Let’s play Jeopardy!
OK, does everybody have their buzzers ready? Here’s the answer:
The correct question is:
“Who are authors of great works of fantasy, Alex?”
I’ve been reading through Paul Ryan’s latest “budget” document, and I have to say that I’m impressed. The world down the Ryan rabbit hole rivals anything created by the other three fantasy authors listed above. It is a place where the impossible is made real, and where obstacles such as the Great Abyss of Illogic and the Chasm of Implausibility are reduced to mere cracks in the sidewalk by prodigious leaps of imagination and acts of “let’s pretend”.
For example, just as Rowling’s work requires us to believe in witches, and Tolkien’s work in the existence of dwarves and elves, the creator of RyanWorld instructs us to pretend that by 2050, spending on all federal programs other than Social Security and the major health care programs will amount to no more than 3.75 percent of the nation’s GDP. That belief is a fundamental building block for the rest of Ryan’s financial structure.
Now, why is that so implausible? Well, today we spend 12.5 percent of GDP on those programs, so right off the top we’re talking about a 70 percent reduction in the share of our wealth going to such efforts. And I can already see many readers nodding their heads out there, believing that to be a good thing.
But let’s take a closer look, shall we? In addition to such things as veterans’ health care, transportation infrastructure, student loans, the National Parks System and air traffic control, the category in question includes all of our spending on national defense.
This year, spending on defense alone amounts to 4.6 percent of GDP, which makes it rather problematic to reduce total spending in this category to 3.75 percent of GDP.
Or as the Congressional Budget Office drily notes:
“By comparison, spending in this category has exceeded 8 percent of GDP in every year since World War II. Spending for defense alone has not been lower than 3 percent of GDP in any year during that period.”
To make RyanWorld come true, in other words, we would have to eliminate absolutely everything in the federal budget except Social Security, defense and health care. And even after doing all that, we would still be forced to cut the share of national wealth that we devote to defense by almost 20 percent.
But don’t worry: As if to compound the make-believe character of his proposal, Ryan reassures us that national defense will be the nation’s number one budgetary priority and that he intends to block across-the-board spending cuts at the Pentagon agreed to just last year.
Now, let’s turn to the revenue side of the equation.
While slashing federal health subsidies for poor people by some 75 percent, Ryan proposes to lower the top tax rate of 35 percent to 25 percent, a great boon to the richest of Americans.
In addition, he would not just reform but eliminate the Alternative Minimum Tax, which was originally designed to ensure that the most affluent taxpayers at least paid something. He also proposes to reduce the corporate tax rate from 35 to 25 percent, another boon to the affluent. Finally, he proposes to eliminate corporate taxes on profits earned overseas, which would add another incentive to companies to relocate offshore.
Is anyone sensing a theme here?
Oh, and Ryan would do all that yet somehow not reduce revenue to the federal government. He doesn’t tell us how such magic will be performed, only that it will. He also ordered the CBO to treat that fantasy as reality when it assessed the impact of his plan.
While it followed those orders, CBO made clear in its report that it wasn’t necessarily buying it:
“In particular, CBO has not considered whether the specified paths are consistent with the policy proposals or budget figures released today by Chairman Ryan as part of his proposed budget resolution.”
Again, Ryan has offered no specifics about how he would turn down into up. However, based on what is publicly known, the Tax Policy Center ran the numbers to try to ascertain the fiscal impact of these cuts:
“The Tax Policy Center estimates that a similar corporate rate cut, AMT repeal, and a two-rate individual system would reduce revenues by about $4.5 trillion through 2022, even after accounting for the $5.4 trillion cost of extending the 2001/2003 tax cuts. In 2022 alone, a Ryan-like plan would reduce revenues by about $600 billion.
To put it another way, TPC figures such a tax package would generate revenues of about 15.8 percent of Gross Domestic Product in 2022. His budget aims to collect about 18.7 percent. That means he’d have to find about $700 billion in new revenues by cutting tax preferences.”
Let’s stretch our imaginations still further. Let’s pretend that Ryan is actually serious about cutting tax preferences. Where might he turn to find the missing revenue?
According to the Joint Committee on Taxation, the single biggest such expenditure is the deduction on mortgage interest. The second largest allows employers to deduct the cost of health insurance. The third largest allows employers to deduct pension contributions.
Who do you think would be hurt hardest by abolishing such deductions? It would be the middle-class taxpayer whom Ryan, in yet another flight of fantasy, claims to be defending.
In “Alice in Wonderland,” the Queen of Hearts bragged that “sometimes I’ve believed as many as six impossible things before breakfast.” But even the Queen would be hard-pressed to believe all this.
– Jay Bookman