Paul Ryan's Budget Is Justified By Implausible Projections, But Doesn't Rely On Them

A savvy question from TP that I'm glad to answer since I've spend a fair amount of the past 24 hours trying to figure it out:

What would Obama's budget look like in the longer term if you use the wildly optimistic assumptions about unemployment, construction, etc used in Ryan's budget? Would Obama's budget result in a higher or lower deficit than Ryan's if you assumed a 2.8% unemployment rate?

Or to put it another way, are Ryan's numbers just driven by the Heritage Foundation's laughable macroeconomic projections? The answer is that, no, they're not. The reason is that Ryan's proposals are all oriented around shares of GDP. On taxes, for example, he proposes cuts in the income tax rates paid by high-income people and then stipulates that total revenue will nonetheless equal the Bush share of GDP via a mysterious middle class tax increase. Similarly, what he does with Medicare is first privatize it, and then stipulate that the private vouchers will grow at the rate of general inflation plus one percent. Under that plan, Medicare spending as a share of GDP shrinks by definition. This also means that every time the engineers in Silicon Valley find out a way to make a cheaper computer, your Medicare benefits go down. And he does something similar to Medicaid, and then he does it again to basically every anti-poverty program out there.

The math of this part of his agenda is totally impeccable. What's deficient is the public policy and this is where Heritage's bad math kicks in. After all, why would you enact this crazy agenda? Now in the case of Paul Ryan the answer is pretty clear—he's an Ayn Rand fanatic who believes that any effort, whether public or private, to help the poor is immoral. But it's difficult to sell that as a political agenda! So instead his argument is that we should do it for the macroeconomic benefits. What benefits? Well, the benefits the Heritage Foundation is pretending the plan will have.