Policy: Budgets & Deficits

Paul Ryan doesn't rock the boat with 2015 budget

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Beltway Confidential,Opinion,Congress,Philip Klein,Taxes,Paul Ryan,House Budget Committee,Entitlements,Budgets and Deficits,CBO

Throughout his political career, House Budget Committee Chairman Rep. Paul Ryan, R-Wis., has alternated between being the Republican Party's courageous idea man and serving as one of its loyal soldiers.

With Republicans feeling optimistic about their prospects going into November's midterm elections, his latest budget proposal, unveiled Tuesday morning, recalls the character of Nicely-Nicely Johnson from the musical “Guys and Dolls” -- a gambler who learned not to rock the boat.

Ryan faced several obstacles in crafting his fiscal 2015 budget proposal. In the year since he produced his last budget, the Congressional Budget Office slashed its economic forecasts, making it much more difficult for Ryan to produce a plan that balanced within a 10-year window, a demand of many conservatives.

To meet that goal and emphasize the party's commitment to putting the nation's debt on a sustainable path, he had to stick by his old entitlement reform proposals and the repeal of President Obama's health care law. But at the same time, he didn't want to reveal any significant new proposals that would give Democrats fresh material to use against Republicans in the fall elections.

The end result is a budget proposal that by in large resembles his plan from last year, only it has to rely on a different accounting technique to claim balance over the next decade.

Overall, Ryan's proposal would reduce deficits by $5.9 trillion from 2015 through 2024 relative to CBO projections. But unlike Obama's budget, Ryan doesn't claim as savings money that isn't being spent on Iraq and Afghanistan under the assumption that the wars would otherwise be fought in perpetuity. Adjusting for that, Ryan's budget reduces deficits by $5.1 trillion.

But again, this is just relative to what CBO estimates would happen if there were no policy changes. Cumulatively, the Ryan proposal still runs deficits of $2 trillion over 10 years, though the annual deficits narrow over the course of the decade.

In a move that’s likely to generate the most controversy of his budget, Ryan’s proposal only achieves balance by employing dynamic scoring — a type of analysis that takes into account the economic benefits of policy proposals when calculating budgetary effects. This is something that conservatives have long called for, especially when it comes to assessing the effect of tax cuts.

In 2024, the last year of the projection period, the proposal would still run a deficit of $69 billion under standard, or static, analysis. But taking into account the expected economic benefits from the proposal, calculated based on other analyses by the CBO, Ryan’s budget gets balanced. In fact, it actually produces a tiny surplus of $5 billion for that year.

From a policy standpoint, there wasn't anything particularly surprising to those familiar with previous Ryan proposals.

As with past budgets, Ryan would slowly transition into a new Medicare system. For current seniors, Medicare would remain the same. But starting in 2024, new retirees would be given the option of either sticking with traditional Medicare or choosing among competing private plans with guaranteed benefits on an exchange. After that point, the retirement age would also gradually increase.

On Medicaid, Ryan again proposes a system that would block grant money to states, giving their lawmakers more flexibility over how to save money in implementing the programs.

Ryan's budget would also make a number of other reforms, such as reaffirming the work requirements in social safety net programs, block granting the food stamp program, better tailoring Pell Grants to students with the greatest financial needs and cutting back on alternative energy subsidies.

He also envisions a greater commitment to the military than Obama’s budget.

In addition, Ryan's budget would repeal Obamacare, and with it, the expansion of Medicaid and the insurance subsidies for individuals to purchase insurance.

Taken together, of the $5.1 trillion of claimed deficit reduction in Ryan’s budget, about $2.1 trillion comes from repealing Obamacare; $732 billion comes from reforming Medicaid and other health programs; and $129 billion comes from smaller near-term Medicare reforms, such as charging wealthier beneficiaries more for their coverage. The remaining savings come from changes to other government programs and lower-than-expected interest payments as a result of the reduced debt.

In fairness to Ryan, it could be argued that his budget proposal only seems routine now because of his successes in getting Republicans to adopt the most significant Medicare reforms they ever have. In contrast, Obama’s budget doesn’t attempt to seriously overhaul entitlements, and the Democratic Senate will not even be releasing a budget at all this year.

But at the same time, Ryan leaves a lot of policy details out.

For instance, though he backs the repeal of Obamacare, he doesn’t say what Republicans would replace it with, writing: “This budget recommends repealing the architecture of this new law, which puts health-care decisions into the hands of bureaucrats, and instead allowing Congress to pursue patient-centered health-care reforms that actually bring down the cost of care by empowering consumers.”

Ryan's budget does not address Social Security, one of the major contributors to the nation's long-term debt problems. Instead, he proposes a procedure under which the president would be required to submit a reform plan to Congress for making the program solvent. After that, the relevant congressional committees would have to send bills to the floors of the House and Senate for consideration on an expedited basis.

On the tax side, Ryan embraces the idea of a simpler, pro-growth tax code with fewer deductions and loopholes and lower rates, but stops short of endorsing a specific plan.

In February, House Ways and Means Committee Chairman Rep. David Camp, R-Mich., released a detailed overhaul of the tax code after years of work. Ryan didn't integrate the plan into his budget, but simply highlighted the Camp proposal along with others as an example of revenue-neutral tax simplification. Since unveiling the proposal, Camp announced his intention to retire from Congress, and Ryan is seen as a possible -- if not likely -- replacement at the Ways and Means committee.

If Ryan does emerge as the committee’s chairman, where he would have jurisdiction over the tax code, Social Security and many elements of the health care system, he could return to more ambitious and detailed policymaking. But for now, he seems content to avoid rocking the boat and to deprive Democrats of new lines of attack during an election year.

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