Reports from the Economic Front

a blog by Marty Hart-Landsberg

Who Needs Government Anyway

Representative Paul Ryan (Wisconsin), the chairman of the House Budget Committee, recently put forward his party’s budget plan.  Dean Baker reports on the Washington Post story which says of the plan that it “calls for spending cuts and tax changes that would put the nation on course to wipe out deficits and balance the budget by 2040.”  He notes that unfortunately the Post forgot to mention that the plan also largely does away with the government.  

The following table comes from the Congressional Budget Office analysis of the Ryan budget plan.  

ryan-cbo.jpg

In 2011, spending on “health care” came to 5 percent of GDP, spending on “social security” equaled 4.75 percent of GDP, and spending on “other mandatory and defense and nondefense discretionary spending” totaled 12.5 percent of GDP.  Congressional Budget Office estimates are that by 2040, the Ryan plan will have reduced spending on “other mandatory and defense and nondefense discretionary spending” to 4.75 percent of GDP.  By 2050, that category will be down to 3.75 percent of GDP. 

As Baker explains:  

The defense budget is currently over 4.0 percent of GDP and Representative Ryan has indicated that he wants to leave it at this level. That would leave little for the Justice Department, Education Department, Park Service, education, transportation and everything else government does in 2040 and nothing in 2050. That fact would have been worth pointing out in this article. 

It is worth adding that the Congressional Budget Office noted in its report that “The amounts of revenues and spending to be used in these calculations for 2012 through 2022 were provided by Chairman Ryan and his staff.”  In other words, the Congressional Budget Office has taken no position on whether Ryan’s plan would actually produce the balanced budget it predicts.  This outcome is especially questionable since his plan projects increases in revenue along with cuts in taxes.  The Congressional Budget Office just extended the plan’s assumed values into the future using standard modeling procedures.   

At some point we really need to get serious about the destructive nature of private profit driven economic activity and the importance of strengthening the capacity of the state to regulate and redirect economic activity in line with majority needs. 

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