Comparing the Budgets on Spending, Revenue, Deficits, and Debt

Update: This blog has been updated since its original posting to incorporate the House Democratic, Republican Study Commitee, and Senator Rand Paul (R-KY) budgets.

Throughout this week we have done a lot of analysis of budget resolutions as they have been released, breaking down many aspects of their policies and estimates. Now it's time to take a step back and see how the House Republican (Ryan), Senate Democratic (Murray), House Democratic (Van Hollen), Congressional Progressive Caucus (CPC), Republican Study Committee (RSC), Congressional Black Caucus (CBC) and Senator Rand Paul (Paul) budgets stack up on spending, revenue, deficits, and debt. The comparison is useful not just to compare the levels for each, but also to look at the timing and pace of the changes that are made.

First, we look at spending levels in the seven budgets. The CBC and CPC both increase spending to varying degrees -- the CPC budget much more in the short term -- but bring spending to 23 percent of GDP by 2023. The Murray and Van Hollen budgets hold spending between 21 and 22 percent of GDP for most of the decade. By contrast, the Ryan budget reduces spending below the baseline throughout the ten-year window, falling to 19 percent in 2023, while spending is reduced under the RSC budget reduces it to about 18 percent and the Paul budget to below 17 percent.

Source: HBC, SBC, CBC, CPC, RSC

Next is revenue. The four Democratic proposals all raise revenue to various degrees, CPC's revenue increase being the highest followed by the CBC and then the Murray and Van Hollen budgets, which are roughly the same. The difference between each is about a percentage point of GDP by 2023. The Ryan budget calls for comprehensive tax reform that would maintain revenue at current law levels, while the RSC would roll back the tax increases in the American Taxpayer Relief Act, thus having revenue slightly below Ryan.

Source: HBC, SBC, CBC, CPC, RSC

On deficits, the Murray, Van Hollen and CBC budgets take very similar paths, slightly increasing deficits in the short term above the baseline, but bringing them down to about two percent of GDP by 2023. The CPC budget does more on both fronts, increasing deficits by much more in the short term with jobs measures, but bringing deficits down more aggressively over the longer term than the other two budgets. The Ryan, RSC, and Paul budgets bring down deficits more aggressively in both the short and long term, reducing deficits throughout the ten-year window and beyond.

Source: HBC, SBC, CBC, CPC, RSC

Finally, we come to the debt-to-GDP ratios, which somewhat reflect the deficit story. The Murray, Van Hollen, and CBC budgets both have slight debt increases in the short term and put the debt on a downward path thereafter (the CBC is slightly more aggressive on debt reduction). The CPC includes large debt increases in the short term, but they get down to about Murray and Van Hollen's debt level by 2023. The Ryan, RSC, and Paul budgets have debt heading downward as a share of the economy throughout the ten-year window, with the RSC's path being slightly more aggressive than Ryan's, and the Paul's path much more agressive than both.

Source: HBC, SBC, CBC, CPC, RSC

We are pleased to see that each of these budgets calls for putting the debt on a downward path as a share of the economy this decade. The RSC and Paul budgets are obviously the most aggressive and successful towards accomplishing this goal, although the Ryan and Progressive Caucus budgets also put debt on a sharp downward path. We look forward to any additional budget resolutions lawmakers may introduce, which we will continue to analyze as they come out.

Econmic Growth

This is very interesting information. One thing I'd love to see would be a chart showing what the expected economic growth rates are that each plan is based on. I've seen an estimate that the Murray plan projects growth in the 4-6% range over most of the period. Obviously if any of the budgets are projecting GDP growth levels above what actually happens, then the charts above are dramatically affected.

Economic growth

All of the budgets use CBO's latest economic projections from February 2013. In those projections, economic growth is 1.4% in 2013, 2.6% in 2014, then accelerates to around 4% for the next few years before falling off to the 2%-2.5% range in 2018 and beyond.

Economic Growth Rates continued

Adam:

 

If I am reading your comment correctly, all of these budgets assume the same growth rate, and assume that drastic changes to fiscal policy would have no effect on economic growth? That makes this type of forecasting fairly worthless. It means the Ryan Plan will not balance in 2023, and that the CPC plan will probably have a somewhat higher deficit, and the Murray budget is probably the most accurate, in that it hews closest to current policy.

 

A lot is lost in these discussions because little of the analysis mentions the difficult of forecasting this out for 10-40 years, and when it does, opinion pages routinely ignore it.

 

 

 

 

Understandable

Obviously there would be effects on economic growth especially for the more ambitious plans, but it'd be fairly uncertain as well as to what exactly the economic effects would be. Plus, budget resolutions don't usually get evaluated by CBO or any other agency in great detail so it'd probably end up being the committees/groups themselves making that evaluation, which could potentially lead to all the plans' numbers being overly optimistic.

 

I agree with you that forecasts that far out are pretty uncertain (even a few years out) and they are too often treated as set-in-stone fact rather than what they actually are, projections.

 

 

Setting the Initial Parameters

I think the first thing to set is an equal % GDP for both revenue and spending, with a wall inbetween.This is what I like about the Simpson Bowles proposal, and I think the number they proposed (21%) is reasonable. Once you lay out such a plan, negotiation must be restricted within both halves. In other words, if you want more spending on specific items, you must reduce it elsewhere. If you want more or specific tax breaks, revenue must be raised elsewhere. 

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