Paul Ryan's Budget, Simplified: Save the Rich, Spare the Old, Forget the Poor

It balances the budget! But it solves our income inequality problem like a flamethrower solves a house fire.

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Reuters

Paul Ryan's new budget is quite long, but its thesis can be stated briefly. If you cut spending on the poor to the bone and radically change the U.S. government's promises to help needy people pay for health care, it is remarkably easy to balance the budget.

Ryan has been releasing an annual plan to sledgehammer U.S. spending for years now, but this time, the mighty hammer falls with a bit of a tailwind. Our deficits are already going down, by a lot. First was the Budget Control Act of 2011, which scheduled $900 billion of cuts over the next ten years. Second was the Fiscal Cliff Deal, which raised taxes on family income over $450,000. Third was the sequester, which cuts another $1.2 trillion -- half from defense, half from non-defense -- over the next decade.

Ryan pockets all of those savings. And he goes further. Much further. He repeals Obamacare. He cuts federal support for Medicaid. He cuts another $1 trillion from "mandatory spending", which is a deceptively anodyne catch-all for mostly (a) cash assistance to the unemployed, low-income, and veterans, and (b) retirement programs for vets and federal employees. 

But this budget is as notable for what it cuts as for what it doesn't cut. Social Security, defense, and Medicare -- together making up about half of the federal budget -- would scarcely be cut at all. After all, it's hard to win a Republican election if you abandon old voters and the defense industry. As for health care and cash support for the poor? That's where the hammer hits.

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Seen slightly differently, here's a pie chart of the cuts above. Health care cuts are in gray-scale. Yes, half of Ryan's cuts come from chopping health care spending.

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One might hope that, if the poor lose in spending cuts, the rich might lose in tax hikes? Oh my, if you have ever read a Ryan budget before, you are laughing uproariously at the suggestion.

The tax plan would cut the top rate to 25 percent -- a 15-point reduction for income above $450,00 -- but somehow it would also collect the same amount of revenue as the president's current policy. Quick math: If you cut tax rates for the top 0.1 percent in half, the only way to make the same amount of money is (a) to practically wipe out all of their tax advantages or (b) to raise taxes disproportionately on the bottom 99.9 percent. To be clear: As written, this is almost certainly a plan to raise taxes on the same lower-middle class which is also getting hit with massive spending cuts.

Ryan is most well-known as an entitlement reformer. And his Medicare reforms are serious. But in the next ten years, entitlements would scarcely change at all, really. Obamacare would never get off the ground. Medicare would hardly be cut. Social Security would see exactly $0.00 in cuts. In the next decade, Ryan's plan is essentially a vision of America where deficits fall because government assistance to the poor and sick rapidly shrinks. It solves our income inequality problem like a flamethrower helps a house fire.

***

AND ANOTHER THING: This isn't really about Paul Ryan's budget, specifically, it's about all budgets that graph America's debt-to-GDP ratio out through 2080.

Look, it's fun to talk about 2080, the way it's fun for children to make-believe they're astronauts and for men to imagine they're married to Heidi Klum, but can we stop pretending like projecting current trends 70 years is a useful way to think about the future?

If you read a stream of technology and budget columns side-by-side, you see one column of people guessing at an unpredictable future of rapid change, where robots take our job and control the world, and another stream of accountants predicting that nothing about today's trends will change EVER, least not the exquisitely precise pace of health care spending. But just LOOK at the pace of health care inflation: It's wildly unpredictable! It's fallen by 50 percent since 1990. It looks like a Universal Studios installation, for heavens sake.

Screen Shot 2013-03-12 at 9.31.08 AM.pngWho looks at this graph and thinks they can draw it for the next 70 years? Only a Washington budget analyst. To be fair: It's their job. To be more fair: That it's their job doesn't make it accurate, or even mildly useful, to anybody else.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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