Paul Ryan: My Plan Can Balance the Budget in 10 Years

By Matt Cover | March 20, 2012 | 9:37pm EDT

House Budget Committee Chairman Rep. Paul Ryan (R-Wisc.) (AP Photo)

( – House Budget Committee Chairman Paul Ryan (R-Wisc.) said that under a different economic growth scenario than that assumed by the Congressional Budget Office (CBO), his budget can balance over the 10-year window that conservative groups, such as the Heritage Foundation and the Club for Growth, have said is the ideal goal.

“Under the right kind of economic growth scenarios--under what I think are more realistic scorekeeping--it is done,” Ryan said at a press conference on Tuesday in unveiling his budget, The Path to Prosperity, for fiscal year 2013. “If you put this budget through what we think are more reasonable projections of the economy, then that is accomplished.”

In other words, if the economy grows faster than current government estimates predict, Ryan’s budget could balance within 10 years, well before the 2040 date it is currently projected to balance in.

Ryan said the reason his current estimates indicate a much longer time horizon than 10 years is because the Budget Committee must use the Congressional Budget Office’s (CBO) economic projections – forecasts that Ryan thinks are wrong.

“The issue is we, as the Budget Committee, must use the CBO baseline, the current law baseline,” he said.  “Here’s the problem: the CBO in their baseline assumes a $4-trillion tax increase starts in January. CBO therefore assumes, rightfully, the economy goes down. But we have to use that baseline.”

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That $4-trillion tax increase Ryan mentioned is the combination of the expiration of the Bush tax rates and the implementation of the Alternative Minimum Tax, which the CBO assumes would depress economic growth.

Because economic growth is the primary driver of government revenue, an economy weakened by tax increases will lead to lower government revenue and thus a higher deficit.

If one assumes a higher economic growth rate than the CBO does, then balancing the budget in 10 years is possible, since a higher growth rate will lead to higher tax revenues under Ryan’s proposal, balancing out the tax cuts he puts in place.

President Barack Obama and Vice President Joe Biden. (AP Photo/Charles Dharapak)

Higher economic growth would also lower government spending on safety net programs, which would lower overall federal spending and lead to reduced deficits. Also, the lower debt projected in Ryan’s plan would reduce federal interest payments and borrowing costs, further reducing government spending and leading to lower deficits. Lower debt also increases economic growth by reducing so-called ‘crowd-out’ where government borrowing hurts economic growth by taking money out of the private sector.

The CBO’s current long-term projections for GDP are that once the economy recovers from the recession, the economy should grow at about 2.5 percent annually, which is its historic long-term growth rate.

When asked what economic growth scenario would be needed for Ryan’s budget to balance within 10 years, the Budget Committee told that a full analysis of the Ryan budget’s impact on the economy would be released soon, including the growth projections that would balance the budget in 10 years.

According to Rep. Ryan, his budget would, among other things,  cut federal spending by $5 trillion relative to President Barack Obama’s budget; would repeal the Affordable Care Act (“Obamacare”); would prevent Obama’s proposed tax increases; and reduces the size of government to 20 percent of the economy by 2015.

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