Friday, April 29, 2011

Jonathan Cohn is Far Too Kind To Ryan

(Updated...Updated again)

The House Republican Budget is a fraud, pure and simple.

Jonathan Cohn has run a great series this week on what the House Republican Budget (also known as the Ryan Budget) would actually do, outside of ending Medicare-as-we-know-it. The final segment is about the deficit, and Cohn is right that the Ryan budget's bark is far more impressive than its bite. But Cohn understates what's going on here. The Ryan budget is far more of a shell game than Cohn lets on; indeed, there's every possibility that it will make deficits much worse far into the future.

Nothing here is original, but I haven't yet seen all of it put together in one place. If you add it all up, you wind up with a plan that just wouldn't come close to doing what House Republicans say, and probably think, it would do.

First step: This is what Cohn has. He runs the Center on Budget and Policy Priorities table about what the Republicans would actually do over the first ten years (see the updated CBPP numbers here*), which show that once you take into account tax cuts and accounting games, the Ryan plan only projects to cut the deficit by $380B over the next ten years.

Still, a deficit cut is a deficit cut, right? Well, not necessarily. Again, as far as I can tell, CBPP's estimate simply accepts Ryan's numbers at face value. Fair enough, but -- second step -- we know that Ryan's numbers are based on [SEE UPDATES BELOW] completely discredited Heritage economic projections -- you remember, the ones that predicted an implausible unemployment percentage for the future, and then "revised" that number while claiming it was independent of employment and unemployment numbers, or something like that. Actually, even economists couldn't do estimates, because Ryan doesn't tell us enough. Basically, he keeps Bush-era tax rates in place (that's the $4T budget hit he claims), makes a bunch of other specific tax cuts, and then says he'll make it up by curtailing tax expenditures. If economic growth is lower than Ryan projects, it's likely that his estimated revenues will also be lower, and it wouldn't take much to wipe out that $380B over ten years.

But at least it lowers the deficit over the long run, right? Hard to say! Future spending cuts are tricky things to think about. It's very possible (as Republicans charged in the debate over scoring ACA) that cuts made today will be restored by future Congresses; indeed, Ryan is only able to show the deficit reduction he has in the first decade by flipping and accepting ACA's Medicare Advantage cuts.

In my view, the proper way to do this, however, is to give the party making the cuts credit for those cuts they now say they want. Still, it's worth noting that it's very difficult to believe that if the plan passes and is fully implemented, there wouldn't be tremendous pressure on Congress years from now to increase spending on the MediVouchers to keep up with the pace of medical inflation. But I'll give Republicans the courage of their convictions on this one, and assume that if they were in charge then they'd opt for impoverishing old people (and the younger family members who would step in to help -- anyone want to project the economic effects of that?) rather than paying more out of the Federal treasury. I can't fault those who believe that's unrealistic (and make this a third step), however.

But one cannot do the same for programs that Republicans themselves have no intention of cutting. Fourth step: the problem with the long term "deficit reductions" in the House Republican plan is that, as CBPP reported, they depend on shuttering virtually the entire government outside of Social Security, health care programs (even as modified), and defense. That is, the entire government outside of Social Security and health care (and interest payments) would, House Republicans claim, be down to 3.5% of GDP by 2050 -- but defense alone is usually over 3%, and Republicans have no plans to cut it. That means no National Parks, no FBI, no veterans programs, no anything. It's not going to happen; Republicans don't intend for it to happen. I'm sure that if Democrats started running ads claiming Republicans were either going to slash defense or eliminate, say, the FBI and the FDA, that Republicans would object. They would be right -- but that means they have no real intention of achieving the cuts they claim (and just voted for).

