An in-depth look at Paul Ryan’s impossible budget proposal
Republican Paul Ryan rocketed back into the national spotlight after he was selected as Mitt Romney’s vice presidential nominee and subsequently gave a speech at the Republican National Convention. Ryan’s newfound position as one of the most important politicians in America has also attracted tons of media attention to the policy proposals that made him famous in the first place: his federal budget proposals.
Almost any policy analyst in America today would agree that the U.S. federal government is spending too much money. However, Paul Ryan’s 2013 budget proposal is not by any stretch of the imagination a sustainable way to balance the U.S. deficit in the long run.
The U.S. budget is split into three categories: mandatory spending, such as Social Security, Medicaid and the Department of Defense; interest on the national debt; and discretionary spending, a broad category that includes everything from research grants to foreign aid. Paul Ryan’s Path to Prosperity budget proposal plans to cut $6 trillion in spending over the next decade. Ryan’s plan leaves Medicare largely untouched for people enrolled before 2021 but does make significant cuts to Medicaid and the Child Health Insurance Program. The Ryan plan would convert Medicaid into a block-grant allocated to the states and ultimately cut spending on Medicaid by 40 percent by 2022. The most recent Ryan proposal does not touch Social Security.
However, the most worrisome aspect of the proposal is that $1.5 trillion of the cuts will come from non-defense discretionary spending. This means that if Ryan’s budget were passed, $1.5 trillion would have to be cut from programs making up only 15 percent of the total national budget over the next 10 years. This small 15 percent umbrella includes the FBI, the FDA, the National Institute for Health, the CDC, the Department of Education, NASA, the National Park Service, Housing and Urban Development, the Postal Service, all federal highway and infrastructure spending, and every single research grant the federal government awards. If Paul Ryan’s budget plan is enacted, many of these programs will cease to exist by 2020 because the funding simply will not be available.
The final tenet of Ryan’s Path to Prosperity budget proposal is that it does not raise taxes at all. The Ryan budget would extend the Bush-era tax cuts as well as cut an additional $4.5 trillion in taxes by reducing the corporate income tax from 35 percent to 25 percent and consolidating income taxes into two brackets. Ryan told Congress to assume that he would figure out how to pay for these cuts later.
However, to help pay for a $4.5 trillion reduction in net taxes, the government would literally have to cut every single deduction out of the tax code. That would mean no Child Tax Credit, no home mortgage interest deduction, no tax credits for charitable donations, no retirement savings contributions credits. Tax cuts like these are simply not compatible with a $6 trillion reduction in spending, no matter what way you look at it.
The Paul Ryan budget proposal does not make a lot of sense when analyzed from a financial standpoint. The proposal is strictly a political move. Paul Ryan can point at it and talk about how he’ll boost the economy by cutting taxes for hardworking Americans, reign in wasteful spending and protect the nation by not cutting the defense budget while everyone ignores the fact that it is literally impossible to do all three of these things at the same time. The current national budget is a wreck—everyone agrees. But until politicians stop using the annual budget proposal as an opportunity to bolster their campaigns by proposing absurdly impossible plans, nothing is going to change any time soon.