CBO Analyzes Ryan Budget Proposal: 2050 Debt/GDP At 10% Versus 344% In Revised Existing Budget... But How?

Tyler Durden's picture

The Congressional Budget Office has chimed in with a 30 page summary comparing the proposed Ryan budget and two previously analyzed scenarios: scenarios—an extended-baseline scenario based on June 2010-current law and an alternative fiscal scenario that incorporated several changes to then-current law that were widely expected to occur or that would modify some provisions of law that might be difficult to sustain for a long period. In essence these are merely variation on the theme of an Obama budget. Needless to say, the divergences are quite dramatic. Since the Ryan budget is focused on fiscal solvency, it achieves that: indeed, comparing projected 2050 Debt/GDP in the Ryan proposal, the CBO reaches a number of 10%, compared to 90% and 344% for the extended-baseline and the alternative fiscal scenarios. On the other hand, the credibility of the assumptions used to goalseek this outcome remain very much in doubt (much more on these in the CBO analysis below). The massive amount of spending cuts, coupled with some very aggressive revenue postulates, will certainly bring the critics out of the woodwork. It will also mean that with fiscal stimulus essentially curtailed, the only source of incremental economic boosting will be monetary policy, read - the Fed, which is an outcome that Bernanke has vocally warned against, due to his concern of Fed "politicization." Then again, with no other choice, it means that the debauchery of the dollar, since the economy is nowhere near the stage where the morphine can be removed, is about to kick into hyperdrive. In the meantime, here are the CBO summary observations.

First, a table showing the key outcomes in the three scenarios.

Then the CBO takes up the topic of key spending line items. Needless the say, total spending is expected to be cut in half in 40 years. Then again, not even Moody's ever tried to forecast more than 5 years out...

Last it a chart showing the breakdown of "Spending on Health Care for a Typical 65-Year-Old with a Standardized Health Insurance Benefit" - i.e., the most contentuous topic at hand: the socialization of US healthcare.

And a summary of the key features of the proposal. Those who wish to sound intelligent while praising or bashing the proposed budget should at least read the following bullets:

Chairman Ryan’s proposal, as specified to CBO by his staff, encompasses changes to Medicare, Medicaid, the major 2010 health care legislation, other government spending (excluding that for Social Security), and tax law.


Starting in 2022, the proposal would convert the current Medicare system to a system of premium support payments and would increase the age of eligibility for Medicare:

