Ryan’s promise to balance the budget in a decade with no tax increases implies cuts in federal spending unseen since the U.S. disarmed after World War II. Most lawmakers are horrified that the automatic spending cuts now scheduled for March would cut military spending by 9.4 percent and domestic spending by about 8 percent. (And note this so-called sequester would exempt Social Security and Medicaid as well as Medicare benefits from any cuts).
So I got to wondering about the nature of this "cut." And I wanted to go back to the earlier post I had done on balancing the budget. If you recall, I ended that post asserting that we would be running a deficit of about 1.2% of GDP assuming:
1. We grew spending at the rate of growth of inflation plus relevant population
2. We asked government (ex-transfer payments) to improve efficiency by 10% over a decade.
3. We eliminated spending on the wars and brought "automatic stabilizers" back to their non-recession levels of spending.
So I wanted to revisit the draconian cuts argument. In point of fact, the tax increases passed at the beginning of this year account for an improvement in the picture of about 0.4% of GDP so that would take our 1.2% of GDP deficit down below 1%. So, if we did nothing more than have government grow "base" spending at the rate of inflation plus population, we'd get the deficit down under 1% of GDP by 2022 and on a trend to balance within a few additional years.
I'd also point out that the statement from the TPC is factually incorrect. Let's say we reduced spending from current levels (22.8% of GDP in FY2012) down to the 19% that will be collected in taxes under current law by 2022. That's a reduction of 3.8% as a percent of GDP over a decade. From 1990 to 2000, spending as a percentage of GDP fell by 3.7%. From 1991 to 2001, it was pretty much the same. The comparison to WWII is highly inapt. From 1944 to 1954, spending fell by more than 20% of GDP. What the Ryan budget would set us up for is something like the 1990s and nothing like the period 1945 to 1955. You'd think the folks at TPC would know better.