Editorial: Paul Ryan’s Budget an Exercise in Fraud, Ignorance
MILWAUKEE, WI (The MPJ) — Much like Rep. Paul Ryan (R-Wisconsin), I am also a product of Wisconsin’s public school system. To make an even more direct comparison, I’m a product of public schools along Wisconsin’s border with Illinois. Janesville, where Ryan was born and raised, is an hour and forty-five minutes straight west of my hometown of Racine. Ultimately, the similarity of the schools we went to, apparently, explains why we’re both bad at math.
But there’s a difference. I know I’m bad at math. Rep. Ryan clearly doesn’t. As a result, I became a journalist, where my balanced-out skill in writing and voicing is used, instead of becoming something like an insurance actuary or a scientist of any sort. Rep. Ryan…became the Chairman of the House Budget Committee. Apparently my ambitions were completely misguided.
But, more seriously, Rep. Ryan is not bad at math. He knows how to add things up, how to use simple formulas to work out seemingly complex mathematical problems. He’s better at math than me, and I’m willing to wager he’s better at math than most of you. And that’s what makes my writing of this editorial about the guy who represents my hometown all the more painful.
He’s not publishing his “Path to Prosperity” because he doesn’t know any better. He knows exactly what he’s doing. And that transforms his intentions from ignorance to malevolence. Let me explain this to you, using information from (non-partisan) people who are good at math, so you guys can spend less time fiddling around with your calculators reading this.
Paul Ryan’s “Path to Prosperity” contains three fatal errors.
- “The Path to Prosperity” report uses misleading, and outright wrong information to bolster flawed arguments.
- “The Path to Prosperity” ignores how budgets work.
- “The Path to Prosperity” ignores the reality of how Congress works…and doesn’t work.
1. “The Path to Prosperity” report uses misleading, and outright wrong information to bolster flawed arguments.
As I read through the report, I noticed a few things that set alarms off in my head. Specifically, the graphs included in the report (especially as they relate to taxes) are so misleading (or incorrect), I would have been fired, as a journalist, had I used the same ones in a report. No, I’m not being hyperbolic. I would have been canned. Take this little gem on your left. You can find this on Page 60 of Ryan’s report.
It’s a comparison of historic top tax rates versus tax revenues received. Look! They haven’t changed at all!
But look a little closer. This graph isn’t comparing “apples and oranges,” but, more accurately, is comparing “apples and Volkswagens.”
Then, next to this graph, the report says the following:
“The biggest driver of revenue to the federal government isn’t higher rates — it’s economic growth. Growth is the key to fiscal sustainability — and low rates are the key to growth.”
Well, to start, yes, economic growth is the key to having a positive balance sheet for any government. I absolutely agree with that. But low rates are the key to growth? Where does this even come from? To be fair, I know exactly what flawed theory this comes from. Supply-side economics has been a staple of Republican economic policy since the mid 1970s. It’s based around the ridiculous notion of the “Laffer Curve,” where taxes can be raised up to an “ideal” limit, and anything above that limit will stunt economic growth (and reduce tax receipts).
But the top marginal tax rate is such a small factor in the equation (here we are at that math stuff again), that there’s no way for this one tiny indicator to have a “good” correlation with tax revenues.
And then Rep. Ryan continues to mislead on Page 63 with another chart I would have gotten fired for had I tried to publish it. It’s the one to your right.
Pay close attention to two things. One, the shape of the chart leading up to the year 2012, and then the shape of the chart afterwards. Two, the fact that the chart projects out to the year 2077, 65 years from today.
Are you meaning to tell us, Rep. Ryan, that we know spending is going to remain on a steep, positive slope for the next 65 years. And even ignoring that, are you meaning to tell us that tax revenues (as a share of GDP) are going to remain perfectly flat for the next 65 years?
Of course this is nonsense. Tax rates will change (one way or the other) over the next 65 years, and spending policies (and priorities) will also change over the next 65 years. I would also contend that both of those variables will change significantly over that time.
But even taking the chart at face value, look at the final figure. Rep. Ryan’s chart projects that 80% of GDP in the year 2077 will be government spending. That’s eight of every ten dollars exchanged in the United States of America will be government dollars. This is patently ridiculous. And here’s some perspective to explain why that is.
In 1990, the USSR’s government expenditures made up 19.2% of that nation’s GDP (that’s $510B in expenses compared to a GDP of $2.66T).
2. “The Path to Prosperity” ignores how budgets work.
