GOP candidates’ budgets not realistic, some analysts say

Republican presidential candidates are pledging to slice a quarter or more out of the federal budget — proposals that would take spending back to levels unseen in decades, and would require the equivalent of axing a major program such as Medicare or cutting the entire defense budget.

The promises to slash spending are winning applause from audiences but are not politically realistic, budget crunchers say.

The plans include Mitt Romney’s vow to cap government spending at 20 percent of gross domestic product, down from the current level of 24 percent, and pledges by Gary Johnson and Ron Paul that would almost immediately cut more than 40 percent from current spending, to levels unseen since the 1950s.

Such proposals are “totally unrealistic,” said Robert Bixby, executive director of the bipartisan budget watchdog Concord Coalition, which advocates for fiscal responsibility.

“It may look good on paper, but I don’t think they realistically confront the automatic cost growth that is built in for Social Security, Medicare and Medicaid — and a realistic plan is going to have to deal with that,” Mr. Bixby said.

The rallying call to cap spending helped Republicans make historic gains in the House last year, and with worries remaining about federal finances, candidates have fought to win the title of champion budget cutter.

Douglas Holtz-Eakin, a former Congressional Budget Office director and adviser to 2008 GOP presidential nominee John McCain, said the proposals floated by the 2012 field represent a “night and day difference” from the projected levels of spending under President Obama, which stands at 24 percent of GDP.

“Those are substantial efforts to rein in future spending,” Mr. Holtz-Eakin said.

He described the promises to cut federal government as “a U-turn back to the norms of the past and away from this amazing expansion of spending we have seen in the past three years.”

But the cuts will be a tough political sell, as each would take major chunks out of every arm of government — or chop off one or two limbs entirely.

Analysts generally measure government spending in comparison with GDP.

With Medicaid spending hitting 1.9 percent of GDP in 2011, Medicare at 3.7 percent, Social Security at 4.8 percent, defense spending at 4.7 percent, non-defense discretionary spending at 4.5 percent, other formula-driven entitlements at 2.9 percent, and 1.4 percent to pay interest on the debt, federal spending will account for about 24 percent of the economy, according to CBO figures.

By that yardstick, Texas Gov. Rick Perry’s goal of limiting the federal government to 18 percent of GDP — a level unseen since the Lyndon B. Johnson administration — would mean a spending reduction of 6 percent of GDP. That is more than the combined cost of Medicare and Medicaid in 2011. It’s more than the cost of Social Security and more than the entire defense budget.

Even Mr. Romney’s goal of limiting spending to 20 percent of GDP would mean cuts the size of the entire Medicare program, or nearly all of Social Security, while the size of cuts Mr. Paul and Mr. Johnson are proposing would mean axing the equivalent of Social Security and Medicare combined.

“We have to rein in the scale of government or we’re not going continue to be a free economy,” Mr. Romney has warned.

The GOP field’s targets aren’t accidents.

In the roughly six decades since the end of World War II, government spending has averaged about 20 percent of GDP while taxes have averaged about 18 percent — thus the persistent but small deficit.

This year, though, federal revenue is just 14.8 percent of GDP while spending is 24.1 percent. The resulting gap is the reason for the $1.3 trillion deficit that the government reported for fiscal 2011.

The problem with Republicans’ goals, though, is that more spending is already built into the future with the aging population.

“If you are going to keep spending at 20 percent of GDP, you are going to have to find a way to cut other spending by that much to offset the growth of Social Security, Medicare and Medicaid,” Mr. Bixby said. “If you are going to cut 5 or 6 percent of GDP out of discretionary programs, that means cutting about 75 percent of what we spend on everything else — all the appropriations, including defense.”

Mr. Obama has defended increased spending in the short term, but says the country must lower deficits and bring the debt under control in the long term.

Still, he envisions much higher spending than Republicans. The budget he submitted in February called for spending to hover between 23 percent and 24 percent of GDP for the next decade — a level substantially higher than the GOP has proposed.

Mr. Obama has called for increased taxes to bridge some of the gap, though his budget would show significant deficits every year for the next decade.

Ben LaBolt, a spokesman for the Obama 2012 re-election campaign, said the Republicans’ plans seek to balance the budget “on the backs of seniors and the middle class — ending Medicare as we know it, gutting Social Security, and eliminating the investments necessary to create the jobs of the future.”

“The president has proposed a balanced plan that would shrink the deficit by $4 trillion by asking everyone to do their fair share and ensuring that the plan helps, not hinders, growth,” Mr. LaBolt said.

In December, the president’s fiscal commission recommended that Congress cap spending at 21 percent of GDP by 2020, and increase taxes to the same level.

Now a 12-member congressional supercommittee has been tasked with identifying at least $1.2 trillion in savings or new tax revenue before a Thanksgiving deadline. Failure would trigger $1.2 trillion in automatic spending cuts to a wide range of domestic programs and the Pentagon.

The effort has spilled into the presidential campaign. Republican candidates have ridiculed the committee while batting around respective economic plans centered on the GDP.

Each of the Republican candidates’ plans generally sets forward lower spending targets while embracing the notion of reshaping entitlement programs to save money. But they tend to gloss over specific changes they would make to Social Security, Medicare and Medicaid — and the fact that the real cost savings from gradually increasing the retirement age or means testing the programs would appear outside the 10-year budget cycle.

“You are certainly not going to get big savings this decade,” Mr. Bixby said. “That doesn’t mean you shouldn’t do it because you want to get the savings in the out years.”