Spending and Revenue in the FY2015 Ryan Budget

Apr 1, 2014 | Budgets & Projections

House Budget Committee Chairman Paul Ryan (R-WI) released his FY 2015 budget today, outlining a series of changes that promise to reduce the debt as a share of the economy and balance the budget by 2024. Our initial analysis of the budget took a look at the impact it will have on the deficit and debt. This post examines spending and revenue levels in the Ryan budget. 

Ryan's budget would significantly reduce both discretionary and mandatory spending. Some of the largest cuts include repealing the coverage provisions in the Affordable Care Act, block granting Medicaid and food stamps, and reducing the federal contribution for civilian pensions. The budget proposal would also cut future non-defense discretionary spending to well below-sequester levels, while restoring most of the defense cuts in the sequester. As a result, outlays would fall from 20.5 percent of GDP in 2014 to about 18.4 percent by 2024 (or 18.6 compared to CBO's GDP projections). 

House Budget Committee FY 2015 Proposal (Percent of GDP)
 2015201620172018201920202021202220232024
Ryan Budget
Outlays20.2%19.5%18.9%18.7%18.8%18.9%18.9%19.0%18.7%18.4%
Revenues18.3%18.4%18.2%18.0%17.9%17.9%17.9%18.0%18.1%18.2%
Fiscal Dividend0.1%0.2%0.1%0.0%0.0%-0.1%-0.2%-0.2%-0.2%-0.3%
Deficit2.1%1.2%0.9%0.7%0.9%0.9%0.8%0.8%0.4%0.0%
Debt73.0%71.0%69.0%66.0%64.0%63.0%61.0%60.0%58.0%56.0%
Ryan Budget Without Fiscal Dividend*
Outlays20.2%19.3%18.9%18.7%18.9%19.0%19.0%19.1%18.9%18.6%
Revenues18.2%18.2%18.1%18.0%18.0%18.0%18.1%18.1%18.2%18.4%
Deficit2.0%1.0%0.8%0.7%0.9%1.0%1.0%1.0%0.6%0.3%
Debt72.8%70.0%68.4%65.8%64.1%63.1%61.4%60.5%58.9%57.2%
Current Law
Outlays20.9%21.1%21.0%21.1%21.4%21.7%21.9%22.3%22.3%22.4%
Revenues18.2%18.2%18.1%18.0%18.0%18.0%18.1%18.1%18.2%18.4%
Deficit2.6%2.8%2.9%3.1%3.4%3.7%3.8%4.2%4.1%4.0%
Debt73.2%72.6%72.3%72.6%73.3%74.2%75.3%76.8%78.0%79.2%

Source: House Budget Committee
*This section represents CRFB calculations if Ryan's budget were measured using GDP projections from CBO, without the bonus from economic growth that Ryan includes in his projections.

Meanwhile, the budget would leave total revenues unchanged, instead calling for revenue-neutral tax reform with a goal of achieving a top individual rate of 25 percent and eliminating the Alternative Minimum Tax while eliminating or reducing tax expenditures. Revenue as a share of GDP would rise, as under current law from 17.5 percent in 2014 to 18.2 percent in 2024 (or 18.4 percent relative to CBO's GDP projections). As a result, spending and revenue levels would be nearly in line by 2024 -- with the difference made up for by a "fiscal dividend".
 
[chart:9825]

 Source: House Budget Committee and CRFB calculations
Note: All numbers use CBO GDP

Spending levels in this year’s budget are higher than those in Ryan’s FY2014 budget proposal, while revenues are lower. However, this difference is is largely due to changes in CBO’s baseline, rather than major policy changes within the budget. Spending and revenue levels in last year's budget would also appear slightly different due to the Bureau of Economic Analysis's new methodology for calculating GDP -- though we've accounted for that adjustment in the graph below.   

[chart:9840]
Source: House Budget Committee and CRFB calculations
Note: All numbers use CBO GDP

In the end, the budget proposal is able to reduce spending significantly as a share of GDP, while allowing revenue to climb slowly as it would under current law.

We will continue to analyze other aspects of Chairman Ryan's budget proposal in the coming days.