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Financial Planning > Tax Planning > Tax Reform

Paul Ryan’s Budget: Something for Everyone (to Criticize)

By Melanie Waddell

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Rep. Paul Ryan’s budget, released Tuesday, is a mixed bag, according to tax professionals and political pundits, with even conservative thinkers deriding its merits. As Cato Institute Scholar Michael Tanner recently opined: Ryan’s budget has “about as much chance of becoming law as Nancy Pelosi does of being elected pope.”

While Tanner shares some critical views of the Wisconsin Republican’s budget in a recent commentary for the National Review, he also opines that the Ryan budget “provides a view of Republican priorities and their vision for how to increase economic growth, reform entitlements and balance the budget. While timid and imperfect, Ryan’s plan shows that Republicans are at least looking in the right direction.”

Tanner’s colleague, Tad DeHaven, Cato’s budget analyst, is the most critical of Ryan’s plan, however, stating that “What makes the Ryan proposal aggravating is that it’s hardly a vision of limited government. The president promises big government and Ryan promises smaller big government.”

Robert Greenstein, president of the Center on Budget Policies and Priorities, says Ryan’s budget is “just as extreme” as the one he proposed last year. Says Greenstein: “Its cuts in programs for low-income and vulnerable Americans appear as massive as in last year’s budget, and its tax cuts for the wealthiest Americans could be larger than in last year’s.”

In addition, Greenstein says that “in critical ways [Ryan’s] budget is exceedingly vague—and, as a result, its claim to reach balance in ten years is hard to take seriously.”

The Ryan plan also “leaves unspecified hundreds of billions of dollars in budget cuts as well as the several trillion dollars of needed tax expenditure savings to pay for its proposed deep cuts in income tax rates,” Greestein says. “Thus, the budget’s fiscal claims rest on massive magic asterisks.”

Ryan unveiled the details of his plan in a Monday op-ed in the Wall Street Journal, stating that with America’s national debt weighing in at $16 trillion, “Washington can’t figure out how to cut $85 billion—or just 2% of the federal budget—without resorting to arbitrary, across-the-board cuts.” Clearly, he says, “the budget process is broken.”

He then criticizes President Barack Obama for missing his budget deadline, as well as Senate Democrats for not passing a budget in “over 1,400” days. “By refusing to tackle the drivers of the nation’s debt—or simply to write a budget—Washington lurches from crisis to crisis,” he said.

But House Republicans “have a plan to change course,” Ryan said. House Republicans propose to balance the budget in 10 years—without raising taxes, he said. “How do we do it? We stop spending money the government doesn’t have. Historically, Americans have paid a little less than one-fifth of their income in taxes to the federal government each year. But the government has spent more.” The House GOP budget, he continued, “matches spending with income.” Under the House GOP proposal, “the government spends no more than it collects in revenue—or 19.1% of gross domestic product each year. As a result, we’ll spend $4.6 trillion less over the next decade.”

Ryan goes on to say that while Democrats “will shout austerity… let’s put this in perspective.” On the current path, “we’ll spend $46 trillion over the next 10 years. Under our proposal, we’ll spend $41 trillion. On the current path, spending will increase by 5% each year. Under our proposal, it will increase by 3.4%. Because the U.S. economy will grow faster than spending, the budget will balance by 2023, and debt held by the public will drop to just over half the size of the economy.”

Ryan also proposes to repeal the president’s health care law and replace it with “patient-centered reforms,” as well as “protect and strengthen Medicare.” Under his proposal, “those in or near retirement will see no changes, and future beneficiaries will inherit a program they can count on. Starting in 2024, we’ll offer eligible seniors a range of insurance plans from which they can choose—including traditional Medicare—and help them pay the premiums.”

But Greenstein argues that Ryan’s plan to “again repeal the coverage expansions in health reform (i.e., the Affordable Care Act or ACA) and cut Medicaid (and some smaller health programs) another $756 billion on top of that” would “cut over $2.5 trillion, largely by greatly boosting the number of low- and moderate-income Americans who are uninsured.”

Last year, Greenstein continues, “the Urban Institute estimated that a very similar Medicaid block grant proposal in Ryan’s previous budget would result in 14 to 21 million individuals losing their Medicaid coverage by 2022.”

In addition, the Congressional Budget Office, he says, “has estimated that the ACA’s coverage expansions will mean that 27 million Americans who otherwise would be uninsured will gain coverage by 2023.”

Thus, under the Ryan budget, “40 to 50 million more poor or moderate-income Americans would be uninsured, even as the wealthiest Americans enjoyed new tax cuts.”

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