But, even at that, if Rep. Ryan wants to reduce tax rates, well…to what level? Americans already have the lowest tax burden among members of the Organization of Economic Cooperation and Development according to New York Times economist (and founder of the non-partisan Tax Policy Center) Bruce Bartlett.
It’s that same Tax Policy Center that ran the numbers of Rep. Ryan’s budget. Ryan proposes reducing tax rates to only two brackets, one that pays 10 percent, and one that pays 25 percent. I can’t, for the life of me, find where in the report he states what the cut-offs for those two brackets are, but apparently the Tax Policy Center has.
Let me sum up what the Tax Policy Center ultimately found. If Rep. Ryan’s tax policies were passed, the US Treasury would lose $4.6 trillion over the next ten years compared to what tax rates are today. If we compared revenues to what they would be if the Bush tax cuts expired, the Treasury would lose $10 trillion.
But never fear! Rep. Ryan would “broaden the tax base to maintain revenue…consistent with historical norms of 18 or 19 percent.” To be clear, we’re hovering between 14 and 15 percent at this point in time. So for Rep. Ryan to get to where he says he wants to be, he would need to find that $4.6 trillion he’s cutting, plus an additional $1.6 trillion to get us to that 18-19 percent range. That’s a total of $6.2 trillion.
And as the non-partisan Brookings Institution states, the “devil is in the details.” The most important detail to pay attention to in Ryan’s plan…there are no details.
As Brookings goes on to explain, the Ryan Plan is so vague, it’s impossible to be scored by the non-partisan Congressional Budget Office. That’s the office that determines what kind of fiscal impact a piece of legislation will have on the budget. But the CBO did give a relatively positive review to the Ryan Plan. But how?
Rep. Ryan instructed the CBO to score his proposal assuming it would achieve its stated goals and revenues. Usually, the CBO determines whether or not a piece of legislation would achieve its goals. But since there’s not enough of a proposal to score, Ryan just said “assume everything works to plan” and then told the CBO to have at it. And that leads us to the final, fatal flaw in the Ryan Plan.
3. “The Path to Prosperity” ignores the reality of how Congress works…and doesn’t work.
How does Ryan propose to make these cuts? Pass the buck. Let the House Ways and Means Committee hash it out.
In order to make the Ryan Plan work, the House Ways and Means Committee would have to find an additional $19 billion in budget cuts over the coming ten years. That’s even more cuts than were agreed to during the debate over the debt ceiling debacle last summer.
Paul Ryan, the budget whiz kid that everyone says is the only member of Congress willing to be “serious” about the budget, so serious as to propose “specifics,” could have outlined the cuts he would propose. But he didn’t.
Without those proposals, this budget plan isn’t worth the paper it’s printed on.
And if Rep. Ryan thinks he’s going to get those $19 billion in cuts through both houses of Congress, and past the President’s veto pen, he’s out of his mind. And if he thinks he’s going to get the kind of draconian, and paradigm-changing cuts to Medicare, Medicaid, and Social Security though, it’s time Rep. Ryan has his head examined…by an actual, licensed neurologist. Something isn’t working in that head of his.
In the end…
All of the above critiques ignore the seriously short-sighted proposals that make up the machinations of the Ryan Plan.
- The Ryan Plan replaces Medicare with a voucher system for insurance premium support (though this time, future retirees could opt for traditional Medicare, though it would have far fewer dollars for them). This is an unconscionably bad idea, especially considering the reason Medicare was created in the 1960s in the first place. The insurance industry wants nothing to do with elderly health coverage, so they price their plans accordingly. The end result, fewer Americans with coverage, and those that have it will be paying more for it.
- The Ryan Plan shifts the burden of Medicaid from the federal budget to the various state budgets. The states would do with the program what they will, and ultimately, this will end up costing taxpayers more (since the program will still exist) while they receive less (since the states will have to gut the program in order to keep up with health care costs). It’s a shell game. And only the shell-mover wins.
- The Ryan Plan cuts all non-military discretionary spending in half, and doesn’t adjust for inflation. The method behind this is to either eliminate or consolidate programs (though, again, he refuses to say which ones or how).
- The Ryan Plan still increases military spending. If all cards are on the table, as Rep. Ryan tries to insinuate…where is the Pentagon card? The Washington Post‘s investigative efforts found the Department of Defense is so large, and so unwieldy, that it’s impossible to determine its effectiveness. This isn’t a problem, Rep. Ryan?
