Republican Vice President Candidate = Paul Ryan

Econintersect:  It is now more than rumor, Paul Ryan has been selected by apparent Republican Presidential candidate Mitt Romney to be the “apparent” Vice Presidential candidate.  It is time to start getting up to speed on Paul Ryan – and what he wants to do to solve the U.S. financial crisis.  This is one of the few times, both opposing Presidential campaigns have detailed plans on monetary policy on the table.  The table below is from the CBO review of the Ryan Plan.

More detailed information and links follow.

According to the CBO Analysis of 20 March 2012:

CBO calculates that, under the specified paths, federal revenues and spending would evolve as follows:

• Revenues—from 15½ percent of GDP in 2011 to 19 percent in both 2030 and 2050;
• Medicare—from 3¼ percent of GDP in 2011 to 4¼ percent in 2030 and 4¾ percent in 2050;
• Medicaid and the Children’s Health Insurance Program (CHIP)—from 2 percent of GDP in 2011 to 1¼ percent in 2030 and 1 percent in 2050;
• Social Security—from 4¾ percent of GDP in 2011 to 6 percent in both 2030 and 2050; and
• Other mandatory spending and all discretionary spending—from 12½ percent of GDP in 2011 to 5¾ percent in 2030 and 3¾ percent in 2050.

Under those paths for revenues and spending, federal debt held by the public would be 53 percent of GDP at the end of fiscal year 2030 and 10 percent at the end of fiscal year 2050.

Under those paths for revenues and spending, federal debt held by the public would be 53 percent of GDP at the end of fiscal year 2030 and 10 percent at the end of fiscal year 2050.

Those figures are compared in this report with updated long-term calculations for two budget scenarios examined in CBO’s 2011 Long-Term Budget Outlook; both of those scenarios represent extensions of current laws or policies in different forms. Under those scenarios, federal spending in 2050 would be close to 7 percent of GDP for Medicare (including offsetting receipts); more than 4 percent of GDP for Medicaid, CHIP, and subsidies to be provided through insurance exchanges; 6 percent of GDP for Social Security; and about 8 percent of GDP for other mandatory spending and all discretionary spending. Under one of those scenarios, revenues would rise to about 26 percent of GDP in 2050, and debt held by the public would decline to 40 percent of GDP in that year; under the other of those scenarios, in 2050, revenues would be 18½ percent of GDP, and debt held by the public more than 200 percent of GDP.

Higher debt tends to imply lower output and income in the long run than does lower debt, because increased government borrowing generally draws money away from, or “crowds out,” private investment in productive capital. As a result, the debt that would occur under the paths specified by the Chairman and his staff would lead to higher national income over the long term than would occur with the higher amounts of debt under the other two scenarios.

The specified paths of revenues and spending would change the federal budget in various ways that differ significantly from historical trends and current policies. The consequences of those changes would depend on both the specific policies that were implemented to generate those paths of revenues and spending and the ways in which the nation’s health care and health insurance systems and other parts of the economy evolved in response to those policies.

This is a bean counters view of the Ryan budget proposals.  Here are his words:

Here is what the CBO Said about the Obama Plan:

CBO estimates that enactment of the President’s proposals would have the following consequences for the budget:

• The deficit in 2012 would equal $1.3 trillion (or 8.1 percent of gross domestic product), $82 billion more than the 2012 deficit projected in CBO’s baseline.
• In 2013, the deficit would decline to $977 billion (or 6.1 percent of GDP), $365 billion more than the shortfall projected for 2013 in CBO’s baseline.
• The deficit would decline further relative to GDP in subsequent years, reaching 2.5 percent by 2017, but then would increase again, reaching 3.0 percent of GDP in 2022. The deficits after 2013 would exceed those in CBO’s baseline by between 1.4 percent and 1.9 percent of GDP each year (see Table 1).
• In all, between 2013 and 2022, deficits would total $6.4 trillion (or 3.2 percent of total GDP projected for that period), $3.5 trillion more than the cumulative deficit in CBO’s baseline.
• Federal debt held by the public would increase from $10.1 trillion (68 percent of GDP) at the end of 2011 to $15.2 trillion (77 percent of GDP) at the end of 2017 and then to $18.8 trillion (76 percent of GDP) at the end of 2022 (see Table 2). Under the assumptions of CBO’s current-law baseline, debt held by the public would increase more slowly, ending 2022 at $15.1 trillion; as a percentage of GDP, however, such debt would decline to 61 percent by the end of 2022.

Per Wikipedia, some of the reaction to the Ryan Plan (Note: Wikipedia has broad detail of the implementation of the Ryan Plan, and the Wikipedia excerpts Econintersect used concentrate on the negative comments to try to give balance to this post):

….. The proposal broadly generated negative reactions from Democrats and positive reactions from Republicans.^[11]

….. A news analysis piece by Glenn Kessler in the Washington Post stated that the proposal “relies on dubious assertions, questionable assumptions and fishy figures”. He stated that it involved unrealistic assumptions for the status quo (the alternate fiscal scenario) such as the inclusion of all the Bush-era tax cuts being extended forever and the alternative minimum tax being indexed for inflation.^[2]

….. Nobel-Prize winning Economist Paul Krugman called it “ridiculous and heartless” due to a combination of income tax rate reductions (which he argued mainly benefit the wealthy) and large spending cuts that would affect the poor and middle classes.^[14][15] The New York Times editorial board wrote: “We are also certain that repealing [Obama’s healthcare ] reform – the Republicans’ No. 1 goal – would do enormous damage to all Americans and make it even harder to wrestle down health care costs, the best way to deal with the country’s long-term fiscal crisis.”^[16]

Steven Hansen