Paul Ryan Unveils His Balanced Budget Plan Today - Here's Why The Democratic Plan Will Be So Much Different

Nomura has a little preview of the general budget politics going on.

Attention will likely focus on the US today as fiscal policy debates continue to rise to the fore. House Budget Chairman Paul Ryan will be releasing his FY2014 budget proposal, “The Path to Prosperity: A Responsible, balanced budget,” at a press conference this morning. Mr Ryan’s proposal will seek to balance the budget by 2023 with $4.6trn in spending cuts. In contrast neither the Senate proposal (expected to be released tomorrow) nor President Obama’s proposal is expected to set a target date for a balanced budget. The White House yesterday noted that its proposal will aim for “sensible, balanced deficit reduction” toward a “fiscally sustainable path,” rather than looking to explicitly balance revenues with spending. Following the White House press conference, House Speaker John Boehner took aim at Mr Obama’s “definition of the word [balance],” as the gap between the parties portends the risk of an extended and contentious debate ahead.

The idea of a "balanced budget" sounds nice linguistically, but it's actually a pointless goal.

If reducing debt-to-GDP is what the US desires, then the US only needs to have annual deficits that are smaller than nominal GDP growth. In fact, we're already basically at that point. The deficit has stabilized (although it's expected to grow in the future, thanks to entitlements).

So expect the Democrats to take a lot of flak for not offering a plan to "balance" the budget. But that really needn't be a goal.