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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.

By Ezra Klein  |  February 5, 2010; 1:36 PM ET
Categories:  Budget  
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Comments

The CBO has never been correct on any prediction involving any major policy proposal. It is useless.

Posted by: Lomillialor | February 5, 2010 1:55 PM | Report abuse

Paul Ryan's plan depends more on dynamic economic systems and markets behaving either (a) statically or (b) in entirely predictable ways that most of the budget proposals the CBO scores. It might work out, it might not, but the CBO scoring isn't much more than a series of wild guesses with charts and graphs.

"Now, this chart makes our outlandish claims of future savings look quasi-scientific."

Posted by: Kevin_Willis | February 5, 2010 2:03 PM | Report abuse

"Paul Ryan's plan depends more on dynamic economic systems"

No Paul Ryan's plans depends on old people not being able to afford health care or life with any dignity in retirement. It depends on eliminating the last shreds of the safety net for the elderly poor. It depends on allowing the richest 2% of the population continuing to hold 50% of the nation's wealth.

Posted by: srw3 | February 5, 2010 2:11 PM | Report abuse

Klein's interpretation seems closer to correct than do those offered by many others (the Tax Policy Center, Tax Foundation, etc.).

Each theoretically non-partisan corporate reviewer is obliged to adhere to its own mission. In the case of the Tax Policy Center (a portion of the Urban Institute corporation), its position must at all times "advocate Federalism" and extend the role of "nonprofit corporations in democratic society"; therefore, any policy which is anti-Federalist or limiting to the role of corporations in politics are given lower marks.

I respect the efforts of the Tax Policy Center, but also recognize that it has an agenda of its own (and, reasonably, uses this agenda as part of its own fund-raising efforts, which lead to payments of more than $200k per year to some 100 or so of its employees).

Posted by: rmgregory | February 5, 2010 2:12 PM | Report abuse

Ezra -

Please write a simialr column regarding the assumptions in the current healthcare bills that costs will only increase at 4% - it is a whopper!

Posted by: Holla26 | February 5, 2010 2:42 PM | Report abuse

Since the Tax Revenue as a percentage of GDP was sitting at 14.8% this last year and the assumed revenue is at 19% it seems that Rep Ryan has some tax increasing to do.

Even discounting for the fact that the tax revenues were dismal this year -- in the Great Recession; the tax revenues as pct of GDP were 16.1 and 16.2 in the first few years of the Bush tax cuts.

You were too kind. You should explicitly note that the revenues as percentage of GDP rate that Ryan 'assumes' is a rate that has not been met since the Bush tax cuts were enacted with great GOP support. All efforts to increase taxes to perhaps bring the rate back to historic norms have been met with cries of Republican anguish and universal opposition.

Posted by: grooft | February 5, 2010 3:48 PM | Report abuse

Having worked in health care for 30 years, we always laugh at any projection that extends beyond five years in this volatile market. Since a huge portion of our budget is health related, to project out to 2080 is laughable to say the least.

Although having said that, anyone can balance a budget with an ax.

Posted by: scott1959 | February 6, 2010 11:10 AM | Report abuse

Ryan's plan doesn't include funding for scraping up all the old dead people off the street dying from sickness and neglect and the cost of the cleanup from the Baby Boomer riots.

Also, you need to have a tax credit for republicans to repair their BWW and Lexus fenders from old people wandering the streets and bouncing off their cars while they drive to deposit their wealth into the bank.

There are lot's of things that need to be considered in the Ryan roadmap.

Posted by: jimjenson | February 6, 2010 6:07 PM | Report abuse

People like jimjenson and srw3 make me laugh. Ryan's proposal would provide $11K cash for seniors to buy their health insurance. Your preference is for a system that we can't afford. I know you believe in money fairies, that resources can be called down from the heavens by the great O and that they will magically appear.

I would recommend you try to find your talking points some place other than Daily Kos. It makes you look stupid.

Steve

Posted by: FatTriplet3 | February 8, 2010 11:04 AM | Report abuse

FatTriplet3,
Since the average cost of health care RIGHT NOW is $12 - 15,000 a year, and given the fact seniors are in more need of health care than other's, anyone can see this is a death panel by proxie. Per his plan, the value of the vouchers will go down on a yearly basis even as health care costs go up.
Did you not read the article? Ryan will have to raise taxes by 2-3% of GOP even with the much smaller amount of health care being provided.
Some people should be careful how they use the word stupid.

Posted by: LauraNo | February 10, 2010 9:44 AM | Report abuse

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