Defense spending – Ryan has proposed that defense spending increase over the currently planned levels – that should come as no surprise. But the increases don’t appear to be very large, if you don’t include the cuts that could be forced on the Defense Department in the sequestration process that was part of the 2011 budget deal. His budget proposal does include full restoration of that money, but overall it says nothing about defense cuts, only talking about general needs.
He clearly favors high defense spending though - when Pentagon representatives testified before the House earlier this year, he essentially said that they were being untruthful about how much defense spending was needed (his exact quotes are here, along with scores of other places). His budget plans to cut discretionary spending (including defense) from 12.5% of GDP today down to 5.75% in 2030 and 3.75% in 2050. Defense spending has not been below 3.7% since the end of World War II, and Romney has said that defense spending should be at least 4% of GDP going forward. I am hesitant to peg defense spending to GDP rather than to the risks we face, but others, I’m sure, will disagree.
Social Security – Ryan’s most recent budget plan does not mention Social Security, so it is difficult to say just what might occur in a Romney/Ryan administration. For clues we can turn to his previous plan, which did deal with changes in Social Security. That plan allowed participants to divert up to 40% of their payroll taxes into separate private accounts, which would be guaranteed not to decline in value below the total of contributions (adjusted for inflation) and could be passed on to heirs. Payments from the currently-existing program (for contributions not diverted to private accounts) would be reduced for those below 55, but the exact amount of reduction is not specified.
Since Social Security is designed to be a “pay-as-you-go” system, this introduces two difficulties that I can identify and maybe more that smarter people can add. The first problem is that up to 40% of the revenue would disappear from the current system once the plan is implemented, but the expenses (mainly Social Security payments to retirees) would continue, creating a very significant shortfall. Also, one feature of the current system is that payments made by individuals who die before collecting benefits, or shortly after benefits start, effectively provide a subsidy that helps keep the system afloat. With private accounts that can be passed on to heirs, this feature would be lessened and the funding shortfall amplified.
Another part of a previous Ryan plan was to institute a “fast-track” process for making further cuts (or, presumably, revenue increases, but I doubt that would be his preferred approach) if the plan is not in balance over a forecast period of 75 years. Given what is noted above, and that 75-year forecasts can be rather unreliable, further unspecified benefit cuts would be likely.
Everything else – This is where most of the spending cuts come in. Identified cuts include 16% for income programs for the poor, 25% for transportation, 13% for veteran programs, 6% for science and technology, and 33% for education, training, employment and social services. Mortgage programs through Fannie Mae and Freddie Mac would over time be eliminated as government programs. Food stamps and other income programs would become block grant programs, with eligibility and payment levels determined by each state.
Some cuts have been specified, but a very large portion ($897 billion for 2013 alone) is buried in a catch-all category that’s usually made up only of expenditures that don’t easily fit into the other defined categories, along with being a placeholder for items not yet allocated to one of those other categories. It’s usually fairly small. It’s called Function 920, for the true budget wonks out there. So, there is $897 billion of cuts that have not been specified in any way. Democrats have said that this allows Ryan to downplay spending cuts by focusing only on the cuts that have been identified, while never mentioning the $897 billion of cuts that haven’t been allocated yet.
I mentioned above that discretionary spending is said to decline to 3.75% of GDP, and that that figure includes military spending. With military spending taking up pretty much the entire total, that leaves precious little for anything else. Spending on non-defense discretionary programs would drop practically to zero, if this provision were enforced. Included in that category are air traffic control, disease control, agricultural programs, law enforcement (such as the FBI), education, infrastructure spending, the Federal judicial system, veteran programs and hospitals, environmental regulation, financial regulation, food safety, National Parks, the National Weather Service (no new weather satellites), public broadcasting, disaster relief, and even Congressional and staff salaries (I have a hard time seeing Congress zeroing out that last line item).
Deficit – The budget would be in deficit for some time, according to the CBO, not coming into balance until 2040. It’s not like anyone else’s budget plan does any better, given the CBO’s analysis rules, but the talk about how the Ryan plan “balances the budget” needs to include that tidbit.
Final assessment – after finishing this review, I can’t help but conclude that the word “budget” is inaccurate. Too much is left out of it to qualify as a budget, and the document itself spends much of its time with statements such as that the health care bill passed in 2010 is a “government takeover” of health care which would include the infamous "death panels" (though that exact term isn't used), that the Obama administration’s budget proposals are “filled with gimmicks instead of real solutions”, that the President’s strategy appears to be to “let someone else propose a path forward, and then attack them for political gain”, that Obama “has chosen to subordinate national security strategy to his other spending priorities”, and that his (Ryan’s) budget will spur economic growth so much that the unemployment rate will be at 2.8% by 2021. Those are in just the first few pages – there’s an abundance of accusations and unsupported assertions in the document, as is the case in any political document but not generally in budgets. There is also a chart that shows how without this plan the Federal deficit will eventually amount to more than 60% of GDP, which to my skeptical mind sounds patently absurd. In the end, it is a political statement of plans and priorities, but does not qualify as a budget. I, for one, am not enamored with the plans and priorities laid out. As explained above, they include or imply:
- Lower taxes for high-income individuals and families,
- Higher taxes for low-income individuals and families,
- Higher defense spending,
- Lower or eliminated social spending,
- Lower or eliminated spending on pretty much everything else,
- Refusal to outline tax deduction changes,
- Refusal to outline large spending cuts,
- Substantial reductions in programs for retirees (Medicare, Social Security), and
- A failure to balance the budget, the plan’s ostensible goal.
I started out on Burgundy but soon hit the harder stuff. Bob Dylan, Just Like Tom Thumb's Blues
How on earth did I get 9 QPs?