In Defense of Congressman Paul Ryan

By :: August 6th, 2010

Given that columnist Paul Krugman relied on Tax Policy Center estimates to level claims that Congressman Paul Ryan is a “flimflam man” and that Ryan’s plan to address our fiscal problems is a “fraud,” I think a defense of the Congressman is in order.  

 

First, it is worth citing budget estimates from the Congressional Budget Office (CBO).  According to CBO, Congressman Ryan’s Roadmap for America’s Future Act would dramatically reduce the build up of America’s debt.  CBO estimates that his plan would result in a debt to gross domestic product ratio (GDP) of 69 percent in 2020, rising to 99 percent in 2040, and then decreasing to 77 percent in 2060.  This is in contrast to CBO’s estimates for its alternative fiscal scenario (which assumes a continuation of current policy) where the debt-to-GDP ratio is 87 percent in 2020, and then rises sharply to 223 percent in 2040 and 433 (!) percent in 2060. 

 

On the spending side, Congressman Ryan’s plan achieves these substantial reductions in our long-term debt through such things as progressive reductions in Social Security benefits, increases in the eligibility age for Medicare, and the replacement of Medicare benefits with a voucher starting in 2021 (with an average initial voucher value for 65-year-olds of $5,900 in 2010 dollars).

 

On the revenue side, Ryan has proposed creating an alternative income tax system that has two marginal tax rates, eliminates most deductions and credits, and exempts all interest, dividends, and capital gains from the individual income tax.  Filers would get to choose between the existing income tax and the new system.  Ryan would also replace the corporate income tax with a business consumption tax (essentially a value-added tax).

 

Krugman alleges fraud because CBO did not score the revenue side of the Congressman’s plan.  (This is correct as the Joint Committee on Taxation is responsible for providing the official revenue score of tax legislation.)  Instead, CBO assumed that total federal tax revenues will be equal to “those under CBO’s alternative fiscal scenario … until they reach 19 percent of gross domestic product in 2030, and to remain at that share of GDP thereafter.”  Contrary to Krugman’s claims, this assumption is not unjustified.  Ryan has explicitly stated that he is willing to work with the Treasury department to adjust the rates on his tax reform plan to “maintain approximately our historic levels of revenue as a share of GDP.”  Since 1980 the federal tax revenue has been about 18 percent of GDP.

 

TPC did analyze Ryan’s tax-specific proposals and found they would fall short of this revenue goal.  For example, Ryan’s proposal would lead to federal tax revenue of approximately 16 percent of GDP, which amounts to a $4 trillion revenue shortfall over ten years compared to the alternative fiscal scenario.  But that doesn’t mean that Ryan’s plan is a fraud. Instead, it shows that Ryan’s vision of broad-based tax reform, which essentially would shift us toward a consumption tax, needs to be adjusted in order to meet his stated goal of matching historical levels of revenue as a proportion of GDP.  This indeed poses a challenge to Congressman Ryan to make specific changes to his tax reform plan in order to meet his revenue goal.  Reasonable people can disagree about whether we should close our long-term fiscal gap primarily through spending reductions or tax increases, but Congressman Ryan’s proposal makes a useful contribution to this debate.

41Comments

  1. Anonymous  ::  7:04 pm on August 6th, 2010:

    Kudos! Congressman Ryan's proposal is not perfect by any stretch of the imagination. His main objective is to bring the issues to the table. He actually requests others to bring their own ideas. Mr. Krugman fails to see Mr. Ryan's decency. Maybe this is because he doesn't see it in the “fairly rarefied circles” where he lives.

  2. Anonymous  ::  8:26 pm on August 6th, 2010:

    'Ryan has explicitly stated that he is willing to work with the Treasury department to adjust the rates on his tax reform plan to “maintain approximately our historic levels of revenue as a share of GDP.'
    Hmm interesting. Paul Ryan proposes cutting taxes by $4 trillion and cutting spending by $2.7 trillion. When the $1.3 trillion shortfall is pointed out, he says “Oh yeah, I'll, like, work that out later.” And you praise him for his “useful contribution to this debate”! My own “useful contribution” is below:
    Step One: Make our debt $1.3 trillion worse
    Step Two: ???
    Step Three: Solve our nation's fiscal crisis!

