy was described. Except the Ryan budget involves even larger tax cuts, and consequently even regressive base broadening that raises taxes on the poor would not be sufficient, which is why Ryan also proposes cutting Medicaid in half. Again, the Tax Policy Centre had this to say:
Ryan proposes big, specific spending reductions such as cutting Medicaid in half and slashing other federal spending (except for Social Security, Medicare, and Medicaid) by nearly 75 percent from current levels by 2050.
Cutting Medicaid in half is estimated to remove Medicaid coverage for between 14 million and 27 million Americans based on which estimate you read. This, in and of itself, would be a human catastrophe. In earlier versions of the plan, he also proposed converting Medicare into a voucher system, a policy that was originally proposed by Newt Gingrich in the mid-nineties and which proved politically unfeasible due to how thoroughly it enraged senior citizens. Trial versions, like the Medicare Advantage programme experimented with under the Bush administration, proved ineffective at lowering costs–the only way to actually reduce costs under the voucher system was to make the vouchers too small to pay the full cost of healthcare, leaving seniors to pay the difference. Needless to say, such a regressive policy did not go over well with seniors, and for good reason. Taken together, all of these proposals leave us with two possibilities:
- The Ryan Budget is Fraudulent–Paul Ryan knows the cuts he proposes to make his budget revenue neutral would never pass and is a grandstanding attention-seeker.
- The Ryan Budget is Delusive–Paul Ryan honestly believes that the public would accept tax increases on 95% of Americans via base-broadening and the tearing to shreds of Medicare and/or Medicaid, and is a dangerous extremist.
In either case, this is not a person you would probably pick to be your vice president, not unless you were every bit as fraudulent or delusive as Ryan himself is. I’ll leave it up to the reader to decide which is the more apt description.
Of course, don’t take my word for it. Here are a bunch of sources that agree with this interpretation of the Ryan budget, which I’m sure Ryan supporters will all immediately dismiss as examples of phantom “media bias”, but I shall none the less include:
The Tax Policy Centre:
Ezra Klein in the Washington Post:
Paul Krugman in the NYT:
Yesterday’s Post on the Romney Tax Plan: