“At the request of the Chairman of the House Budget Committee, Congressman Paul Ryan, the Congressional Budget Office (CBO) has calculated the long-term budgetary impact of paths for federal revenues and spending specified by the Chairman and his staff. The calculations presented here represent CBO's assessment of how the specified paths would alter the trajectories of federal debt, revenues, spending, and economic output relative to the trajectories under two scenarios that CBO has analyzed previously. Those calculations do not represent a cost estimate for legislation or an analysis of the effects of any given policies. In particular, CBO has not considered whether the specified paths are consistent with the policy proposals or budget figures released today by Chairman Ryan as part of his proposed budget resolution.”
As pointed out by Ezra Klein, many of the assumptions underlying the paths specified by Paul Ryan and his staff are unrealistic. The story would be a lot different if CBO were told to conduct a real analysis.
Just consider taxes. He instructed CBO to assume revenues would stabilize at 19% of GDP in the long-run. But his plan includes numerous tax cuts specified in detail, to be offset by other revenue policy changes that he left unspecified. How realistic is it that he could actually achieve 19% while repealing the AMT, extending the Bush tax cuts, reducing the income tax rates to 10 and 25 percent, cutting the corporate rate to 25%, etc.?
First, those tax cuts he wants are actually very expensive…
“The Tax Policy Center (which I co-direct) analyzed the revenue policies as proposed by Rep. Ryan. We simulated the effects of repealing the AMT and reducing ordinary income tax rates to 10 and 25 percent. These proposals would cost about $3.2 trillion over ten years, on top of the $0.3 trillion lost from repealing taxes enacted to pay for Affordable Care Act, the $1.1 trillion lost from his desired reduction in the corporate tax rate, and the $5.4 trillion lost from first extending the Bush-Obama tax cuts (which he also supports). By 2022, the tax policies he has specified would lower federal revenues to just 15.8 percent of GDP. Talk about digging yourself a hole.”