  3. Anonymous  ::  8:51 pm on August 6th, 2010:

    First, it is said that Ryan would reduce spending by creating more “progressive” changes to SS and medicare/medicaid. How is it then that his Roadmap shows little change to those spending numbers and the drastic decrease in spending comes from some ambiguous “other” catagory?
    Second, the CBO did not assume that revenue would be equal to those under the alternative fiscal scenario, they were told by Ryan's staff to make that assumption. How is it that revenue will maintain the same level if added tax cuts are in place?

  4. Anonymous  ::  10:35 pm on August 6th, 2010:

    The CBO never tested the assumptions. Ryan stated he wanted taxes to stay at their historical levels of GDP and put forth a plan. When JTC scored it below, it means he'll have to change it or change his objective. If you're not a hopeless partisan, that's not so hard to understand.
    Despite all of the crying from all sides, his plan is still the only one in the game at the moment.

  5. Anonymous  ::  11:34 pm on August 6th, 2010:

    The numbers crunchers find that Republican Paul Ryan's budget creates “a $4 trillion revenue shortfall over ten years compared to the alternative fiscal scenario.”
    And Ted Gayer magically asserts that that MASSIVE shortfall “doesn’t mean that Ryan’s plan is a fraud.”
    Actually, it does.
    Republican Paul Ryan has repeatedly made fraudulent claims that his plans would _reduce_ the deficit. That's false and claiming otherwise doesn't reflect any honest assessment of the factual numbers.
    The clear facts are that Republican Ryan's budget would radically INCREASE the “fiscal gap”.
    Falsely implying otherwise discredits both the individual making the claim and the institution they are working for.
    Is this the kind of 'analysis' that the Tax Policy Center wants to be known for?

    NB: Beyond Republican Ryan's fraudulent plan massively increasing in the federal deficit while falsely claiming to do the opposite, Republican Ryan's plan gifts massive tax cuts to the ultra-wealthy while increasing taxes on 95% of Americans.

  6. Anonymous  ::  11:39 pm on August 6th, 2010:

    Huh. That was much less of a defense than I was expecting. So we're sure he'll find a way to plug the revenue hole, so as long as we can convince 50 years of governments not to deviate from the plan or start any new projects, we're home free….

  7. Anonymous  ::  2:09 am on August 7th, 2010:

    You ignore Obama and the Democrats use every trick in the book to skew the numbers so that they can create even MORE fiscal problems that Ryan is trying to solve, and then you turn around and call Ryan a fraud for wanting to fix the problems you seem to feel don't exist?
    Here's a thought. Stop thinking.

  8. Anonymous  ::  4:26 am on August 7th, 2010:

    May I point out that for all your attacks on Mr. Ryan, you are actually granting him success by the fact that you are debating the fiscal crises rather than ignoring it (as our current legislature has done by refusing to pass a budget at all). He states frequently, “I don't have all the answers. I want this to get people debating.” So, thank you Mr. Ryan. As for Paul Krugman, he is a subjective, pathos mongering, Eugene Lawson.

  9. Anonymous  ::  5:18 am on August 7th, 2010:

    Like I said above, I have a plan to balance the budget. Hmm, let's look at the numbers — it adds $1.3 trillion to the debt, you say?
    So oh, uh, when I said I had a plan to “balance the budget,” I actually meant a plan that makes the fiscal crisis worse. And uh, the point of my plan was just to get people “debating the fiscal crises.” Yeah, that's it!

  10. Anonymous  ::  6:25 am on August 7th, 2010:

    Fascinating that liberals fancy themselves able to do simple arithmetic when reviewing Ryan's plan, but aren't willing to do the same when looking at Obamacare.

  11. Anonymous  ::  7:41 am on August 7th, 2010:

    Yeah, except 'obamacare' actually does reduce the deficit in the long run. Fascinating that conservatives fancy themselves able to do simple arithmetic when reviewing Obamacare, but aren't willing to do the same when looking at the Bush tax cuts.
    See what I did there?

