October 1, 2014

Ryan Budget Falls Short on Fiscal Sustainability

  • The federal budget is an expression of our country's values. Where we choose to spend and at what levels, how and who we tax, and the borrowing we...

Today the House Budget Committee is considering Chairman Paul Ryan’s proposed budget for Fiscal 2015 -- a document that lays out Republican priorities but does not represent a realistic blueprint for progress towards a fiscal sustainability plan.

Concord Coalition Executive Director Robert L. Bixby says Ryan deserves credit for proposing a budget “in an election year when some may argue that it would be more convenient to remain silent.”

But Bixby adds that Ryan’s proposal, like President Obama’s budget, “is best viewed as a statement of party principle with little chance of moving the fiscal debate forward, much less of being enacted.”

Ostensibly aiming to balance the budget within 10 years without tax increases, Ryan’s plan calls for $5 trillion in cuts, including major changes in health-related spending.

Given the size and nature of the structural problems in the budget, the goal of eliminating deficits within a decade sets up some very difficult policy choices. A renewed focus on open-minded budget negotiations -- using policy levers that affect both revenues and spending -- would offer a better chance to enact reforms with a positive fiscal outcome.

Achieving the health care savings in the budget is likely to be hamstrung by political rhetoric.

“The Medicare savings included in Ryan’s budget -- such as those from the current-law reductions in Medicare Advantage plans and the shift to a Medicare premium support system -- are valid and achievable,” said Joshua Gordon, Concord’s policy director. “However, fully realizing them will require a break from the current rhetorical stance of many in both parties against the Medicare Advantage financing trajectory and the narrow provider networks and private insurance regulations in the ACA insurance exchanges, without which budgetary savings from premium support would be unlikely.”

Ryan suggests allowing defense to exceed current spending caps. Non-defense discretionary spending, however, would fall to an unrealistic 2.2 percent of GDP by 2024, compared to an average of 3.8 percent over the past 40 years.

Concord also questioned other features of the budget. For example, while criticizing Obama for abandoning a proposal to switch to a more accurate measure of inflation, Ryan failed to include that idea in his own budget.

His plan supports base-broadening tax reform and a two-rate structure of 25 and 10 percent but does not embrace any particular proposal for making these reforms revenue-neutral.

A small but growing portion of the assumed savings in Ryan’s budget comes from estimates of its macroeconomic feedback, which introduces additional uncertainty into the projections.