The Shortcomings of Ryan’s Budget in One Chart

Monday, March 26th, 2012 and is filed under Blog, Debt

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Mercatus Institute Scholar Veronique De Rugby has been a sharp critic of the Ryan budget over the past week.  Today, she posted a chart that illustrates just how modest the long-term cuts in the Ryan budget are in contrast to Obama’s projected spending levels:

As you can see, the discretionary cuts are very small, even infinitesimal, with most of the savings coming from Medicaid, welfare reform, and repeal of Obamacare.

I would note that after 10 years, when Ryan’s Medicare reforms begin to take effect, Medicare spending will dramatically decline.  Nonetheless, the fact that Ryan forestalled the reforms until 2023 made it impossible to cut one cent from the program during the 10-year budget frame.

Also, part of the reason why the discretionary cuts are so modest is because Ryan’s budget accounts for a much higher level of defense spending than Obama’s proposal.  So non-defense discretionary spending does indeed undergo a more significant cut than this chart would indicate.

However, the main problem with Ryan’s plans for discretionary spending is that after the initial cuts are implemented, he allows for a steady increase in spending towards the end of the budget frame.  As De Rugby notes, when the growth in discretionary spending is coupled with the lack of Social Security and Medicare reform over the next 10 years, overall spending actually increases by 4% per year, down only slightly from Obama’s 5% rate of growth.  That is still faster than the average growth of the private sector.

The bottom line is that balancing a budget without raising taxes in not  rocket science.  There aren’t too many choices.  It is clear that the only way we will balance the budget is by including the four following elements:

  • Wholesale Entitlement Reform – This means that all three major entitlements must be addressed to reflect free-market values, personal responsibility, and more federalism.  They also must be addressed within the next few years.
  • Discretionary Spending – All non-defense discretionary spending must be dramatically reduced, with plans to eliminate several full departments.
  • Rate of Growth – Even after the cuts and reforms are implemented, federal spending must not be allowed to grow quicker than the rate of growth of the private sector.
  • Welfare Reform – The ultimate goal of welfare reform cannot be focused on merely making the welfare state more efficient.  All reforms must work towards the goal of decreasing dependency and winding down most of the programs (beyond the bare safety net), not preserving them.

Any budge that does not contain those elements will never balance within enough time to forestall fiscal calamity.