I found this explanation of a new analysis by the bi-partisan Committee for a Responsible Federal Budget (CRFB) fascinating. The Washington Post's Ezra Klein does a nice job summarizing it.
From this morning's Wonkbook by Ezra Klein:
...According to a new report by the Committee for a Responsible Federal Budget, none of Ron Paul's opponents are even running fiscally conservative campaigns. Quite the opposite, in fact.
The report takes every tax and spending policy the Republican candidates have offered and tallies them up. It does so against what the CRFB calls "a realistic baseline." That's a baseline where all the Bush tax cuts are extended, and many of the scheduled spending cuts are ignored, and debt is piling up. It's a baseline, in other words, in which Congress has made the deficit much worse. A baseline where debt is 86 percent of GDP in 2021. A baseline in which the debt is on a completely unsustainable path. And so, in theory, a baseline so bad that it should be easy for the candidates to appear responsible by comparison. But, with the exception of Paul, they don't.
Take Santorum. He has not shied away from naming large spending cuts. He would implement Paul Ryan's plan for Medicare reform on an accelerate schedule. He would convert "Medicaid, housing, education, job training, and food stamps” to capped block grants. He would cut Social Security benefits. All in all, CRFB estimates he would reduce spending by over $2 trillion between 2013 and 2021. Unfortunately, his tax cuts would increase debt by more than $6 trillion over the same period. Net impact: $4.5 trillion in new debt, for a debt-to-GDP ratio of 105 percent.
Newt Gingrich's plan is, remarkably, even worse for our finances. Like Santorum, he would block grant and cap almost everything in sight. In fact, he's promised to block grant and cap more than 100 programs. In total, CRFB estimates his spending cuts would shave $2.7 trillion off of the debt. But Gingrich would also spend $1.6 trillion dollars financing new private accounts for Social Security. And his tax cuts would cost more than $7 trillion. Net impact: $7 trillion in new debt, for a debt-to-GDP ratio of, wait for it, 114 percent.
Mitt Romney's plan is more difficult to score. He saves $1.2 trillion by block granting Medicaid and cutting the federal workforce. But his new tax plan doesn't have enough detail to say how much it costs. The campaign says it will be revenue neutral, but in part because they assume it will lead to faster economic growth, and thus higher revenues. That's an assumption that would get thrown out if he sent it to Congress. He also hasn't specified which tax breaks he'll eliminate. But if he's sufficiently aggressive in that area, much of his tax plan could ultimately be offset. For now, however, CRFB estimates that if the plan isn't paid for at all, it will add $2.6 trillion to the deficit, leaving Romney's debt-to-GDP at 96 percent. The more deductions and loopholes he closes, the lower that number will be.
Ron Paul is the only candidate whose plan puts him in the black. His cuts to federal spending are incredibly severe, saving $7.5 trillion. Comparatively, his tax cuts cost $5.2 trillion. And though his plan to end the Federal Reserve would rack up $400 billion in transition cost (and, if we're being real about this, untold trillions in market terror and future financial panics), put it all together and he cuts the deficit by $2.2 trillion, and brings debt-to-GDP down to 76 percent.
And remember that al these tax cut plans are coming on top of making the Bush tax cuts -- with their $4+ trillion price tag -- permanent. All of this, in some sense, gives the GOP candidates too much credit. Their tax plans, with the possible exception of Romney's, are fantastical. Their proposed spending cuts are far beyond what's plausible. The point is that even unfettered by political reality or operational responsibility, three out of the remaining four candidate have proposed plans that take an unsustainable deficit path and make it significantly worse. And if they can't cut the deficit when they don't have to worry about Congress or the federal bureaucracy or the consequences of actually implementing their proposals, how will they do it when they are burdened by those constraints and concerns?
You might wonder, of course, where Obama's proposals fit into all this. His budget estimates that debt will be 76.5 percent of GDP in 2021. That's lower than any of the Republican candidates save Paul. Though, CRFB is quick to note that 76.5 percent of GDP is "roughly double historical debt levels" and is not sufficient "to reduce the debt relative to the economy."