  • Starting in 2022, the age of eligibility for Medicare would increase by two months per year until it reached 67 in 2033.
  • People who turn 65 in 2022 or later years and Disability Insurance beneficiaries who become eligible for Medicare in 2022 or later would not enroll in the current Medicare program but instead would be entitled to a premium support payment to help them purchase private health insurance.
  • Beneficiaries of the premium support payments would choose among competing private insurance plans operating in a newly established Medicare exchange. Those plans would have to comply with a standard for benefits set by the Office of Personnel Management. Plans would have to issue insurance to all people eligible for Medicare who applied and would have to charge the same premiums for all enrollees of the same age. The premium support payments would go directly  from the government to the plans that people selected.
  • The premium support payments would vary with the health status of the beneficiary. In addition, the Centers for  Medicare and Medicaid Services would collect fees from plans with healthier enrollees, on average, and convey the proceeds to plans with less healthy enrollees, on average, with the goal of appropriately compensating plans for the health risks of their insured population. This riskadjustment mechanism would be known as the risk review audit and would be budget-neutral.
  • The payment for 65-year-olds in 2022 is specified to be $8,000, on average, which is approximately the same dollar amount as projected net federal spending per capita for 65-year-olds in traditional Medicare (that is, the program’s  outlays minus receipts from the premiums enrollees pay for Part B and Part D, expressed on a per capita basis) under current law in that year. People who become eligible for Medicare in 2023 and subsequent years would receive a payment that was larger than $8,000 by an amount that reflected the increase in the consumer price index for all urban consumers (CPI-U) and the age of the enrollee. The premium support payments would increase in each year after initial eligibility by an amount that reflected both the increase in the CPI-U and the fact that enrollees in Medicare tend to be less healthy and require more costly health care as they age. (For example, projected net federal spending per capita for all people age 65 and older in traditional Medicare would be about $15,000 in 2022, CBO estimates, in comparison with about $8,000 for 65-year-olds.)
  • The premium support payments would also vary with the income of the beneficiary. People in the top 2 percent of the annual income distribution of the Medicare-eligible population would receive 30 percent of the premium support amount described above; people in the next 6 percent of the distribution would receive 50 percent of the amount described above; and people in the remaining 92 percent of the distribution would receive the full premium support amount
  • described above.
  • Beginning in 2022, the federal government would establish a medical savings account (MSA) for certain beneficiaries with low income. (An MSA is an account that holds deposits that can be used for medical expenses.) Eligibility for MSA  payments would be determined annually by the federal government on the basis of income relative to the federal poverty thresholds. The amount of the contribution in 2022 would be $7,800, and the annual amounts in subsequent  years would grow with the CPI-U.
  • Eligibility for the traditional Medicare program would not change for people who are age 55 or older by the end of 2011 or for people who receive Medicare benefits through the Disability Insurance program prior to 2022. As a result, the average age and average costs of enrollees remaining in the traditional Medicare program would increase over time. However, enrollees’ premiums under traditional Medicare would be adjusted to equal what they would be under current law—a so-called hold harmless provision. People covered under traditional Medicare would, beginning in 2022, have the option of switching to the premium support system.


The proposal would modify Medicaid as follows:

  • Starting in 2013, the federal share of all Medicaid payments would be converted into block grants to be allocated to the states. The total dollar amount of the block grants would increase annually with population growth and with growth in the CPI-U.
  • Starting in 2022, Medicaid block grant payments would be reduced to exclude projected spending for acute care services or Medicare premiums and cost sharing paid by Medicaid.
  • States would have additional flexibility in designing their programs.

2010 Health Care Legislation

The proposal would make several changes to the Patient Protection and Affordable Care Act (or PPACA, Public Law 111-148) and the health care provisions of the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). In general, it would repeal the provisions of those laws that deal with insurance coverage, including:

  • The requirement that most legal U.S. residents obtain health insurance;
  • The establishment of health insurance exchanges and the provision of subsidies for certain individuals and families who purchase coverage through the exchanges;
  • The expansion of Medicaid coverage to include most nonelderly people with income below 138 percent of the federal poverty level;
  • The penalties on certain employers if any of their workers obtain subsidized coverage through the exchanges; and
  • The tax credits for small employers that offer health insurance.
  • The proposal would also change some other provisions of PPACA and the Reconciliation Act:
  • It would repeal the Community Living Assistance Services and Supports (CLASS) program for long-term care insurance, as well as a number of mandatory grant programs including funds for so-called high-risk pools, reinsurance for early retirees, and prevention and public health activities.
  • The proposal would repeal the provisions that created the Independent Payment Advisory Board and that expanded subsidies for the “coverage gap” in Part D (a range of spending in which many enrollees have to pay all of their drug  costs, sometimes called the doughnut hole).

Most of the other changes that PPACA and the Reconciliation Act made to the Medicare program would be retained.

Other Spending

The path for all other federal spending excluding interest—that is, for discretionary spending and mandatory spending apart from that for Social Security and the major mandatory health care programs—was specified by Chairman Ryan’s staff. The remaining part of mandatory spending includes such programs as federal civilian and military retirement, the Supplemental Nutrition Assistance Program, unemployment compensation, Supplemental Security Income, the refundable portion of the earned income and child tax credits, and most veterans’ programs. Discretionary spending includes both defense spending and nondefense spending—in roughly equal amounts currently. That combination of other mandatory and discretionary spending was specified to decline from 12 percent of GDP in 2010 to about 6 percent in 2021 and then move in line with the GDP price deflator beginning in 2022, which would gen-erate a further decline relative to GDP. No proposals were specified that would generate that path.


