David Frum

03.23.12

Ryan's Budget is So Ambitious, it Needs Magic to Work

paul-ryan-budget
House Budget Chairman U.S. Rep. Paul Ryan (R-WI) (L) and members of the House Budget Committee introduce the House FY2013 budget at a news conference at the Capitol on March 20, 2012 in Washington, D.C. (T.J. Kirkpatrick / Getty Images)

Bruce Bartlett, the author of what is currently the most comprehensive book on tax reform takes a look at how Paul Ryan's budget would start fixing America's tax problems. It turns out that Ryan is embarking on a Herculean task of raising revenue by closing every last tax exemption in the budget:

In other words, it will be impossible to achieve Ryan’s revenue target without pretty much wiping the slate clean of every tax preference except for a handful of the most popular ones. This may be worth doing, but will be very difficult. The Tax Reform Act of 1986 reduced tax expenditures by about 2.7 of GDP, according to the TPC. If it could be duplicated, that would only get Ryan to his absolute minimum level of revenues as a share of GDP. Getting to the upper end of his target range would require a tax reform one third larger.

In short, looking only at the tax side of Ryan’s plan, he is anticipating enactment of an extraordinarily ambitious tax reform on top of the most ambitious budget cutting effort ever enacted. He would sharply cut outlays for every major program except Social Security and national defense. Every governmental function one can think of would be virtually abolished except for Medicare, Social Security and defense. A key reason for the severity of these cuts, of course, is that Ryan would cut taxes at the same time he is cutting spending. To achieve balance with lower than projected revenues requires even larger cuts in spending.
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In my opinion, the Ryan budget should be seen as nothing more than a PR document for Republicans so they can say they have a plan to balance the budget, cut taxes, and cure the common cold.

An additional point that should be made is that it will probably only be possible to close politically popular tax policies if there is some sort of governing consensus between the two parties. Such a consensus seems very far from happening.