  12. Anonymous  ::  3:38 pm on August 7th, 2010:

    a really excellent point………which is why we need to change the very nature of the political system and the very nature of the politician…..if there is to be any hope. The people HAVE to take the government back from this lunatic class we have put in control.

  13. Anonymous  ::  5:16 pm on August 7th, 2010:

    Honestly, I think it is ridiculous to debate competing forecasts. People think it reduces the debate to quantifiable, rational terms, when in reality there are so many assumptions and unknowns (not least of which are “external events”) that it becomes as useful as trying to defend one weather forecast versus another. What we really need to be debating is principles, with the knowledge that the outcomes are, in the end, unpredictable. In other words, do we prefer a future along the lines of the European model, where higher taxes fund a government that directs a large proportion of our economy? Or do we prefer a more limited vision of government, where individuals control more of their own income and wealth and make their own choices in the open market? That is the debate we need to be having at this juncture.

  14. Anonymous  ::  2:07 am on August 8th, 2010:

    The point is that without understanding that he's short of $4 trillion dollars, he makes it seem like tax cuts, deficit cuts, and maintaining entitlements are a piece of cake for the non-socialists among us. Like it's just a question of trying.
    And anyone who proposes a tax increase to cover that other $4 trillion would be a socialist. Let alone someone who didn't want a tax cut for the wealthy that makes the taxpayer pay interest on $4 trillion.

  15. Anonymous  ::  3:06 am on August 8th, 2010:

    No one seems to want to talk about the dynamic effects Ryan's proposals would have on the economy. The economy would explode. Federal revenues would likely skyrocket. Ryan's proposals would likely lead to large excesses of federal revenue, based on an economy that would be massively larger. As noted, all projections are pure nonsense. The CBO got current year federal revenues wrong. They have no possibility of getting anything else right. If anyone is a flim flam man, it is Krugman, and the CBO.

  16. Anonymous  ::  5:40 am on August 8th, 2010:

    So the plan is to cut taxes in a way that basically shifts the burden to the middle and lower income families, which is exactly what shifting to a consumption tax structure would be. Rich households have a large amount of income they can save (which would hardly be taxed) as opposed to middle of the road or lower families and individuals without the luxury of saving. So the low percentage (of income) consumers (ie the affluent) pay significantly less taxes by percentage than high percentage consumers. Rich become richer, poor become poorer.
    What has made this country great has been the ability of one to change their circumstances from one generation to the next or within their lives, this would destroy what is left of that dream. Basically if you are rich your money will always be there for generations regardless of your skills or talents, if you are not rich, the shifted tax burden would keep you desperately treading water before you even get a chance at reaching for that ladder of yesteryear. Look at the history of taxes in this country, the most opportunistic times of upward mobility had been when the taxes on the highest earners were the highest and the lowest earners got a break. A break that allowed them to become the greatest generation, a break that has been fading since the years of Reagan.
    It is sad, hopefully America can see what is being proposed as an assault on the American Dream but most likely they will read articles like this or watch Fox News and get duped. Want a balanced budget, why not CUT spending and RAISE taxes on those who can handle it (the affluent) to something approaching pre-1980's levels… though definitely makes sense to wait on both until this downturn is behind us, as President Obama has very wisely been doing and hopefully planning.

  17. Anonymous  ::  6:00 am on August 8th, 2010:

    1) The big deficit reductions in his plans begin after 2020. If you look at the CBO table that Krugman himself show here: http://krugman.blogs.nytimes.com/2010/08/06/how-to-read-a-cbo-report/ , the deficit reduction in 2020 is negligible compared to those in 2040 and 2060. The Roadmap was always meant to be, first, a long term plan, and second, a starting point for debate and getting us on the a sound fiscal path. Rep. Ryan, I'm sure, has no delusions that this is even remotely close to a final bill.
    2) While Ryan's current numbers do result in tax cuts, the point of this article is to show that he does not intend there to be tax cuts. Rather, he wants tax reform, to move towards a simpler tax code that results in the same, or nearly similar revenue. You can debate the merits of that separately.