Oh, and if you want to call it a fifth step: there's no particular reason to believe that GOP tax policies in the long run would yield the revenues they claim, given that their long-term reliance (not just in this budget, but consistently for the last thirty years) on fairy tales about taxes and revenues. In some ways, this is the biggest problem with the GOP budget, and the main reason I disagree with Ross Douthat about whether there's a "seriousness" gap between the parties.** Suppose that steps three and four are both wrong, here, and that in fact Republicans are dead set on getting their Medicare and Medicaid cuts, and then shuttering all the things they would have to shutter to meet their spending goals. It still won't produce a surplus if they're using fraudulent economic projections based on supply-side hokum. Instead, their tax revenues will be systematically lower than they expect, and spending systematically higher.

To sum up: the House GOP budget doesn't actually cut the deficit much in ten years even if you accept their numbers, properly understood; even that ten year estimate is based on phony projections, so it almost certainly yields larger deficits over that period; in the long run many would argue that the Medicare savings are unrealistic; in the long run the other proposed savings are certainly unrealistic given that Republicans right now would not support the cuts needed to achieve those savings; and regardless of any of this, relying on supply-side hokum yields a process that is systematically biased towards producing deficits, just as it did ten years ago and in 1981.

I don't understand deficit idealists, so I'm not surprised -- but I am puzzled -- about why they give any "serious" points at all to something like this.

*Cohn uses, unless I'm missing something, an older CBPP projection based on the bill reported out of committee; see here for their analysis of the bill that wound up on the House floor, which had additional cuts for the first ten years.

**To his credit, Douthat wrote perhaps the best short critique, and certainly the best conservative critique, of the Ryan plan's shortfalls in this extremely hard-hitting and spot-on post.

[UPDATE: Jonathan Chait believes that "Ryan's revenues are made up, but they're not based on dynamic scoring. Just says, 19% of GDP, 25% rate, we'll make it work." I think that's a reasonable interpretation, although I still disagree; the problem is we don't quite know enough to know. Chait's interpretation assumes that Ryan doesn't actually have specific plans to hit those numbers; my interpretation assumes that Ryan does -- but that if he doesn't, he's already telegraphed how he's going to score them, and that will produce the problem I believe is already there -- see Step 5, above. The relevant documents are Ryan's budget document (see especially Appendix 2) and a Heritage memo Ryan posted. I'll update further if anyone has a more definitive conclusion.]

[UPDATE 2: Chait in more than 140 characters, and my longer response. Bottom line: the above probably should read "are based on, or promise to eventually be based on," or something like that. Note however that Chait is basing his views on his conversation with CBPP, and I have a lot of respect for them, and for Chait for that matter.]


  1. There absolutely is a seriousness gap between the two parties.

    The Republicans based their whole plan on bogus numbers pumped out by a partisan think tank that decided to meddle in its own economic forecasting model by substituting magical thinking for economic relationships. They inserted massive tax breaks into their own deficit reduction plan. Their majority leader went on TV to explain how a law passed by the House was going to "become the law of the land if the Senate does nothing." Absolutely there is a seriousness gap.

    Oh, he thinks the gap runs the other way? Yeah, I got nothing.

  2. “…in the long run many would argue that the Medicare savings are unrealistic; in the long run the other proposed savings are certainly unrealistic given that Republicans right now would not support the cuts needed to achieve those savings…”

    In the long run, middle and upper class retirees will have to pay more for their medical care. It won’t be popular, but there’s simply no way around it. Ryan gets points for at least proposing a plan that will do this. I also question the Republicans’ seriousness, but Ryan has at least come to terms with the realities of Medicare.

  3. @Couves I share your impulse to give Ryan "points" for something in his plan. However, any points he gets for including a proposal to make middle and upper class retirees pay more for their medical career he loses (in my view) for:

    *exempting current retirees;
    *exempting those currently 55 and older;
    *slashing (immediately) Medicaid and food stamps, thereby making the poor and disabled pay more (immediately);
    *repealing most of the health care cost controls in the ACA;
    *lying about the Medicare replacement that is not (despite what he says) "just like" the Federal Employees Benefit Health Plan; and,
    *using fake numbers... name just a few of the more egregious elements of his plan.


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