More on the Ryan Budget: A Guidepost on the Road to Gridlock

March 12th, 2013 at 4:38 pm

Like I said last night, we’ll have lots to say about Rep Ryan’s new (old, really—he even keeps the same name from last year!) budget as we crunch through the numbers.  But the overview is the same: deep spending cuts in programs that support the least advantaged, large tax breaks with unspecified “pay-fors,” Medicare gets voucherized after 10 years, the safety net gets blockgranted, and so on.

I can’t really work up much outrage here.  This is exactly what you’d expect House Rs to rally around, so I’ll just hit on a few points worth noting.

–The R’s are making a lot of noise about the importance of zero budget deficits, i.e., balancing the budget.  Just so you know, there’s no economics to that.  (I know…shocking!)  Yes, you want your deficits to shrink as the economy hits a bona fide expansion, and typically, unless you gut your tax system (which happens to be a big risk with this budget), growth helps a lot with that endeavor.

The math, as I explain here, hinges on getting the deficit below primary balance, because that will nudge the debt ratio (debt/GDP) down.  That implies budget deficits below 3% of GDP, which, you will note, is not zero.

I re-raise this for a reason.  The Senate D’s will come out with their budget tomorrow which I suspect will emphasize primary balance over zero deficits.  And the R’s will bash them for not getting to zero, which has zero economic relevance but may well resonate with the tiny share of people who don’t regularly visit OTE.

–I am also reminded today of my absolutely least favorite thing that politicians say about fiscal policy, and there’s tons of competition for that slot.  It’s that good old folksy aphorism, “hey, families have to balance their budgets, so government does too!”  Rep Ryan’s been going on about that today (“…our budget matches the spending with our income, just like every family and business must do throughout America”).

And here it is right out of President Obama’s 2013 budget: “Just as families and businesses must tighten their belts to live within their means, so must the Federal Government.”

That is just so freakin’ wrong.  It’s the opposite: when families and businesses tighten their belts due to recession, that’s exactly when the government takes advantage of the fact that it can run large budget deficits in the interest of temporarily offsetting the private sector demand contraction.  Which, of course, is exactly what the White House did, to their credit (believe me, I was there).  And, in fact, as just noted, when families and business loosen their belts, that’s when you want your deficits to start coming down (be a CDSH as I stress in the link above).

BTW, re the administration’s messaging on these matters, no wonder people are confused about all of this when you do X and say “not-X!”

–Next, I thought Jon Weisman of the NYT summarized things pretty gracefully here:

But with his budget — and a Senate Democratic budget to follow Wednesday — Republicans and Democrats are setting up a clear contrast between rapid deficit reduction that relies on spending cuts only to reach balance and a slower approach that will mix tax increases and more gradual spending cuts to aim for fiscal stability if not a balanced budget.

I can assure that the economics of an economy trying, with some hints of success, to shift out of weak-recovery mode needs the latter, not the former.

–Talking about confusing messaging, Rep Ryan got interestingly snared this AM in his press conference.  He was asked how could he count $600 billion in higher tax revenue from the fiscal cliff deal as part of his plan when he has so intensely inveighed against it?  His response, which I found kinda reasonable, was something like: Hey, I’m against it but not going to refight it.  It’s the law so let’s move on.

Which begs the question, thankfully asked on follow-up: Then how do you explain repealing the Affordable Care Act, dude??!!

I won’t bother to explain his answer, which was nonsensical.

–Finally, reflecting on Weisman’s points above, we’re about to scrum around like crazy analyzing two very different budgets that can’t possibly be reconciled.  Practically, that means that for the near future we’ll continue to muddle through with continuing resolutions that just extend current budget levels, debt ceiling fights, and all the rest of it.

My point is that all this talk about how “we must have a budget!—the Senate hasn’t had a budget for years!—the President’s budget is late!” is pretty much nonsense talking points.  Do you think House R’s are criticizing the President’s tardiness because they want to hurry up and implement his budget plan?