- The Ryan Plan proposes cutting the corporate tax rate from 35% to 25%, and changing it to a territorial system (which would only tax profits made in America, and not overseas). While I agree our corporate tax system needs to be reexamined for both fairness and competitiveness, just slashing and burning it isn’t the answer.
- The Ryan Plan, even if it works exactly as desired, would still require 30 years to balance the budget. Yes, this requires a HUGE batch of baseless assumptions, but 30 years is the best-case scenario for this proposal. The biggest reasons are that it devastates government spending (which, as we’ve seen in Europe, will prolong the current economic stagnation we’re in, and cause long-term damage to our economic performance) and slashes government revenues (which means we’re digging a bigger hole before we start trying to climb out of it).
- Finally…the Ryan Plan isn’t even “good enough” for the most conservative of Republicans. Those Republicans (including the Heritage Foundation, the fraud tank that many of Ryan’s numbers come from) want the budget balanced in ten years, using the same slash-and-burn parameters. If Ryan can’t even get buy-in from people who generally agree with him, where does he plan to get the votes to make all this happen?
So, to wrap things up, Rep. Paul Ryan’s “Path to Prosperity” is neither a path, nor a means to prosperity. It’s a fraud, just like all his other budget proposals have been. Even worse, it’s a waste of time and taxpayer money.
And since he keeps coming up with nonsense like this, you’d think he would be out of a job come November. Sadly, I have a feeling my fellow cheeseheads will re-elect Paul Ryan. Part of this is because his main Democratic challenger, Kenosha County (WI) Supervisor Rob Zerban isn’t a serious-enough challenger. Yes, he had a nice AMA on Reddit, and has put up a goofy site called www.handsoffmygrandma.com. But he just isn’t hitting enough buttons to unseat the heavy hitter that is Paul Ryan. Zerban is certainly not getting the money needed to defeat Ryan’s $4.6 million warchest, by far the biggest in the state.
And that’s unfortunate. Paul Ryan has been wasting the time and money of Wisconsinites for far too long.
I’m not very impressed with Ryan’s plan either, but I find your analysis and facts a bit lacking in a couple spots. You seem to deride Ryan’s prediction for the next 65 years as ludicrous. Ryan’s prediction for the next 65 years isn’t meant to be what he thinks will happen, it’s what he’s saying will happen if we make no changes to the system as it stands right now, which are two very different things. I doubt he thinks we’ll actually reach 80% of GDP in government spending, since we’ll have to do something before then… which is kind of his whole point, isn’t it? He’s trying to point out how bad things would get if we didn’t change anything and advocating that we start making changes (albeit, some of the proposed changes are dumb) now. As for the facts, under the Ryan plan The House Ways and Means Committee would not have to find an additional $19 billion over the next 10 years. They would need to find an additional $19 trillion to balance the budget.
My issue with the graphs is not that they accurately reflect what Ryan thinks what will happen, but that they are entirely misleading (and highly inaccurate). In the text describing the second graph shown above, Ryan criticizes the current trajectory for bringing both spending AND revenue to historic levels (the current historic high for spending vs. GDP was just shy of 55% during WWII).
First, the graph itself shows revenue levels wouldn’t even be at record levels (they overtook his projection at 21% of GDP around 1998). Second, projecting a simple-function positive slope as the future of spending to an 80% of GDP level is simply theater of the absurd. Third, it contradicts his own central tenet, that current spending and taxing rates will kill economic performance (thus negatively affecting GDP), which would completely change the slopes of those functions.
Ultimately, it looks like Ryan took a wooden ruler, lined it up against the last levels the CBO calculated, and drew straight lines from there. It’s ridiculous. And, as I said in the original article, it would get me fired, as a journalist, if I presented them in the same way Ryan does.
As for the $19 billion, no, that’s a correct figure. The Ryan Plan proposes cutting an additional $19 billion from future non-defense, discretionary spending beyond what was already agreed to in the debt-ceiling negotiations. This clearly won’t balance the budget in and of itself, nor is it meant to. The timeline for budget-balancing, by Ryan’s own report, is 30 years. And that factors in his growth targets (which he can’t account for), an ultimate 50% reduction in non-defense, discretionary spending levels (not being given an adjustment for inflation), and cuts to entitlement programs like Medicaid, Medicare, and Social Security.
The last bit would have to take place beyond the 10-year horizon due to promises being made by Republicans to not touch either Medicare or Social Security for those currently 55 and older.