The path for revenues as a percentage of GDP was specified by Chairman Ryan’s staff. The path rises steadily from about 15 percent of GDP in 2010 to 19 percent in 2028 and remains at that level thereafter. There were no specifications of particular revenue provisions that would generate that path.

Hopefully the bolded sentence means there is something more than just a magic wand being waved around in geting this revenue rise.

Full report

CBO - Ryan Budget 2011-04-05

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knukles's picture

Go long popcorn.

StychoKiller's picture

No changes to Medicare until 2022?  Whew, for a moment there, I thought they were serious!

Kiwi Pete's picture

Scrap your military, CIA & NSA. Presto balanceo!

Dr. Porkchop's picture

Well my grandfather used to say;

If you can't dazzle them with brilliance, baffle them with bullshit.

Sudden Debt's picture




A Nanny Moose's picture

Sovereign default.....Bitchez!

traderjoe's picture

A default of the illegitimate debt is the only solution for people. The TPTB created the Fed and took control of the printing of 'our' money. They created the paradigm of borrowing. Why does a sovereign country borrow its own money?

Austerity is the final chapter of the wealth transfer to the TPTB. It will not 'heal' the economy. Ryan is carrying the water for the bondholders.


jmc8888's picture

Exactly. Glass-Steagall. Too bad we don't have two congressmen named Fuch and Fraud.

TaxSlave's picture


I didn't borrow it.  I'm not paying it back.  Bondholders who expected to get rich by putting me in bondage can go fuck themselves.

glenlloyd's picture

Well, we knew it was coming, but it really sounds like more complexity.

Personally, I'm not fond of block grants. I've seen the city I live in use block grants for doing untold damage in neighborhoods and converting the medicaid system to block grants could be a windfall if used improperly. Who will monitor the program to verify compliance or appropriate use? I see the potential for more abuse here.

I also see a problem using the CPI-U, I would prefer an unbiased 3rd party generated inflation rate, otherwise we'll have an even more worthless an indicator than we have now.

Yen Cross's picture

Hey Elmondorf. Appreciate the input. Maybe one of your interns can crack out some decimals on that 2050 26Trillion Figure. 1,000,000   1,000,000,000  1,000,000,000,000x26! Quadrillion 1,000,000,000,000,000 .26 Bitch!

baby_BLYTHE's picture

Ryan’s description of the plan is disappointing after all the buildup. If he can’t give a summary with numbers of where he and Heritage calculate $6.2 trillion savings, then he is a poor communicator. The rest is just words.

I don’t see $6.2 trillion in this description, so I’m eager to see whatever support exists. I hope he has believable support. How can a Congressman devote his life to this program and dismiss social security proposals by just saying: “This budget forces policy makers to work together to enact common-sense reforms...”?

Yen Cross's picture

Total revenue column 1 page one. 2050. Why do the old farts use fractions, and hide UST BP yield changes?

web bot's picture

They're talking 2050? The world as we know it won't exist in 2050...

Yen Cross's picture

I'll be dead for sure. My family won't though!

Shock and Aweful's picture

Paul Ryan is a complete lying sack of shit....

Anyone who actually believes that this budget he has proposed is even remotely accurate has to be the dumbest motherfucker alive.

You wanna tell me how ANY government agency...or anyone for that matter can forcast 40 years into the future?  Are they assuming we will only be involved in 4 or 5 medium sized wars in that time period?  Or maybe they assuming that there will be a massive pandemic that will kill off half the population or something?  That would save a bunch of money.  This whole 40 year budget effect bullshit is a complete joke and a waste of time to even entertain. 


If it is not already obvious...Ryan and his Ilk are nothing buy apologists and hatchet men for the large corporations and banking sector...They are so zealous in their disdain for governement...I am surprised they even wanted to run for office  (doesn't that strike any of you as funny....since Reagan...the GOP has been claiming how much they hate government...and how government is evil.  When we send people like that to Washington...people who think government is a failure...is there any wonder why we get a government that is anything but? 


