The Budget Nemesis—Is the Latest Plan Credible?


Q & A with Dr. Lynn Reaser
by: Dr. Lynn Reaser

Paul Ryan, Chairman of the House Budget Committee, has released a new plan to reduce the budget deficit and size of the nation’s debt burden relative to the economy over time.  Is it credible?
The answer is a reserved “yes” although many more details need to be spelled out and near-term prospects for Congressional passage are nil.  Still, the proposal belongs on the table.

Under the Ryan plan, compared with a long-run 18% average, by 2030 federal revenues would amount to 19% of GDP.  Spending would equal about 20% of GDP, erasing most of the deficit.  The shares of social security, medicare, and medicaid would all be equal or larger than in 2011.

Two questions, however, need to be answered.  What tax deductions would be cut to allow a new tax system of just two brackets:  10% and 25%?  What programs would be cut to reduce the share of discretionary spending to about 6% of GDP versus the 8% or more under current law?  Deficit reduction will be hard but necessary.

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