An unrealistic target in need of explanation

Jared Bernstein flags a line in Mitt Romney’s new economic plan that warrants some additional scrutiny: “Mitt Romney will immediately move to cut spending and cap it at 20 percent of GDP.”

This figure is thrown around quite a bit in Republican circles as a critical, if arbitrary, goal. It’s worth remembering, then, just how ridiculous it is.

As Bernstein noted, “According to CBO, that would reduce government spending in the 2012 economy by 3% of GDP, or $476 billion. I truly can’t imagine any reasonable economist of any political stripes who doesn’t believe that would turn an already weak economy back into a recessionary economy.”

Right. Romney believes it would be smart to take nearly a half-trillion dollars out of the economy “immediately.” Why? Just because.

But also note his plan to cap spending at this level indefinitely. The Center on Budget and Policy Priorities did an analysis of what would be necessary if spending was capped at even 21% of GDP (20% would be even worse).

* The aging of the population and increases in per-person costs throughout the U.S. health care system (in both the public and private sectors) will increase the cost of meeting longstanding federal commitments to seniors and people with disabilities. Together, these factors will drive up spending for the three largest domestic programs — Medicare, Medicaid, and Social Security. Limiting total federal spending to 21 percent of GDP despite these developments would have enormous implications for those programs as well as the rest of government.

* The federal government’s responsibilities have grown since 2000, with developments at home and abroad pushing spending above the average for earlier decades. These responsibilities include homeland security (in the aftermath of September 11, 2001); aid to veterans of the Iraq and Afghanistan wars (many of whom need health care and income support); education (with the federal government providing more resources to improve educational quality and outcomes); the Medicare prescription drug benefit (which Congress added in 2003); and health reform (which extends health coverage to tens of millions of Americans who would otherwise be uninsured and will increase federal spending, even though it will reduce the deficit).

* Spending for interest on the federal government’s debt also will be substantially higher in coming decades than it was during the past 40 years. By the end of 2010 — largely as a result of the wars in Iraq and Afghanistan, the large Bush-era tax cuts, and the current severe recession — debt held by the public will be nearly twice as large (as a percentage of GDP) as in 2001, with a commensurate increase in interest costs.

Romney’s vow to “cut spending and cap it at 20 percent of GDP” sounds rather generic, but in practice, it’s a recipe for brutal cuts that would decimate much of the government. If the Republican presidential hopeful is serious about this goal, he should be pressed on how he intends to make the numbers add up, because realistically, Romney would be forced to admit (a) the numbers can’t add up; or (b) he’s going to have to take an ax to programs like Medicare.

Matt Yglesias noted this morning, “The Mitt Romney jobs plan is a very savvy document. It’s not all ranting and raving about how everything is unconstitutional, and indeed it doesn’t even say he wants to repeal Medicare. And yet lurking between the lines is an agenda on social welfare policy that’s basically every bit as extreme as anyone else’s.”