by Yuval Levin
In his column this morning, Paul Krugman writes:
The Ryan budget purports to reduce the deficit — but the alleged deficit reduction depends on the completely unsupported assertion that trillions of dollars in revenue can be found by closing tax loopholes.
He then proceeds to work himself purple with rage over this assertion, and the fact that the budget does not get into the details of which loopholes would be closed. He says Ryan “claims that he has a secret plan to raise trillions of dollars in revenue, a plan that he refuses to share with the public,” and that the entire fiscal logic of the budget rests on this sleight of hand. “So the Ryan budget is a fraud,” he writes:
Mr. Ryan talks loudly about the evils of debt and deficits, but his plan would actually make the deficit bigger even as it inflicted huge pain in the name of deficit reduction. But is his budget really the most fraudulent in American history? Yes, it is.
Well it’s good to have that cleared up. But while it’s nice to see Krugman stomp his feet and wave his hands, someone might think about interrupting his tantrum for just a moment, wiping his brow, and letting him know that his premise is actually completely false. The Ryan budget in fact does not count on tax reform for any of its deficit reduction. None. The budget includes a general outline of goals for a revenue-neutral tax reform. So its revenue projections are simply CBO’s current-policy baseline—they are where CBO says revenue would be if today’s rates remained in place, but Ryan proposes to get there in a way that would be much more conducive to economic growth. His revenue assumptions are therefore lower, not higher, than Obama’s (who wants to raise taxes by $1.9 trillion) and lower, not higher, than CBO’s current-law baseline (which assumes the Bush tax cuts all expire). This makes them more realistic, not less, than the assumptions in the president’s budget. Ryan’s deficit reduction comes from spending cuts.
The budget’s tax section is more general and less detailed than its other sections because the Budget Committee can’t write tax legislation, and so cannot produce a detailed proposal. Most past budget resolutions have not included tax reform discussions at all. But Ryan wanted to show how tax reform would fit into the larger vision he lays out and so provided an outline to which all the Republican members of the Ways and Means Committee (which does write tax legislation) agreed. It will be up to that committee to produce a detailed proposal. But the outline the budget does provide very clearly states that its goal is a revenue-neutral reform, so it doesn’t count on that tax reform for any of its other assumptions. The CBO score of the budget, which says it will reduce the deficit by about $3 trillion compared to Obama’s budget, therefore does not count on any savings from any closing of any tax loopholes.
Is Krugman’s column therefore really the most fraudulent in Krugman’s history? Not even close, alas, but it’s pretty silly.