I am being serious too...there was a time when the position of representative and senator (and president for that matter  - you fuck up Obungo) actually made the person in that position give a shit about their constituents....seems today that everything, on both sides is about some abstract policy or ideology and has NOTHING to do with reality or the day to day lives of how people live.

I have a feeling that the next two years are going to be sillier than ever in politics...(don't ask me why I think that...hahaha)

My only question...when in the fuck are the American people going to start DEMANDING something a little more authentic and effective?  We are FULLY asleep at the wheel here...and have no one but ourselves to blame for our nation's current state of affairs.  SHAMEFUL!

baby_BLYTHE's picture


You nailed it!

As to your final point, Don't start the Revolution without me. I am ready and waiting to take to the streets to Restore America (not in the vain of the fascist Glenn Beck). In the vain of Jeffesron, Hamilton, Franklin, Paine and Washington!

Dr. Porkchop's picture

The founding fathers were products of the enlightenment who respected philosophy and laws and principles. Who can hold a candle to them now? I wonder if society can muster anyone to fill their shoes.

Yen Cross's picture

Infinity. It's all starting.

jeff montanye's picture

hey baby, hope your efforts are not in vain.  

jeff montanye's picture

hey baby, hope your efforts are not in vain.  

PhotonJohn's picture

Amen brother! The founding fathers saw political science as a necessary evil. These people know live, breathe and get advanced degrees in it. Anyone who would strive to be a career politician is not someone you want in DC.

Yen Cross's picture

Beck is nutty! I have to admit. I'm a different kind of concervative.

baby_BLYTHE's picture

6 junks, interesting...

What is the big secret about the Founding Fathers? am I missing something?


Global Hunter's picture

honest question here, what has Paul Ryan done wrong?  Not many others are talking about spending cuts.

Silva Plata's picture

Please look at Paul Ryan's donors, it's all insurance and banking. That's who he represents. Don't think for one second he cares about you or America or the national debt. All he cares about is pleasing his Wall Street masters. Plus, he shouldn't be trusted because of that hair.

tarsubil's picture

Rand's budget gets ignored while Ryan's gets praised in the NYT? Something isn't right here folks. Even ponytailed hippies can see it.

MachoMan's picture

Well, the answer to your last question is fairly complex...  Presently, we do have a politically active america.  However, we're only active for a continuation of or additional entitlements...  the counter-argument has yet to gain any traction.  As a result, we get only half-hearted (at best) budget and austerity proposals.

The problem is at what point do 80%+ americans who rely upon governmental aid refuse to ask for more?  I postulate, never...  The only possible way this could happen is when the government is no longer...  which is a difficult endeavor when the vast majority of the population demands entitlements rather than an equal playing field, clawbacks of ill obtained gains, and the possibility (not god given right) to work.  The american people, like all others, will choose the well worn path over the one less traveled.  In other words, even if the government collapses, the populace will still seek to rekindle the entitlement system.

In short, the populace at large will never seek a more bleak (for the risk averse) future.  If it is to occur, it will have to be imposed...  [see generally, the level of general support for the american revolution].

bob_dabolina's picture


Doesn't the Fed have a dual mandate to have stable prices and maximum employment?

How much more politicized can you get?

Maybe a tri-mandate:

-Maximum employment

-Stable prices

- and abortion.

You gotta' be kidding me.

I'm going to take a Ben Bernanke brb.

Yen Cross's picture

The Fed is Done. BD. It's done.

savagegoose's picture

2050! how many more wars between now and then, lol kick the can to a date noone alive now will be alive to see.

and here is hoping another katrina like event dont happen in next 40 ish years.  or your numbers could; read WILL, be all fucked up.