I’m not saying these budget documents are pointless.  I’m looking forward to seeing what Senate Budget Chair Patty Murray comes up with and agree that it’s about time that Senate D’s release their budget priorities.  But as the Ryan budget, which is really quite divorced from reality outside the hyper-conservative House and has absolutely zero chance of enactment, shows, these budgets have little to do with the actual agreements that determine actual revenues, outlays, and policies.  Right now, I’m afraid they’re just guideposts pointing the way toward gridlock.

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8 comments in reply to "More on the Ryan Budget: A Guidepost on the Road to Gridlock"

  1. foosion says:

    “Just as families and businesses must tighten their belts to live within their means, so must the Federal Government.”

    I regard that as the cardinal sin committed by Obama and the Dems (I believe I’ve said that in comments once or twice, if not more).

    The Federal Government must be counter-cyclical – it must stand up when families and businesses are standing down.

    We need infrastructure (roads, buildings, etc.), an educated population, a population where no one goes to bed hungry, where everyone has a roof over their heads and a bed to sleep in, police, firefighters, a military, etc., etc. These require govt. We need jobs and a growing economy – these require infrastructure, etc. Not to invest today when things are cheap, interest rates are low and there is massive unemployment is nuts.

    “Just as families and businesses should buy when things are cheap, so must the Federal Government. Waiting to pay more is a waste.”

    Instead, we’re arguing over the deficit and how much to cut programs that benefit the middle class and poor in order to cut taxes on the best off.

  2. SeattleAlex says:

    It really does sound like a fundamental difference on the role of government, but I’m pretty sure if we just left it up to the private sector we would certainly get investment in schools, infrastructure, science/drug research, aid for the poor/elderly, aid during catastrophes, consumer protection, clean water and air, food and drug safety, near universal access to health care, alternative energies and so on… Now I’m sure the R’s and their followers appreciate some of this stuff, but they sure don’t act like it.

  3. readerOfTeaLeaves says:

    Having heard about Ryan’s Budget Plan, I throw my hands up in despair. Ryan’s plan seems like the economic equivilent of some old 1952, wood-paneled Chevy that needs a major engine overhaul, new tires, and new upholstery.

    To restore my good humor, I went to the extraordinary Prelinger Archive and searched on ‘automobiles’.

    I spotted a film strip (10:42 minutes) made in 1952 by Chevrolet. The statistics on American workers, and the number of US jobs linked to the auto industry in 1952, are eye-popping. The film was made in GM’s heyday, and seems to qualify for a link at OTE, because it includes information about the specific musical notes that GM’s “Toot Tuner” used to refine the sound of their car horns (E flat with G!). It is nostalgic and charming:

    Strangely, the metaphor of ‘cars’ led me to realize just how dangerous the GOP/Ryan ideas are at this historical moment.

    I have recently been looking at electric and hybrid vehicles. As I clicked on the Chevy ‘hybrid engines’ web page, it really hit me that Ryan’s proposal is budget bloatware.

    In one browser window, I had evidence of Chevrolet offering consumers a paradigm shift in transportation. Developing these engines has taken decades of research, and years of focused effort that is only beginning to pay off. Anyone with half a brain would see this as an opportunity for a new, publicly financed smart grid:
    (Ford, Nissan, Toyota also have good info about hybrids on their websites.)

    In another browser window was news of Paul Ryan’s budget: basically, it appears to keep the economy slogging along at 10 mpg, while wailing about inefficiencies.

    The disconnect between what I see around me and what I hear from the GOP continues to grow, and this latest fiasco of Ryan’s makes it appear the party is incapable of adapting to contemporary realities.

  4. Sidney R. says:

    If families have to balance their budget where did all that consumer debt come from?

    If businesses have to balance their budget where did all that corporate debt come from?

  5. Rima Regas says:

    This new tack will come in handy for the R’s come 2014, I’m sure! It shows just how well they’ve accepted the fact that they won the election. Oh, wait!

    What happens if the gap (gulf) can’t be bridged? How long can we go without a budget?

  6. LJ Pipes says:

    On Bill Maher’s show you said Obama increased Fed spending by 0.6%. How did you determine or arrive at that figure (i.e., your numerator & denominator)?