Was the CBO too kind to Paul Ryan's budget?
Howard Gleckman thinks people -- myself included -- are overstating the CBO's score of Ryan's budget plan.
All this confusion is due to a letter written on Jan. 27 from CBO director Doug Elmendorf to Ryan. In that 50-page document, CBO suggests the plan could eliminate the deficit in 50 years and, even more impressively, eliminate the debt by 2080.
But, and this caveat is a whopper, CBO assumed this wonderful outcome would occur only if the revenue portion of Ryan’s plan generated 19 percent of GDP in taxes. And there is not the slightest evidence that would happen. Even though Ryan’s plan has a detailed tax component, his staff asked CBO to ignore it. Rather than estimate the true revenue effects of the Ryan plan, CBO simply assumed, as the lawmaker requested, that it would generate revenues of 19 percent of GDP.
I took that disclaimer a bit differently: If revenues could be held at a fairly low percentage of GDP, then this is what the plan would do. It would be pretty easy, as a policy matter, to keep revenues around 19 percent of GDP, so I didn't give this too much thought. But Gleckman is certainly right that the Ryan plan, as written, may not hold revenues there. Fred Thompson apparently released a similar plan during the campaign and the Tax Policy Center estimated that it reduced revenues by $6 to $8 trillion over 10 years, which suggests that the impact over the many decades the Ryan plan covers could be huge.
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