Yen Cross's picture

2030 comes to mind. If we make it through that it should be pretty darn good. I'm looking forward to making a lot of new friends.

nah's picture

abort the jobless babys... but tax their parents first

Yen Cross's picture

Got the sarc/ Never abandon  babies! They are the future. Ass slap em and teach em how to Race Motocross, Own expensive cars, Houses, travel, Double breasted suits, Fly Jets, Scuba dive, And chew heads off bats.

InconvenientCounterParty's picture

protect life at all cost while it's helpless in the womb. Of course, once in pops out, don't use my tax money to keep it healthy or educate it or feed it.

Misean's picture

Shit man, if they put the spending cuts in year 39, the budget balances. Man, we are ruled by geniuses.

RockyRacoon's picture

Funny how Nomi Prinz was pilloried for saying about the same thing in her article.


Consistency here at the ole ZH seems to be lacking...

At least this article had more purty charts and pitchurs and stuff.

Eureka Springs's picture

Double down on the profiteer for health billing model, instead of eliminating 30 percent of costs for an entirely needless corporate insurance model, which is not about care at all. Also refusing to negotiate pharma down to prices small european countries manage to do so well. Our drug using pool of 300 million ought to have the lowest bulk drug prices in the world, not highest.

This is all to familiar pure evil ponzi... and I am sure there will be bipartisan immoral expensivesupport for doing the wrong thing again.

Oh and cut all defense spending by 85 percent, yesterday!

I hate fascists, no matter what they call themselves libertarian, teabagger, republican, democrat, conservative, centrist or liberal. A mandate forcing people to buy corporate insurance, and paying the non-negotiated highest drug prices in the world is just that, fascism.

None of this is new or humane in the least, thus shouldn't be treated as such... it's the same old shit.

Korg's picture

I can just imagine the German Kaiser in 1900 saying the same thing this asswipe shill is saying.

How'd that work out????

Yen Cross's picture

I can sit down a dissect any chart. The best make me question them. I always respect them. We respect each other. I did this stupid IQ thing hung over in Cairns Qld. I still hill hit 136 after hanging with the Quantas crew. I'm guessing a trapaziod could have been found after Some Calcium Carbonate on Lipids?

Id fight Gandhi's picture

Just shut the whole damn thing down. Fuck it.

Nobody wants to take the medicine or cut shit.

Fiscal and monetary policies need to worked on together. Otherwise one fucks the other.

baby_BLYTHE's picture

I went to a bar near Arizona State University with my friends over Spring Break.

Get ready for this... you cannot make this sh*t up (picture I took with my Andriod)


Get ready, folks!

We are going into an inflationary Depression! Tyler was right. The dollar is in BIG TROUBLE!

Thankfully I own Gold and Silver, I advise you all take precaution. This shit is f***ing real! It is unbelivable.

Hard times are coming. For everyone!

Yen Cross's picture

It's right. @ 19 I made a promise to GOD. It's real!

baby_BLYTHE's picture

WTF are you talking about?

What is Hyper-Inflation? Dollar bills in wheelbarrows, 150 dollar gallon of milk, defaced graffiti currency dangling from the ceiling?

People want to see the end result of massive debt monetization, bailouts and deficits as far as the eye can see? WELL I provided that in the link above^^^ 

InconvenientCounterParty's picture

The one dollar bill could be a collectors item if we don't turn shit around. Then again so could spring break. I would really hate to lose that.

Yen Cross's picture

Relax Blythe. I'm thinking a short like the old days on euro yen. It's not God. It's been around for awhile.

honestann's picture

Unless they refuse to raise the debt ceiling, any and every plan is just short-term feel-good talking-point propaganda designed to garner brownie points with TeaParty types.

What we need for a first step is a 2/3 reduction in federal spending, then subsequent 2/3 reductions until the federal government is gone.  The experiment in "central government" is a total failure, and must be recognized as such.

Akrunner907's picture

Maybe Allan Grayson's prophetic words about the Repub health care should be expanded to the entire federal budget plans, "Die quickly!"

ATG's picture

Since when did CBO get it right?