Apr. 2, 2014

Choosing the Path to Prosperity

Paul Ryan issues his updated budget, and it features more growth potential than alternatives.

On Tuesday, Rep. Paul Ryan (R-WI) released his 2015 budget proposal, the latest version of his “Path to Prosperity.” The Senate, meanwhile, isn’t going to bother with a budget again this election year. But Senate Leader Harry Reid did take the opportunity to continue his crazy rant about the Koch brothers, calling Ryan’s plan “a blueprint for a modern Koch – how would we say this? Koch-topia. Yes, that’s it. K-O-C-H-T-O-P-I-A. Call it whatever you want.” Whether it’s anchored in reality or not.

Some conservatives have been disappointed with Ryan’s compromises, but he remains the GOP’s go-to guy on budget issues. And he will likely end up chairing the Ways and Means Committee since Chairman Dave Camp announced his retirement Monday. Camp’s last contribution was his February tax reform proposal.

Now, the details of Ryan’s budget. As with last year’s plan, he aims to balance the budget in 10 years in large part by reducing projected spending by $5.1 trillion. This time, however, Ryan wisely doesn’t count the “savings” of not fighting wars in Afghanistan and Iraq. In fact, Ryan moves $482 billion from domestic spending to defense, which would allow the Army and Navy to remain at current strength.

Ryan wants to make permanent the cap on discretionary spending enacted in the Budget Control Act of 2011 (the sequester), with the notable exception of defense. These cuts would save $800 billion over 10 years in lower interest payments alone. By 2024, he would have the federal government spending $1 trillion less than the president’s latest budget calls for. That’s still nearly $5 trillion for FY2024, so while he isn’t exactly proposing a bare-bones government, he’s proposing to reduce spending to a projected 18.4% of GDP – down from 20.2% currently. And his plan shrinks public debt from 73% of GDP to 56% in 10 years.

The Washington Examiner’s Philip Klein highlights other aspects of the plan: “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.” Ryan includes several health entitlement reforms too, such as putting Medicaid on a budget indexed to inflation and population growth, and moving Medicare (albeit too slowly) toward a premium support model.

His biggest reform: Repeal ObamaCare. As the Heritage Foundation notes, “The budget would save $792 billion over 10 years by repealing the costly Medicaid expansion and $1.2 billion over 10 years by repealing the subsidies and related [ObamaCare] exchange spending.”

Ryan reaches balance by using what’s known as dynamic scoring, or taking into account the economic effects of proposed policy changes. This is a far more accurate measure of taxation and spending – the very reason Democrats never use it. By reducing deficits and the overall drag of government on the economy, more wealth will be generated, leading to more federal tax revenue. The bad news is that, thanks to Obamanomics, the Congressional Budget Office has revised growth projections down to a woefully inadequate 2.5% through 2024. Ryan’s budget would improve that number, low bar though it is.

Overall, Ryan’s budget is an incremental improvement on his past proposals, not a seismic shift. But voters in November have a clear choice: The stagnation of the massive spending and higher taxes of Obamanomics or a Path to Prosperity.

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