  18. Anonymous  ::  3:17 pm on August 8th, 2010:

    There was a lot more to Krugman's article than the issue of the $1.3 trillion shortfall!
    Gayer's post mentions Ryan's intent to “replace… Medicare benefits with a voucher”, and as Krugman says “the main alleged saving would come from sharp cuts in Medicare”. It should be obvious that the mere act of conversion to vouchers saves nothing. As Krugman points out, money is saved only by then limiting the size of voucher payments — in other words, rationing. Neither Rep. Ryan nor Gayer's post mentions this detail.
    The astounding inequity of Ryan's plan goes unmentioned. From Krugman: ” The Tax Policy Center finds that the Ryan plan would cut taxes on the richest 1 percent of the population in half, giving them 117 percent of the plan’s total tax cuts. That’s not a misprint. Even as it slashed taxes at the top, the plan would raise taxes for 95 percent of the population.”
    Gayer says that “Ryan’s proposal would lead to … a $4 trillion revenue shortfall over ten years compared to the alternative fiscal scenario. But that doesn’t mean that Ryan’s plan is a fraud. Instead, it shows that Ryan’s vision of broad-based tax reform … needs to be adjusted in order to meet his stated goal of matching historical levels of revenue as a proportion of GDP.”
    Give me a break! His plan needs to be adjusted by a mere $4 trillion? What it shows is that Ryan's tax-reform vision doesn't work!

  19. Anonymous  ::  5:22 pm on August 8th, 2010:

    I don't know why everyone seems to be missing the point.
    GROWTH and full employment.
    None of these problems can be fixed by remaining at 9-10% unemployment.
    Hugh spending increases and accompanying deficits haven't worked. Higher taxes, whomever they are imposed upon, will not work.
    Forecasts that go out 10 years are bunk. We have to do what we think might work now. What's that?
    Don't change the current tax code. This leads to stability in planning. Stop experimenting with taxes.
    Agree to finance non-social spending with current year taxes, whatever they may be. This may have to include payments to redeem bonds held by the social security administration.
    Refund the debt with long-term bonds whose rates are inflation protected, say 2% – 4% plus the rate of inflation.
    Start a grown-up discussion of how to make social spending finally self-financing. All options should be on the table.
    Objective: GROWTH, full employment, stability of government behavior.
    Devote social security and medicare income to financing only those programs.

  20. Anonymous  ::  6:19 pm on August 8th, 2010:

    This is not a mere word game, a matter of semantics. It's all about the numbers, and Ryan's numbers don't add up. So I guess you've taken your own advice, even before you wrote that comment – you stopped thinking.

  21. Anonymous  ::  8:50 pm on August 8th, 2010:

    Just like Bush's tax cuts would create millions of jobs, cut the deficit and solve all our problems?

  22. Anonymous  ::  12:25 pm on August 9th, 2010:

    Ryan's plan cuts benefits severely, relative to current promises, and the cuts are “to be named later”. However there is no other viable plan on the table.
    You can compare Ryan's plan to the fantasy in which all promised benefits are delivered, but that is less useful than comparing your spouse to photoshopped pictures of a fashion model.
    When the government suddenly loses its ability to borrow, even Ryan's plan will look good by comparison to the new reality. Progressives need to wake up before it's too late. Except it's likely too late already.

  23. Anonymous  ::  5:57 am on August 10th, 2010:

    Actually, my plan is better – I just don't have a skin in the game.

  24. Anonymous  ::  6:00 am on August 10th, 2010:

    Its not anywhere close to too late, although it might be if the top tax rate is extended any period of time. We are not yet near the tipping point.
    Ryan is a fraud because his proposals on Medicare and Social Security have no hope of enactment. My proposals have more feasibility than his do, but he gets more press because I blog and he is ranking minority member on the budget committee.
    Of course, even mine are DOA unless organized labor can be convinced to change how they think about personal accounts for Social Security – at which point the GOP will attack my plan.

  25. Anonymous  ::  6:03 am on August 10th, 2010:

    The next entry provides ample evidence that tax increases on the wealthy will both produce revenue and not ruin small businesses or the job market.

  26. Anonymous  ::  6:07 am on August 10th, 2010:

    I sent the Fiscal Commission my comprehensive plan, which contains some interesting counter proposals. If he is serious about his desire to encourage debate, he will have me in to talk about it. I am not holding my breath, especially since my proposals on personal accounts for social security would have conservatives run from the room in hysterics. Two words by way of a hint – Union Proxy.

