Should The Revenue Assumptions In Ryan’s Budget Be Trusted?

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"Should The Revenue Assumptions In Ryan’s Budget Be Trusted?"

During a speech at the American Enterprise Institute yesterday, House Budget Committee Chairman Paul Ryan (R-WI) said that his budget — which was released yesterday — “reduces the debt as a percentage of the economy, and puts the nation on a path to actually pay off our national debt.” But does it?

According to the official score from the non-partisan Congressional Budget Office, the House Republican budget does significantly reduce the national debt, eventually (though it increases the debt in the short-term, because the health care cuts it would implement phase in slowly, while the giant tax cuts for the rich it includes would take effect immediately). But the CBO only shows this result because it is assuming that the government will raise 19 percent of gross domestic product (GDP) in revenue.

Why is the CBO assuming that? Because Ryan’s staff told it to, without indicating how that revenue would actually be raised:

The path for revenues as a percentage of GDP was specified by Chairman Ryan’s staff. The path rises steadily from about 15 percent of GDP in 2010 to 19 percent in 2028 and remains at that level thereafter. There were no specifications of particular revenue provisions that would generate that path.

If you tell the CBO to assume a certain amount of revenue will be raised, it does, even if that revenue is wildly optimistic. Ryan did the same thing when he had the CBO score his Roadmap For America’s Future. He told the CBO to assume that the plan would raise 19 percent of GDP in revenue, and the CBO based the rest of its numbers on that assumption. But when the Tax Policy Center ran the numbers, it found the Roadmap would raise far less than Ryan said it would:

Assuming taxpayers choose their preferred tax system, revenue would average 16.1 percent of GDP between fiscal years 2011 and 2015, rising to 16.6 percent by 2020, compared with 20.2 percent under CBO’s January 2010 baseline. The fall in revenue would result primarily from the lower individual income tax rates and the exemption of capital income.

Without the level of revenue specified, Ryan’s Roadmap wouldn’t set the country on a path to reducing the debt, with debt growing to 175 percent of GDP. Are the revenue assumptions for Ryan’s 2012 budget any better? If they’re not — and we have no reason to believe they are, given Ryan’s previous performance — the radical cuts that Ryan has in mind will fail to reduce the country’s debt.

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