How Much Might the Ryan Budget Have to Change to Reach Balance?

With the new expectation that the House budget resolution will reach balance in 10 years -- more than 15 years earlier than was projected last year -- there has been much speculation about how House Budget Committee chairman Paul Ryan (R-WI) will modify last year's budget to reach the more aggressive target. Jeanne Sahadi of CNNMoney has an article talking with budget experts, including our own Marc Goldwein, about ways in which the budget could balance within a decade. The ideas involve more optimistic assumptions, more aggressive health spending cuts, or an earlier start date for Medicare premium support. 

But the first idea mentioned in that article may be the most accurate one: banking the revenue increases from the fiscal cliff deal (ATRA). The deal reduced 2014-2023 deficits by about $850 billion relative to current policy, thus improving the budget outlook. Since these tax increases were not included in last year's House budget, they would improve the budget outlook automatically, assuming that Ryan chose not to roll them back.

In fact, when taking into account other changes in CBO's baseline since March 2012 (the one the House budget was based off), most of the work may have already been done. The 2022 deficit in last year's House budget was estimated at $287 billion. The fiscal cliff deal, according to the OMB, will shave about $125 billion off that. Other non-legislative changes in CBO's baseline since March 2012, some of it coming from reduced health spending, reduce the 2022 deficit by an additional $75 billion or so. If the budget chooses to account for a timing shift which pushes payments that would be made in FY 2023 into FY 2022 (as the CRFB Realistic baseline does), that would take another $45 billion off the year's deficit. Thus, the budget would only need to make additional cuts beyond last year's budget of about $40 billion to reach balance in nine years. The story would likely be similar for 2023.

Changes to 2022 Deficit (billions)
  2022 Deficit Impact
2012 House Budget Resolution Deficit $287
   
American Taxpayer Relief Act  -$125
Economic and Technical Changes -$75
Timing Shift -$45
   
Remaining Deficit ~$40

Source: CBO, OMB, CRFB calculations
Note: Other than 2012 House budget resolution deficit, numbers are rounded.

Richard Kogan of the Center on Budget and Policy Priorities reaches a similar conclusion in an exchange with Ezra Klein. He notes that both the economic and technical changes and deficit reduction from ATRA have reduced 2014-2023 deficit projections by $1.6 trillion. In addition, although the budget did not balance until around 2040, it was relatively close to balanced ten years out.

One caveat to this analysis is that the specific numbers in this post depend on how the budget is scored this time. Certain policies could be scored differently, and interest savings will generally be larger than projected previously because interest rates are projected to be higher. It is unknown if or how the updated scoring could factor in.

Still, after speculation about how the House budget might change to reach its new goal, the answer might actually be: not much.

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