  27. Anonymous  ::  6:45 am on August 10th, 2010:

    Paul Ryan…FOR PREZ…;)…

  28. Anonymous  ::  11:00 am on August 10th, 2010:

    But, you see, the idea is he'd FIX the rates to achieve his GOALS BEFORE implementing them. Is that really too complicated for anyone to have assumed from the start, that Ryan would have the numbers shimmed up to flush before the “Roadmap” became a BILL? Sheesh.

  29. Anonymous  ::  11:05 am on August 10th, 2010:

    Only if you don't think borrowing endlessly from the Chinese -to be payed back by the Unborn- is somehow not a “plan”….

  30. Anonymous  ::  7:54 pm on August 10th, 2010:

    actually the bush tax cuts did create jobs and economic growth. it also spawned the mother of all credit bubbles; this is why short-term economic policies do not work.
    the dirty truth is (see http://www.c-spanvideo.org/program/88723-1) deficit spending drives away jobs via the trade deficit (trade deficits being the only way to finance fiscal deficits, other then inflation).
    so what we need is a balanced budget, as quickly as possible. . .as painful as that may be in the short term.

  31. Anonymous  ::  6:12 pm on August 11th, 2010:

    No no no. The purpose of vouchers is to put choice back into the hands of consumers. Once consumers are in control rather than a third party (such as the government or an insurance company) market forces will drive prices down.
    As for who gets the tax cuts, you should note that recent tax policy has greatly shifted the income tax burden from the middle class to the rich – a family of 6 with $100K income, 12% 401k contribution, $22K in itemized deductions and $4800/yr in health care premiums / HSA contributions will pay roughly $1000 in federal income taxes. Is it really so wrong to expect such a family to pay a little more into the system?

  32. Anonymous  ::  1:11 pm on August 12th, 2010:

    Very good points. Honestly I think we all need to wake up to the false lines we have been fed by both parties for the last couple of decades. The affluent can withstand a higher tax rate while still driving growth through their businesses and grow their own income contrary to what the republican party wants everyone to believe. Spending has to be cut and many government run programs can be removed without it meaning starvation and death for the poor, like the Democrats want everyone to believe.
    What is the “ideal” tax rate? What spending and programs can be cut? I have no idea, and I doubt any other one person does either. That's why we need to have real debate about it. Not this name calling, bickering, one party deciding to disagree with basically everything the other party says, constant campaigning we have had.

  33. Anonymous  ::  6:38 pm on August 12th, 2010:

    Not to be snarky, but on what basis will most people decide between the two competing visions of the future, if it's “ridiculous to debate competing forecasts?” Are you saying that this is really a philosophical question where personal freedom and responsibility are prime? Tobey Keith(“I'm proud to be an American, where at least I know I'm free.”) and Milton ('”Tis better to rule in Hell than serve in Heaven.”) come to mind.

  34. Anonymous  ::  4:22 am on August 13th, 2010:

    Are you unable to assume the good faith of your fellow citizens in addressing the long term fiscal problems of our country? You throw around the term fraud loosely and repeatedly.
    The unwillingness or inability among certain quarters of the left to see their political opponents as legitimate (not just their opponents' views, mind you–the opponents themselves!), is very disturbing.
    Congressman Ryan's sincere, serious, and collegial effort to attack a giant and heretofore intractable problem is met with howls of derision, ad hominem vitriol, and very little in the way of detailed rebuttal based on thorough examination. When an organization on the left (TPC) does make an attempt to analyze seriously the details, the partisans come out in force whip it back into line.
    Anonymous, you are the one who isn't contributing to the debate, you are the one with the poor 'analysis'. I applaud the TPC for crediting the good faith of Congressman Ryan enough to engage seriously with him on a substantive debate on how to solve the long term fiscal disaster toward which our nation is slouching.

