Ryan's spending cuts aren't just big, they are impossible
What would you cut?
By Alex Hern Published 14 August 2012 9:07
Yesterday, we touched on why Paul Ryan's budget will inevitably lead to skyrocketing deficits. But one part of that in particular deserves unpacking: Ryan wants to cut almost all of the discretionary federal budget down to just 0.75 per cent of GDP. That is, bluntly, impossible.
The (simplified) argument against Ryan's "fiscal credibility" is that he wants to cut taxes and spending. But while no-one ever argues with tax cuts, the spending cuts he has laid out are implausible. As a result, his plan would result in lower taxes but the same spending, creating a budgetary black hole which will rapidly increase the deficit.
The claim about spending cuts, however, deserves some unpacking. Leaving aside for the moment Ryan's plans for Medicare, Medicaid and social security, he wants to reduce spending on everything else to 3.75 per cent of GDP by 2050.
That "everything else" includes defence spending, which Mitt Romney has separately promised to guarantee receives 4 per cent of GDP, and which has in fact never fallen below 3 per cent of GDP. Given even Ryan doesn't plan to fund federal services with negative money, lets assume that his plan calls for 3 per cent of GDP to be spent on defence, leaving 0.75 per cent of GDP to be spent on everything in the federal budget which is not Medicare, Medicaid, social security or defence.
America's GDP for 2011 was $15.09trn, which means Ryan's discretionary budget has a little over $113bn to allocate. What costs $113bn?
The administration for children and families is a centralised agency under the aegis of the Department of Health & Human Services which provides most welfare services aimed at children and families. It takes up $16.2bn of federal funding.
Food and nutrition assistance distributed by the Department of Agriculture stops people starving. It costs $7.8bn.
The National Science Foundation spends $1.4bn on Maths and Physics research, its largest single spending area (largely due to the fact that health research is given to the National Institutes of Health instead).
The National Oceanic and Atmospheric Administration – NOAA – is roughly the equivalent of the Met Office. It costs $5.5bn a year.
The Department of Energy spends $0.5bn on advanced computing research, $0.8bn on High Energy Physics, and $2.0bn on basic energy research, all of which ensure that American energy supplies are fit for the future.
NASA cost $18.7bn in 2012, and managed to land a rover on Mars this year, which has got to count towards some value for money.
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The Internal Revenue Service – although mostly concerned with bringing money in, rather than spending it – required a budget of $13.3bn to do just that.
$2.4bn was spent on HIV/AIDS prevention and treatment domestically and $5.6bn on the same overseas. $2bn was spent on public health responses and dealing with infectious diseases, and $4.6bn was spent on the Indian Health Service, which provides healthcare to Native Americans.
The Postal Service cost $5.9bn and the Federal Aviation Administration spent $13.1bn. Proving, yet again, that trains rule and planes drool, the Federal Railroad Administration cost just $3bn.
The Bureau of Alcohol, Tobacco, Firearms and Explosives – which, yes, sounds less like a government department and more like the best party shop ever – had a budget of $1.1bn in 2012.
The two highest resourced Institutes of Health were the Cancer Institute, and Allergy and Infectious Diseases. They got $5.2bn and $5.0bn respectively.
Those programs alone – some big, some small - spend, between them, $114.1bn a year. That is $900m more than what Paul Ryan wants to spend on the entire non-defence discretionary budget.
Or, to put it another way, we have used up the US budget on projects which are entirely valuable, and which would cause real pain if cut, without even touching on:
The FBI ($8.1bn), Elementary and Secondary Education ($41.4bn), Financial Aid to university students ($31.4bn), the entire legislative, judicial and presidential branches ($12.3bn), public housing and housing assistance ($35bn), the FDA ($2.7bn), the EPA ($9.0bn) and FEMA ($6.8), the highway administration ($43.6bn) and the entire department of the interior ($12.0bn).
(Those departments, by the way, have a budget totalling $202bn. So even if everything else in the entire discretionary budget didn't exist, they would still have to lose almost half their budgets to stay within Ryan's spending limits)
Oh, and that's not even mentioning the smaller agencies, which would likely come under the knife in an attempt to squeeze out every last cent. Agencies like the FTC, Holocaust Memorial Museum, FCC, Smithsonian Institution, SEC and the entire District of Columbia may have budgets which amount to little more than rounding errors in the grand scheme of things, but you can be sure some of them will go as well.
But all of this assumes that Paul Ryan will be able to get defence spending down to its historic minimum of 3 per cent of GDP. Right now, the National Security budget is $754bn, and the Department of Defense alone commands $671bn. That is 5.0 per cent, and 4.4 per cent, of GDP, which Ryan would need to slash.
The spending cuts he desires are impossible. They will not materialise, and never could be expected to. And so Ryan will either have to abandon his plan entirely, or pass unfunded tax cuts. If he really is a deficit hawk, that has got to qualify him as one of the most incompetent ever
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9 comments
I don't see any grounds to assume the US economy will ever return to the conditions held by some to be normal. The high growth of the 1950s was due to very special global conditions - all their competitors were in ruins and rebuilding shattered infrastructure.
