Paul Ryan Unveils FY 2012 Budget

Apr 5, 2011 | Budgets & Projections

Today, Rep. Paul Ryan (R-WI), chairman of the House Budget Committee, unveiled his FY 2012 budget proposal. His budget would bring debt down to 67.5 percent of GDP by 2021 and would reduce the deficit by over $4.4 trillion over the next ten years when compared to CBO's score of the President's budget.

At the heart of this proposal are significant deficit reducing reforms to Medicaid and Medicare: the creation of a premium-support model for Medicare (although this has minimal effect over the 10 year window as it begins in 2022), changing Medicaid from an entitlement program to a block-grant funded program to the states, and repealing the coverage provisions and tax increases from health care reform. The Medicaid change would save over $700 billion over ten years. Ryan’s budget would also cap non-security discretionary spending at FY 2006 levels, freeze it for five years, and then holds security spending growth to inflation thereafter. On security spending, Ryan's proposal does very little--mirroring the President's request to reduce defense spending by $78 billion over five years.

On tax reform, Ryan assumes that the 2001/2003 tax cuts are extended throughout the decade. He also calls for fundamental tax reform via eliminating and reducing many tax expenditures and reducing marginal rates, but does so in an entirely revenue neutral manner. Ryan’s budget also calls for a special process to address Social Security if it is projected to be insolvent--which it certainly is (see here for more).

Irrespective of the policies, the budget succeeds in reducing yearly deficits and stabilizing and eventually reducing federal debt. Since the budget focuses on federal health spending both in this decade and beyond, federal deficits and debt are further reduced in the out-years and would be brought to more sustainbable levels-- debt is reduced to 48% in 2040 and 10% in 2050.

Deficits as a Percentage of GDP

Plan201120122013201420152016201720182019202020212012-2021
CBO March Baseline9.8%7.0%4.6%3.6%3.2%3.3%3.0%2.9%3.0%3.1%3.1%3.7%
President's Budget9.5%7.4%5.5%4.4%4.1%4.4%4.3%4.3%4.7%4.8%4.9%4.8%
Rep. Paul Ryan's Budget 9.2%6.3%4.3%2.9%2.4%2.5%2.0% 1.8%1.9%1.8%1.6%2.7%

Rep. Paul Ryan's budget has signifigantly lower deficits than President Obama's budget under the same economic conditions with a deficit over 3.3 percentange points lower in 2021 and averages 2.1 percantage lower over the ten year window. As a result, the debt path is also on a better trajectory.

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As CRFB President Maya MacGuineas said,

"This is a bold budget, and Congressman Ryan should be congratulated for putting forward structural budget reforms to address our unsustainable debt path. However, while the proposal deserves praise for being bold, the national discussion has moved beyond just finding a plan with sufficient savings to finding one that can generate enough support to move forward.
 

All parts of the budget, including defense and revenues, will have to be part of a budget deal. Given the need to put a budget fix in place as quickly as possible, we need to turn our attention to developing a comprehensive plan that can garner broad-based support. Time is not on our side here.

We hope that Congressman Ryan's proposal will not generate attacks but rather lead to a larger discussion over how to move forward with a comprehensive solution. With lawmakers overly focused on a very small part of the budget, this is an important reminder of the tremendous fiscal challenges the country faces and that we should be looking to save not just billions, but trillions. Now that both the White House and House Republicans have made their opening bids, this continues to reinforce our belief that a comprehensive plan to fix the budget like the one the Fiscal Commission recommended has the best hope of moving forward."

For a more detailed analysis, see our Press Release from today and for detailed analysis of the President’s Budget (click here to read our blog series on the President's budget).