The Chairman of the House Budget Committee has produced a new budget plan which contrasts very favorably with the tax-heavy, big-spending proposal submitted by the President last month.
Perhaps most important, Congressman Ryan’s plan restrains spending growth, allowing the private sector to grow faster than the burden of government, thus satisfying Mitchell’s Golden Rule so that spending falls as a share of GDP.
The most important detail in the proposal is that the federal budget, which currently consumes 24 percent of GDP, would fall to less than 20 percent of GDP beginning in 2016.
That’s the good news. There are three pieces of not-so-good news.
1. Ryan’s plan allows spending to grow by an average of 3.1 percent annually over the next 10 years, with is faster than the 2.8 percent average annual growth in last year’s budget.
2. His proposed Medicare reform, while far better than current law, also is not as good as what was proposed last year.
3. The federal budget would still consume a greater share of the economy’s output than it did when Bill Clinton left office.
I suppose it’s also worth mentioning that Ryan’s proposal isn’t as good as Rand Paul’s budget. Spending only climbs 2.2 percent yearly under the plan put together by the Kentucky Senator, and he also abolishes several useless cabinet-level departments.
But the very good shouldn’t be the enemy of the good. As noted already, Congressman Ryan’s plan meets the most important test, which is restraining spending so that the federal budget grows slower than the private economy. And, as the chart shows, he obviously imposes more fiscal restrain then President Obama.
Regular readers know that I generally show no mercy to jelly-spined Republicans, but I praised GOPers for approving last year’s Ryan budget. The same will be true if they approve this year’s version.
P.S. I am frustrated and nauseated by all the people who are fixating on whether Congressman Ryan’s plan balances the budget in 10 years, 20 years, or whenever. What matters is shrinking the burden of government. I hereby bestow the Bob Dole Award on all the people who are mistakenly focusing on the symptom of red ink rather than the underlying disease of bloated government.
P.P.S. I’m happy to report that there is no value-added tax in the revenue portion of Congressman Ryan’s budget. There is a VAT in his Roadmap plan, and I endlessly worry that this poison pill will re-emerge and ruin other good fiscal plans put forth by the Wisconsin lawmaker.
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[…] But I believe in being honest and nonpartisan, so I also groused that it wasn’t as good as the 2011 and 2012 versions. […]
Great post, Dan! I firmly agree with Mitchell’s golden rule and all lawmakers would be wise to adhere to it. How can you even justify a growth in government faster than the private sector? The private sector funds the government!
[…] discussed in the video, the reform (which has been part of the Ryan budget that’s been approved by the House) basically leaves the program as is for current retirees […]
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[…] believe in being honest and nonpartisan, so I also groused that it wasn’t as good as the 2011 and 2012 […]
[…] in being honest and nonpartisan, so I also groused that it wasn’t as good as the 2011 and 2012 […]
[…] Last year, he put forth a budget that limited spending so that it grew 3.1 percent per year. […]
[…] Last year, he put forth a budget that limited spending so that it grew 3.1 percent per year. […]
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[…] put together a good budget and got the Republican Party to rally around the plan – a remarkable achievement considering […]
[…] I’m glad that I exposed the dishonest Washington budget math used by critics of the Ryan plan (which allows government spending to grow by an average of 3.1 percent per year). […]
[…] I’m glad that I exposed the dishonest Washington budget math used by critics of the Ryan plan (which allows government spending to grow by an average of 3.1 percent per year). […]
[…] I’m glad that I exposed the dishonest Washington budget math used by critics of the Ryan plan (which allows government spending to grow by an average of 3.1 percent per year). […]
[…] Want to know what to think about Representative Paul Ryan’s budget and Medicare plan? Look no further. […]
How much longer can we run up these huge deficits? If the Federal Reserve has no money to buy anything then how could have they bought more of our debt than China owns. The case could be made that we are walking on egg shells and need to balance the budget now at the 14% level of GDP that we are now collecting in taxes. We could be heading toward an economic collapse sooner than we think if we don’t stop spending so much?
[…] Congressman Ryan’s Budget Restrains Spending Growth, Allows Private Sector to Expand Faster than B… […]
[…] plan in more detail in the Wall St. Journal. You can read generally favorable analysis of it from Dan Mitchell, and a typical liberal hack job by Ezra “the Constitution’s too old to understand” Klein at […]
User fees > Flat consumption tax > Flat value added tax > Flat income tax.
Although, actually, I think 2 (or at most 3) bracket is better than truly flat (1 bracket) taxes, and you can replace welfare with a negative rate in the first bracket. Dan’s argument, as I understand it, is that flat income tax is the most politically feasible and that the trade-off is worth it and that a VAT wouldn’t replace an income tax, but instead supplement it, obviously a worse situation.
[…] plan in more detail in the Wall St. Journal. You can read generally favorable analysis of it from Dan Mitchell, and a typical liberal hack job by Ezra “the Constitution’s too old to […]
Why can’t they propose a budget with negative growth, oh wait they are politicians.
I need to find a deserted island that’s completely off the charts.
VAT with a balanced budget amendment?
I live and have lived under a VAT most of my life. Why do you think that Europe, Britain, and Canada have had such deficits?
Could the guaranteed tax income from a VAT be something to do with the excessive spending and growing budget deficits? Naaw, can’t be, after all isn’t it totally “fair”.
the problem is government spending, and giving more alcohol to an alcoholic has never solved the problem!
I would prefer a VAT to an income tax anyday. VAT is ‘fair’ since all residents would pay. Once they start paying, all residents will focus on government spending. No more culture of dependance
Imagine a nation that would really know, every day, what its government spends of our hard earned $.
Also imagine the reaction of a president’s vote for an increase (or a decrease) to the national tax rate. We can easily measure a VAT, we can’t easily measure the income tax.
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I thinks his budget is beyond silly. It counts on other politicians adhering to it down the road. Only cutting deficit spending NOW will do the job.
Apparently, the real intent of our DC overlords is to placate their donors till someone else, e.g. the bond market, says stop. I’m disgusted with their cowardice because the powerless in this country have to pay their tab.
Ryan’s plans were and are inadequate and highly political. If you want a serious plan adopt Ron Paul’s and watch this country rocket into prosperity.