The latest fuss over Rep. Paul Ryan's budget plan -- a perennial topic, apparently, because it's the only Republican public policy proposal with even vague specifics -- has prompted another controversy: Megan McArdle sniping at Paul Krugman over which congressional organ does which tax estimate. More on that fascinating issue down the road, but let's get down to brass tacks: Where did Ryan's revenue estimate come from?
It was made up by Ryan's staff. The CBO, which often but not always uses Joint Tax Committee revenue estimates in its scoring process, decided to use an estimate provided by Ryan's office in its rough analysis of the bill -- that revenue collection would remain unchanged over time at 19 percent of GDP. That estimate is reflected in all of CBO's analysis of the bill.
However, the Tax Policy Center did its own analysis [PDF] of the bill that looked at how Ryan's tax policies would change that revenue number. Unsurprisingly, for a plan with massive tax cuts, they found that "Ryan’s plan generates much less revenue than he projects. If all taxpayers chose the simplified system, it would produce about 16.8 percent of GDP by 2020, far below the 18.6 percent he figures for that year." Under a further option for tax-payer choice, revenue would be even less. That's why, for all its austerity and intentions to radically overhaul entitlement programs, the bill does not reduce the deficit over 10 years as much as President Obama's budget.
Regardless of whether Ryan could or should have gotten a better estimate of his revenue, what we do know is that his office's initial revenue estimate was unaccountably high, and we don't know how his staff got that number. When the Tax Policy Center did its own analysis, it found that the bill would "likely fall far short of his goal of balancing the budget and paying off the national debt by 2080." That's what matters here: Ryan's bill, regardless of what we think of the policies it employs, doesn't work.
-- Tim Fernholz