How Will the GOP Contenders' Policy Proposals Really Affect the Deficit?

During the Committee for a Responsible Budget’s (CRFB) U.S. Budget Watch report release event today, Alice Rivlin, the former director of the Congressional Budget Office and a CRFB board member, predicted a tough week ahead for Maya MacGuineas, CRFB’s president. “I expect that in the next week, Maya will get angry phone calls from all these campaigns,” Rivlin said, referring to staffers of the GOP contenders whose spending and tax proposals were analyzed in the report. “That’s terrific. That means they’re paying attention.”
The report outlines the fiscal impact of the policy plans former Massachusetts Governor Mitt Romney, former Pennsylvania Senator Rick Santorum, former House speaker Newt Gingrich and Texas Rep. Ron Paul have proposed to date. If you were wondering, for example, how Gingrich’s pledge to implement an alternative flat tax of 15 percent, or Paul’s promise to eradicate the Federal Reserve, might affect the deficit, wonder no more.
But back to Rivlin’s point: Campaigns may react angrily because many of the candidates’ policy plans are not fully hashed out. Still, the dearth of details shouldn’t delay a discussion about fiscal responsibility. “This [report] is saying to candidates, ‘what you say matters. ‘This report doesn’t have all the scoring answers, but its main contribution is going to make the candidates think, am I really proposing something that I could do as President?”
The report, MacGuineas stressed, is a “living, breathing document” that the Committee will update as the candidates continue to flesh out the specifics of their policy proposals. For example, Mitt Romney has promised a 20-percent of-GDP cap on spending, and Rick Santorum pledged to $5 trillion in spending cuts. But neither candidate has explained exactly how he’ll achieve either goal.

 “We score [proposals] very differently if someone says they will cut spending [versus] that they will cut spending by doing X, Y and Z, “ MacGuineas explained. “The hard part of all this is being willing to get specific,” and to be transparent about the inherent tradeoffs of spending cuts.
 According to CRFB’s report, the current debt trajectory is “unsustainable.” Historic debt levels have averaged less than 40 percent of the GDP.  Our current level is about 70 percent of the GDP and climbing. CRFB predicts that at our current rate, the debt will rise to 85 percent of the GDP by 2021.  It measured the candidates’ deficit levels against that realistic baseline.
Another slice of realism from CRFB: None of the candidates’ proposals balance the budget. But that doesn’t matter right now because it’s an impractical short-term goal. Instead, MacGuineas said, policymakers should focus on this question: “How do we get the debt so it’s not growing faster than the economy overall?”
MacGuineas briefly compared CRFB’s assessments of the candidates (check out the report here for more detailed numbers). They found that only Ron Paul’s proposals would decrease the deficit under two of the three scenarios (each candidate’s proposals were assessed against three backdrops – an optimistic scenario, an intermediate one, and a pessimistic outlook).  Of course, Committee members warn, it’s important to look at how Ron Paul – and other candidates—plan to achieve their deficit reduction goals. Paul, for example plans to eliminate the Federal Reserve, and privatize the Federal Aviation Administration and the Transportation Security Administration.

 Gingrich’s plans would significantly increase the debt. He’d lose revenue from an alternative flat tax of 15 percent and a reduction of corporate taxes 12.5 percent (from 35) Romney’s proposals would increase the deficit under CRFB’s intermediate and more pessimistic scenarios (yesterday, his campaign released a proposal to reduce individual income taxes which the Committee included in an addendum to the report). He’ll cut the corporate tax rate from 35 to 25 percent, and advocates for massive entitlement reform.
Like Romney, Santorum’s proposals would balloon deficits under two of the three assessments. He’d make cuts to social security benefits, freeze military spending, and slash individual and corporate income taxes.
Overall, under the intermediate scenario, the debt would increase by $7 trillion over the 8 years under Gingrich, $4.5 under Santorum and $2.6 trillion under Romney.  It would fall by $2.2 trillion under Paul.
Stay tuned for upcoming reports from CRFB assessing the longer-term impact of these proposals, and for an analysis of President Obama’s policy plans.
Read more on the U.S. Budget Watch 2012 report from…
The New York Times
USA Today
The Washington Post

Photo credit: Joshua Lott/Reuters