  35. Anonymous  ::  6:02 pm on August 13th, 2010:

    So I guess all of you blasting Ryan's initial idea because his initial numbers for revenue came up short must then agree that President Obama is now a liar in saying that the Healthcare bill lowers the deficit since in just the past 4 months it has been shown to cost 1.1 trillion versus the originally scored 800 billion?
    Ryan at least posed an idea in broad strokes with sample numbers to use as a starting point. Because he posed those numbers that scored to 16% of GDP instead of 18% you want to say the whole thing is flawed. Fine. The entire HEALTH CARE BILL YOU LOVE is flawed because it was scored and 4 months later we find that score was “cooked books” by the Spendocrats.
    Unlike Pelosi and Reid, at least Ryan is willing to suggest a starting point for bipartisan discussion and amending to get to a common goal: cutting spending while modernizing the tax code to make it simpler while not reducing revenue.

  36. Anonymous  ::  3:13 pm on August 16th, 2010:

    My concern with Ryan's plan is that his new tax system doesn't include the transfer features of the current tax system, which I don't think can be ignored in any serious tax debate. On top of that, the “choose the current system or new system approach” seems like a political maneuver that actually serves to prevent debate on issues such as the EITC and the refundable CTC, not stimulate debate. If I argue with Rep Ryan that his new plan doesn't contain an EITC, he responds “if you want the EITC, stick with the old plan”, instead of actually debating the merits of an EITC. It also adds enormous complexity to the tax code, which seems like a step in the wrong direction for someone touting a simpler system.
    When I asked Rep. Ryan directly about whether his plan included an EITC at a TPC event several months ago, he did not know the answer. That's a problem.

  37. Anonymous  ::  8:18 pm on August 16th, 2010:

    Maybe I am just being well, confused. Why does Rep. Paul Ryan suggest a 10% tax on married earning 0 to $100,000? He also suggests 10% tax on singles earning $50,000. So, no deductions, would mean no tax refunds? Only a middle class family of four earning $39,000 would have NO TAX. I don't believe that qualifies that family as middle class but at the federal poverty guidelines. If I am earning $30,000 a year, I sure could not afford to pay a straight $3000.00 income tax. What about those recieving SSDI and are disabled? Would this mean their social security disablity would all be taxable? I agree we need reform but lets get rid of giving any Medicaid to illegal aliens first….

  38. Anonymous  ::  5:36 pm on September 7th, 2010:

    You hit the nail on the head. In order to go to any kind of private system, the transfer effects must be shifted to fund accumulation. The obvious way to do that is to credit the employer contribution (and distribute funds to personal accounts) on a per capita basis, with each worker earning a full credit in the quarter getting the same amount, regardless of wage level. Taking off the income cap at the same time would have wonderful results for low income workers, who could potentially retire much earlier if their benefits outstrip their wages due to accumulated balances.
    Of course, if the Democrats demanded these two provisions, the Tea Party would begin to demand that we leave Social Security alone.

  39. Rhetoric v. Reality: A Viewer’s Guide to Rep. Paul Ryan’s State of the Union Response » Greenline: The AFSCME Blog  ::  5:00 pm on January 25th, 2011:

    […] Reality: Mere weeks in control of the U.S. House, Republicans have already passed legislation repealing health reform that would add $230 billion to the deficit and stifle job growth by up to 400,000 a year. In addition, according to the Tax Policy Center, over all the Ryan Roadmap budget plan would reduce revenue, not the deficit, by almost $4 trillion over the next decade. […]

  40. tony laz  ::  10:44 pm on April 5th, 2011:

    Who is this guy ‘Anonymous’ who seems to be talking to himself?

  41. Anonymous  ::  9:56 pm on August 20th, 2012:

    The real question is “What is best for all of us in this nation who work hard to build America”. During the past 10 years under the Bush tax cuts the wealthy and multinational corporations have had the most of the freedoms that you mention. What did they do? They used those freedoms to close domestic plants and send the production overseas, they outsourced jobs by the millions to foreign countries. They reaped profitable results from “free trade” that made much their gain possible, but many of the less affluent lost their jobs while the wealthy pocketed most of the benefits. It doesn’t look like most of us got the freedoms and benefits that you mention. Don’t get me wrong, those who generate jobs and profits should be very well rewarded, but the middle portion of us who have also worked hard to make it happen, need a fair share of the pie and enough income to exercise those freedoms.