Gerson says CBO found Ryan's plan would balance budget, but CBO didn't look at the whole plan

Written by Jocelyn Fong

Published

In a Washington Post column praising Rep. Paul Ryan (R-WI), Michael Gerson asserted that Ryan's budget blueprint “according to the Congressional Budget Office (CBO), eventually achieves a balanced budget.” But CBO's analysis doesn't show that Ryan's proposal would balance the budget; rather, CBO only analyzed a portion of Ryan's proposal, and at his instructions, did not analyze significant tax changes found in the legislation that would likely alter the legislation's assumed revenues.

Gerson: CBO found Ryan's plan “eventually achieves a balanced budget”

From Gerson's February 10 Washington Post column:

During his question time at the House Republican retreat, President Obama elevated congressman and budget expert Paul Ryan as a “sincere guy” whose budget blueprint -- which, according to the Congressional Budget Office (CBO), eventually achieves a balanced budget -- has “some ideas in there that I would agree with.” Days later, Democratic legislators held a conference call to lambaste Ryan's plan as a vicious, voucherizing, privatizing assault on Social Security, Medicare and every non-millionaire American. Progressive advocacy groups and liberal bloggers joined the jeering in practiced harmony.

But, per Ryan's instructions, CBO did not account for “significant changes to the tax system”

CBO: Analysis assumes revenues under a “current fiscal policy” scenario up to 19 percent of GDP. From CBO's January 27 analysis of Ryan's “Roadmap for America's Future Act”:

Other Tax Provisions. The proposal would make significant changes to the tax system. However, as specified by your staff, for this analysis total federal tax revenues are assumed to equal those under CBO's alternative fiscal scenario (which is one interpretation of what it would mean to continue current fiscal policy) until they reach 19 percent of gross domestic product (GDP) in 2030, and to remain at that share of GDP thereafter.

Tax Policy Center's Gleckman: "[T]here is not the slightest evidence" CBO's assumption reflects Ryan's revenue proposals. From Howard Gleckman's February 4 post on the Tax Policy Center's TaxVox blog:

CBO assumed this wonderful outcome would occur only if the revenue portion of Ryan's plan generated 19 percent of GDP in taxes. And there is not the slightest evidence that would happen. Even though Ryan's plan has a detailed tax component, his staff asked CBO to ignore it. Rather than estimate the true revenue effects of the Ryan plan, CBO simply assumed, as the lawmaker requested, that it would generate revenues of 19 percent of GDP.

[...]

Ryan would: turn the current exclusion for employer-sponsored health insurance into a refundable credit; allow people to choose to pay either under the current income tax system or a two-rate, broad-based alternative; replace the corporate income tax with a business consumption tax, and exclude from tax dividends, capital gains, interest, and estates.

We don't have any idea what this plan would do to revenues, but in some ways it resembles former GOP presidential candidate Fred Thompson's campaign plan. TPC figured that scheme would reduce tax revenues by between $6 trillion and $8 trillion over 10 years. Unless Ryan can achieve unrealistically large cuts in spending as well, this is not exactly a roadmap to solvency in my book.