So Where Do the Savings Come From?

Yesterday, Congressman Paul Ryan released his budget proposal, which would bring the federal debt down to 67.5 percent of GDP by 2021, and significantly further thereafter.

Ideally, it is best to think about a proposal like this by looking at where takes future deficits and debt in absolute terms. However, it's also important to understand where the cuts come from, which means determining their magnitude relative to a "baseline".

Compared with current law, Congressman Ryan's budget would reduce deficits by $1.6 trillion over ten years. Compared to the President's Budget, it would reduce it by $4.4 trillion.

  Savings Compared to CBO Baseline
Savings Compared to President's Budget
Cut Non-Security Spending to FY 2006 Levels, Freeze, and Hold to Inflation
 $1,617  $923
Limit Growth in Security Spending and Assume $50 billion per year Plug for War Spending^ $830 $0
Block Grant Medicaid  $771  $735
Repeal Coverage Provisions and Tax Increases from PPACA $590 $590
Enact Medium-Term Medicare Savings
 $30  $18
Fully Extend 2001/2003 Tax Cuts*  -$3,820 -$812
Other Revenue Changes $0 -$415
Reduce and Block Grant Food Stamps $126 $129
Increase Contributions for Federal Retirement Program $123 $123
Reduce Agricultural Subsidies $28 $22
Other Mandatory Spending Policies $909 $1,734
Enact Doc Fixes -$298 $0
Interest Savings
$383  $885
Total Deficit Reduction $1,288 $3,932

Unspecified Offsets for Doc Fix and Transportation (Including Interest)

$361 -$499
Total Deficit Reduction, Including Unspecified Offsets
$1,649  $3,593

*Includes outlay effects from refundable portions of credits and deductions.
^Savings compared to CBO baseline largely reflect scheduled reductions in war spending, not deficit-reducing policies.

However you cut it, the largest savings in his plan come from reducing non-security discretionary spending, block granting Medicaid, and repealing the tax and coverage provisions of PPACA. Moving in the other direction, Congressman Ryan actually reduces revenues substantially relative to current law -- mainly by calling for the extension of all of the the 2001/2003/2010 tax cuts.

This is certainly a bold and honest way to bring the deficit under control. But getting bipartisan support will require putting defense and revenues on the table.