Thursday, March 4, 2010

Paul Ryan Correct on Budget Gimmick Claim

From OMB Director Peter Orszag's blog:
...the President has put forward a health plan that would reduce deficits by roughly $100 billion over the next ten years and by roughly $1 trillion in the decade after that.

Recently, a lot of attention has been paid to a claim that this deficit reduction is achieved only through a business-as-usual Washington budget gimmick: paying for just a few years of costs with many more years of savings.
Paul Ryan isn't the only one making this claim I am sure, but he certainly is one of the most prominent. Especially since he made this claim during the televised health care summit last week.

Ryan's criticism was specifically that the healthcare plan was crafted so that cost savings started right away, but costs didn't start occurring until 2014. Government programs are often looked at in a ten year window, so in this window you have 10 years of savings and only 6 years of costs, which make the program seem less expensive.

Mr. Orszag acknowledges that this is a gimmick that is often used in Washington, and then tries to persuade us that this is not what the current administration is doing. Unfortunately, his argument mainly consists of repeating "this is not a gimmick" over and over again within the span of a few short paragraphs.

Of course we don't have to simply take Paul Ryan's word that a gimmick is, in fact, what is going on here.

Liberal blogger Ezra Klein, known for in-depth analyses of politics and policy, published a long blog post discussing Ryan's criticisms. Ryan supporters may not agree with Klein's conclusion, but there can be no doubt that Klein is offering a serious consideration of Ryan's equally serious proposal.

With regard to the budget tactic that Mr. Orszag insists is not a gimmick, Klein is unequivocal:
Ryan says that "the true 10-year cost of this bill in 10 years" is $2.3 trillion. On this, Ryan is right, but misleading. In Ryan's favor, Democrats have artificially lowered the cost of the bill by pushing its start date back to 2014, even as its 10-year budget window begins in 2010. The 10-year cost of the bill is really only counting six years of operation. This was a deceptive effort to keep the bill's price tag under $1 trillion, even as the bill's price tag was really quite a bit more. Point for Ryan.
So contra Orszag, the Democrats are using the same old budget gimmick to sell their healthcare plan. Klein then argues Ryan is misleading because in the second decade savings accrue even faster than costs, so in essence it's a gimmick with an expiration date!

Oh. Well why didn't Mr. Orszag just say so?


Jay Bullock said...

Klein then argues Ryan is misleading because in the second decade savings accrue even faster than costs [. . .]. Oh. Well why didn't Mr. Orszag just say so?

Um, he did. In the very blog post you linked to:
The purpose the tried-and-true gimmick described above is to make a proposal that adds to long-term deficits appear fiscally responsible. But if that were the course we were taking, we would expect to see a large fiscal hole at the end of the first decade and larger and larger deficits in the second decade. Instead, over the long-term, the savings under the President’s plan are expected to grow faster than the costs.

Meaning, of course, that Paul Ryan is not completely correct on his claim.

J. Strupp said...

...and, if Klein is correct, it appears as though Ryan is cherry picking numbers to suit his position.

Obviously, this is nothing new in Washington, but it certainly seems as though Ryan isn't telling the whole tale here.

Jeremy R. Shown said...


Thanks for taking the time to comment.

I went and re-read Orszag's post. By my count he used the word "gimmick" six times, but never did he say, "we use the tried-and-true budget gimmick in the first ten years to make the costs more palatable, but then the real savings kick in and we don't need it anymore," which is exactly what they are doing.

It is what Ryan is alleging, and what Klein confirms is going on.

I know that Ryan is a particular bete noire of yours, so I understand where you are coming from.

Thanks again.

Jeremy R. Shown said...


Good to hear from you again.

If Klein is correct, then perhaps Ryan is cherry-picking, but so are Orszag and Obama, and that's my point.

I think we should hold Ryan and Obama to the same standard, which I think Klein does.