This kind of situation is unlikely to recur (thankfully) and the US will have to make it's projections based on what is a likely cycle of short term booms and intermittent recessions/depressions.
It's extremely foolish or just dishonest to claim there will be high growth for any significant period during this century.
There is also a major brake on growth - either the US (and others) start curbing greenhouse emissions or they live with the consequences - already apparent during every weather report. For a while they will have to deal with both since much of the damage is already done.
It's also tragic that the US military continues to consume so much while achieving so little. It is the nature of militaries to plan and equip for the last war and not the next war, meaning the US has some quite ridiculous assets that soak up resources and accomplish nothing. New spending on fighter jets is one area that has pulled in billions and yet they have no credible enemy. There are many more.
We know Obama has been a bit of a disappointment. His hands have been tied by obstructive Republicans who should have been more patriotic and his feet shackled by a financial crisis/depression that he had no hand in making.
It is easy for the right wing loonies to criticism Obama for the economy but they have zero concrete suggestions and just repeat the mantra about 'entrepreneurs, lower taxes making America being 'strong' again'.
America is in dire straits and needs to address itself to it's real problems - it will never be rich again like it was or strong again like it was. There is no time to waste on silly right wing fantasies.
Love the "scouring" of the Ryan budget when Obama can't get a budget approved & the Dem Senate just sits on their hands... Barry o has spent $4 trillion since taking office & we have what??? 10,000 senior boomers hit 65 years each day in the US. This race shouldn't even be close. Two paths: "equal outcomes" or equal opportunity". Take your pick. This will be a beatdown!
Um, it may have escaped your notice that the Republicans hold the House, which may explain why they are blocking the budget. Most of them voted for the Ryan budget, so hopefully Dems will hang it like an albatross around their necks.
You do remember Obama's credit downgrade? Historic. Congress approval now at 10%. 201o Wisconsin landslide vote results. Romney/Ryan now pulling 10,000 at events, crazy Biden got 660 & can't remember what state he is in. I'd be scared too...
Let's start by cutting Ryan's salary for even proposing such a silly "budget".
You must realize that the current GDP is in a depression era environment. Once the drivers are in place to get the economy back to 'normal', which will mean to reduce spending on irrelevant (unproductive) sectors while providing a predictable long term tax structure for entreuperneurs to take chances again, the GDP will grow, thus reducing the percentages. Until then, all of Ryan's plans look impossible. Government spending is, and always has been, the most inefficient means to produce anything. It presupposes what the people want and need, invites waste, fraud and abuse. Why would anyone advocate continuing it as a formula for success when it has never worked in the history of man? When will people finally get their head out of the sand? Just look at Europe, USSR, Cuba, etc. The proof is everywhere.
You must realize that the current GDP is in a depression era environment. Once the drivers are in place to get the economy back to 'normal', which will mean to reduce spending on irrelevant (unproductive) sectors while providing a predictable long term tax structure for entreuperneurs to take chances again, the GDP will grow, thus reducing the percentages. Until then, all of Ryan's plans look impossible. Government spending is, and always has been, the most inefficient means to produce anything. It presupposes what the people want and need, invites waste, fraud and abuse. Why would anyone advocate continuing it as a formula for success when it has never worked in the history of man? When will people finally get their head out of the sand? Just look at Europe, USSR, Cuba, etc. The proof is everywhere.
But what is the evidence the private sector are more efficient at spending money? After all, the primary goal of most private sector companies is to make not just *a* profit, but year on year, to make a bigger profit than the year before, regardless of where the country is in the economic cycle.
Evidence from the UK tends to suggest that chargeable privatised services (i.e. service where the public pay up-front, e.g. utilities, public transport) tend to accumulate wealth at the top of the organisation, increase prices far faster than inflation, and over time aggregate into an oligarchy of a handful of companies (or even worse, local monopolies) which reduces most of the benefits of competition.
Only yesterday was it simultaneously announced that rail companies will increase fares by an average of 6.2% in January and that our fares are significantly higher than the rest of Europe (where, in most countries, there's still a national rail operator). Most bus services are run by one of three companies (First, Stagecoach, National Express - who also run a significant portion of the rail network together with Arriva Trains), and many companies are based overseas (including significant ones owned by other governments) - one of our biggest electricity suppliers is EDF (80% owned by the French government), while Arriva Trains is part of Deutsch Bahn (100% owned by the German government).
Meanwhile, many civilian public sector contracts and posts are being outsourced to a single company - G4S. Need I say any more about why privatisation isn't always the panacea to every problem?
Entirely correct, but even
your sensible ideas will come to nothing unless the entrepreneurs remember to wear tin foil in their hats to stop communists from reading their thoughts.