Ryan Reprise: House Budget Committee Chairman Releases New Budget

This morning, House Budget Committee chairman Paul Ryan (R-WI) presented the House Republican budget, one that is similar to last year's budget resolution but contains some key differences. In an op-ed in the Wall Street Journal, Rep. Ryan billed his plan as "reforming and modernizing government to prevent an explosion of debt from crippling our nation and robbing our children of their future." In a press release today, CRFB agreed that in terms of overall fiscal impact, it was "an impressive achivement."

Overall, according to the budget, debt as a percent of GDP would fall to 62 percent of GDP in 2022 (compared to 85 percent in the CRFB Realistic baseline). Spending would come down to 20 percent of GDP in that year, while revenue would remain on its current (2001/2003 tax cuts-extended) path at 18.7 percent of GDP.


The most visible and controversial component of last year's budget -- turning Medicare into a premium support system--returns in an altered form. As expected, the plan is more similar to the Ryan-Wyden or Coburn-Burr premium support proposals than last year's plan. In this budget, traditional Medicare is kept as an option to compete with private plans and Medicare spending per beneficiary growth is held to GDP plus 0.5 percent instead of inflation. Also, the start date is pushed back to 2023 to ensure that people over age 55 would not be affected. In the op-ed, Rep. Ryan contrasts his plan with the Independent Payment Advisory Board, the 15-member board that is charged with making recommendations to hold Medicare spending growth to GDP plus one percent -- a board that the House (and the budget) is looking to repeal.

Fiscal Parameters in the Ryan Budget (Billions)
  2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013-2022
Spending $3,624 $3,530 $3,476 $3,536 $3,690 $3,824 $3,977 $4,199 $4,409 $4,605 $4,888 $40,135
Revenue $2,444 $2,734 $2,980 $3,232 $3,449 $3,642 $3,811 $3,986 $4,184 $4,388 $4,601 $37,008
Deficits $1,180 $797 $496 $304 $241 $182 $166 $213 $225 $217 $187 $3,127
Debt (% GDP) 73.2% 77.0% 77.6% 75.3% 72.7% 70.4% 68.4% 66.7% 65.1% 63.5% 62.3% N/A

One intriguing part of the budget was speculation about what level they would set for discretionary spending and how they would deal with the sequester. On the second question, they would replace one year of the sequester ($78 billion) with reconciliation instructions to the committees to save $260 billion over ten years. On the first question, they would replace the BCA caps with new caps that would have lower spending levels.

On tax reform, the budget reduces tax rates to 10 and 25 percent, down from the six brackets with a top rate of 35 percent today. The plan would also repeal the AMT, reduce the corporate tax rate from 35 to 25 percent, and switch to a territorial system. Although the document states that the reform plan would be revenue-neutral, no specific base-broadening measures have been named; at first look, it would seem that reform with these parameters would require eliminating virtually all tax expenditures.

In terms of other spending measures, the budget would block grant Medicaid, SNAP (food stamps), and other low-income programs and limit their growth. Also, it would enact medical malpractice reform, increase Medicare Part B and D premiums for high earners, reduce and reform Pell Grants, consolidate the many job training programs that currently exist, privatize Fannie Mae and Freddie Mac, reduce farm subsidies, reduce federal workforce costs, and repeal the Dodd-Frank Act. The budget repeals the Affordable Care Act's coverage provisions, but it keeps the Medicare cuts (besides IPAB) and appears to keep the tax increases as well.

CBO's report on the long-term impact of Rep. Ryan's proposal--which essentially takes the spending and revenue levels that he and his staff have specified--shows that his plan would halt spending growth, especially in health care programs, and it would put debt on a path to be paid off around 2050. Revenue would be capped at 19 percent of GDP while spending would be projected to fall to about 15.5 percent by mid-century.

Although the plan contains many constructive proposals, it also appears to contain some gimmicks or magic asterisks. First, it looks as if it would repeal the sequester for only one year, leaving it in place for the remaining years despite their intention to repeal it entirely. Second, it either assumes no doc fix (which would result in a Medicare physician payments by 27 percent at the end of the year) or assumes it is offset. Adding in the rest of the sequester repeal and the doc fix would add (including interest) about $1.4 trillion to ten-year deficits.

Adjustments to the Numbers in the Ryan Budget (billions)
  2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013-2022
Old Deficits $797 $496 $304 $241 $182 $166 $213 $225 $217 $287 $3,127
Sequester $21 $72 $93 $101 $104 $106 $105 $105 $105 $94 $904
Doc Fix $11 $18 $21 $24 $26 $28 $31 $34 $37 $41 $271
Interest $0 $2 $4 $8 $14 $21 $29 $37 $45 $53 $214
New Deficits $828 $588 $422 $375 $327 $321 $378 $401 $404 $475 $4,520
Old Debt (% GDP) 77.0% 77.6% 75.3% 72.7% 70.4% 68.4% 66.7% 65.1% 63.5% 62.3% N/A
New Debt (% GDP) 77.2% 78.3% 76.6% 74.7% 73.0% 71.6% 70.6% 69.6% 68.6% 68.0% N/A

As with last year's budget, Chairman Ryan deserves a lot of credit for his proposals to get spending under control over the long-term. Even taking out any claimed savings from no doc fixes and leaving in the sequester, the House Republican budget still looks better than most other prominent plans out there by putting debt on a clear downward path -- a very encouraging element of the plan.