Friday, February 5, 2010

More on Ryan Roadmap

Howard Gleckman at Urban noting that people are overstating the Ryan Roadmap. CBO estimated that revenues (taxes) of the nation would equal 19% of revenue over the long term (see table 1, page 6; in 2040, 2060 and 2080 assumes taxes=19% of GDP). The CBO did not estimate Ryan's tax proposal, meaning model what effect it would have on revenues because Ryan's staff asked them to make the 19% assumption. The tax plan is for a $25,000 standard exemption and then two rates: 10% up to $100,000 and 25% over $100,000.

The CBO letter clearly states this. But, it is important to keep in mind that the CBO letter provides no information whatsoever on the revenue side of the equation.

However, Ryan's plan is still a useful estimate in the senst of saying, if revenues are at 19% of GDP, here is the type of cuts in benefits necessary to get to long term solvency.

We don't know if Ryan's plan could produce 19% of GDP worth of revenue....and Gleckman says almost certainly not based on past scores of similar plans. It is worth noting that all the balanced budgets the U.S. has had since World War II have occurred in years in which revenues were around 20% of GDP.

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