Why These Budget Plans Are More Fiction Than Fiscal

Published Mar 12, 2013. By Josh Boak and Eric Pianin. In The Fiscal Times.

When Republican House Budget Committee chief Paul Ryan unveils his spending and tax plan for fiscal 2014 today, it will get probed, prodded, and debated for its ideas about balancing the budget over 10 years.

From all indications, the new budget will be laced with gimmicks and goals – such as dismantling Obamacare and changing Medicare to a voucher-style program – that play well to Ryan’s base but aren’t likely to survive.

A similar story will unfold on Wednesday when Washington Sen. Patty Murray announces the Democratic version of the budget blueprint – this one laden with increased tax revenues already declared dead on arrival by Republicans, more spending to spur the economy and a much more modest goal of stabilizing the $16.5 trillion national debt as a share of the national economy, rather than creating a surplus in a decade.

If the recent past is any guide, these two budget plans will mostly be fantasies, attempts at partisan branding first and foremost. They are efforts to shape public opinion for the fierce negotiations or brutal stand-off to follow. And in the case of the Senate Democrats who have failed to approve a budget in the past three years, Murray’s document will amount to some badly needed face-saving by her party.

“The cynical answer is that neither of these budgets matter,” said Michael Linden, director of tax and budget policy at the progressive Center for American Progress. “They are good as statements of principle about where both sides think we should go.”

There is wisdom in being cynical, based on the recent fiascos involving the 2011 debt ceiling increase, the collapse of the super committee, the drama around the fiscal cliff at the start of this year, and the $85 billion in across-the-board sequestration cuts that began kicking in this month.

Ahead of the Ryan budget plan’s official release as well as others, here is The Fiscal Times’  preview of the half-truths and talking points being issued this week – and why real deficit reduction remains so elusive.

‘WELL BEYOND CHUTZPAH’ Put simply, the Ryan budget depends on a bizarro universe in which President Obama ditches his beliefs and converts to a GOP that he roundly defeated in last year’s presidential election. 

It is premised on repealing the spending associated with Obamacare while retaining the $716 billion in Medicare savings made possible by the 2010 law to provide near-universal health insurance coverage. As the GOP vice presidential nominee last year, Ryan savaged these same savings at the Republican National Convention, saying, “The greatest threat to Medicare is Obamacare, and we’re going to stop it.”

“I really can’t think of any comparably dishonest episode in recent American political history,” commented University of Texas-San Antonio political scientist Jonathan Bernstein in a Monday blog post for The Washington Post. “[I]t’s well beyond chutzpah.”

At the same time, Democrats are committed to raising hundreds of billions in new revenue to reduce the deficit and offset other spending during the next 10 years by closing tax-code loopholes. House Speaker John Boehner, R-Ohio, has repeatedly pledged to block the measure, after having accepted a rate increase on household incomes above $450,000 at the start of the year as part of the fiscal cliff deal.

For anything to become real policy, it must receive approval from all sides. “So what if you can pass a budget out of your own chamber? That’s no big deal. The trick is to be able to pass a budget out of Congress – a joint-budget resolution,” said Robert Bixby, executive director of the fiscal watchdog organization, The Concord Coalition. “It’s the best hope to get some kind of grand bargain.”

Even then, the budget would merely set overall spending and revenue targets. “It does not provide funding for federal programs or change tax law,” Robert Sunshine, deputy director of the Congressional Budget Office, blogged on Monday.

Ryan has pretty much acknowledged that his blueprint will never get to the construction stage. The Wisconsin congressman plans to trim federal outlays by $4.6 trillion over the next decade. He claims in a Tuesday editorial for The Wall Street Journal that spending would grow more slowly than the economy, reducing the publicly held national debt to half of Gross Domestic Product from more than 70 percent of GDP.

Repealing Obamacare might rally his caucus and conservative groups such as the Club for Growth, but the chances of the president killing his own landmark bill to help Ryan’s math work are nil.

“Well, that's not going to happen,” Fox News Sunday host Chris Wallace said bluntly when Ryan unpacked his proposal this past weekend in an interview.

“Well, we believe it should,” Ryan answered, somewhat sheepishly. “That's the point. That's what's – but this is what budgeting is all about … It's about making tough choices to fix our country's problems.”

The GOP’s 10-year timeframe did benefit from the tax rate increase in the fiscal cliff deal – which both Ryan and Boehner supported despite its rejection by the majority of their caucus. The tax hike added more than $600 billion to the bottom line, making it easier to theoretically balance the budget.

But what Ryan is proposing on spending reductions is somewhat misleading. He just wants to tweak the rate of spending growth. Instead of expenditures increasing at a 4.9 percent annual clip over the next decade, the average would be 3.4 percent. “That gets us on a path to balance, and results in about a $5 trillion spending cut,” said Ryan, stressing that his budget would not be composed of absolute cuts.

This is a gross over-simplification. These cuts would preserve and expand some programs, meaning that other unspecified spending would actually bear the brunt of absolute reductions. Making these kinds of hard choices – no matter how they are cloaked – is why tackling the country’s $16.4 trillion national debt is so difficult.

Ryan refuses to change Medicare benefits for Americans who are currently older than 55, despite recent speculation that he might do that to achieve more savings. So the meaningful deficit savings would accrue after the 2023 timeframe. The reasons for this policy are largely political, since some Republican lawmakers worry that a shift to voucher-style (or premium support) Medicare coverage for anyone older than 55 would upset the party’s voting bloc.

Mandatory spending, which includes Medicare, Medicaid, and other entitlements, will grow, on average, at 5.6 percent over the next decade, according to the Congressional Budget Office. Most of the cuts will come from discretionary spending – which the CBO estimates will average a 1.6 percent increase over the next 10 years, slightly below inflation.

This is before Ryan applies the cuts to be contained in his budget – which, factored in for inflation, would likely amount to an absolute reduction for many programs that lawmakers might rather protect.

“In reality, we have never had spending that low on this category of programs, and it’s unlikely to be the case that Congresses 10 years from now will agree on that level of spending,” said Linden at the Center for American Progress.

The Concord Coalition’s Bixby summarized the proposal this way: “It may turn out to be fictional savings.”