Cut through the bluster in Paul Krugman's New York Times column on Rep. Paul Ryan (R, Wisc.) and his fiscal "Roadmap, and you're left with four seemingly substantive criticisms. Each one is empty.
First, Krugman claims:
The Post also tells us that his plan would, indeed, sharply reduce the flow of red ink: “The Congressional Budget Office has estimated that Rep. Paul Ryan’s plan would cut the budget deficit in half by 2020.” But the budget office has done no such thing. At Mr. Ryan’s request, it produced an estimate of the budget effects of his proposed spending cuts — period. It didn’t address the revenue losses from his tax cuts. The nonpartisan Tax Policy Center has, however, stepped into the breach. Its numbers indicate that the Ryan plan would reduce revenue by almost $4 trillion over the next decade. If you add these revenue losses to the numbers The Post cites, you get a much larger deficit in 2020, roughly $1.3 trillion.
Ryan has already responded to the "nonpartisan" (meaning left-leaning Brookings project) Tax Policy Center:
The Tax Policy Center has completed a 10-year revenue estimate of “A Roadmap for America’s Future” that suggests that the tax reforms would raise slightly less revenue than claimed. With respect to TPC’s analysis, Congressman Paul Ryan issued the following statement: “I appreciate the Tax Policy Center’s effort to advance the debate on our need to get a grip on the explosion of spending and put the government on a sustainable path. Our nation’s fiscal crisis is the result of Washington’s unsustainable spending trajectory, not from a lack of sufficient revenue. “The tax reforms proposed and the rates specified were designed to maintain approximately our historic levels of revenue as a share of GDP, based on consultation with the Treasury Department and tax experts. If needed, adjustments can be easily made to the specified rates to hit the revenue targets and maximize economic growth. While minor tweaks can be made, it is clear that we simply cannot chase our unsustainable growth in spending with ever-higher levels of taxes. The purpose of the Roadmap is to get spending in line with revenue – not the other way around. “I look forward to continuing the dialogue with the Tax Policy Center and working with my colleagues in Congress to advance real solutions to our fiscal crisis.” The following additional points should be considered when interpreting these results: 1) The Tax Policy Center’s revenue analysis of the Roadmap is not an “official” score of this plan. The Joint Committee on Taxation (JCT) is responsible for providing the official revenue score of legislation before Congress. 2) The Roadmap’s revenue baseline was constructed last year, using CBO’s long-term “alternative fiscal scenario.” This baseline incorporated an economic forecast from early 2009. Since that time, economic forecasts have generally been lowered, which would tend to cause lower-than-predicted revenues over the near term. The Tax Policy Center’s revenue analysis of the Roadmap uses an updated economic forecast from the one originally used to construct the Roadmap revenue baseline. The different economic assumptions in these baselines likely explain a portion of the lower revenue prediction. 3) The Tax Policy Center analysis covers a 10-year period, but the Roadmap is a long-term plan with spending and revenue projections covering 75 years. As such, the analysis is not consistent with the long-term horizon of the plan. Staff originally asked CBO to do a long-term analysis of both the tax and spending provisions in the Roadmap. However, CBO declined to do a revenue analysis of the tax plan, citing that it did not want to infringe on the traditional jurisdiction of the JCT. JCT, however, does not have the capability at this time to provide longer-term revenue estimates (i.e. beyond 10 years). Given these functional constraints for an official analysis, staff relied on its original work with the Treasury Department and other tax experts to formulate a reasonable expected path for long-term revenues given the tax policies in the Roadmap combined with the economic growth projections available at the time.
Second, Krugman claims:
Even as it slashed taxes at the top, the plan would raise taxes for 95 percent of the population.
Where Krugman gets the figure that Ryan's Roadmap would raise taxes for "95 percent of the population" is unclear. Here's the Tax Policy Center's report, which claims:
Relative to current law—and assuming that taxpayers choose their preferred tax system—the Roadmap would reduce taxes for most people, but the largest reductions would go to those with the highest incomes.
The basic outline of Ryan's tax plan: you won't pay any income tax on the first $39,000 you make, then a 10% tax rate kicks in up to XXX, and a 25% rate above XXX. It replaces the 35% corporate tax with an 8.5% business consumption tax (i.e. a VAT).
Third, Krugman claims:
zero dollar growth in domestic discretionary spending, which includes everything from energy policy to education to the court system. This would amount to a 25 percent cut once you adjust for inflation and population growth. How would such a severe cut be achieved? What specific programs would be slashed? Mr. Ryan doesn’t say.
What specific programs will be slashed? Ryan spells out $1.3 trillion in specific spending cuts he'd make in this document--$400 billion would be saved by canceling unspent stimulus and TARP funds, and freezing government pay and hiring. The other $900 billion would be cut by reducing non-defense discretionary spending to 2008 levels and capping it. Maybe that's not specific enough for Krugman, but the basic idea is that the various departments will figure out what to cut or not cut. Obama has also endorsed the idea of a discretionary spending freeze. Ryan tried to explain this to Chris Matthews on TV the other week.
Fourth, Krugman claims:
After 2020, the main alleged saving would come from sharp cuts in Medicare, achieved by dismantling Medicare as we know it, and instead giving seniors vouchers and telling them to buy their own insurance. Does this sound familiar? It should. It’s the same plan Newt Gingrich tried to sell in 1995. And we already know, from experience with the Medicare Advantage program, that a voucher system would have higher, not lower, costs than our current system. The only way the Ryan plan could save money would be by making those vouchers too small to pay for adequate coverage. Wealthy older Americans would be able to supplement their vouchers, and get the care they need; everyone else would be out in the cold. In practice, that probably wouldn’t happen: older Americans would be outraged — and they vote. But this means that the supposed budget savings from the Ryan plan are a sham.
And here's the nub of the argument. Krugman is a liberal statist