The Budget Battle Begins

Democrats and Republicans: worlds apart.

On Tuesday, House Republicans and Democrats unveiled budget plans that illuminate the wide ideological divide between the parties when it comes to dealing with the nation's burgeoning debt and unsustainable entitlement programs. Despite that divide, both parties contend that a bipartisan deal can be reached.

The House Democratic budget, written by Rep. Chris Holland (D-MD), the House Budget Committee’s top Democrat, is an effort to offer a different vision than the one proposed by Republican Committee chairman Paul Ryan (R-WI). Holland's plan focuses on reducing the percentage of the deficit relative to the Gross Domestic Product (GDP) from 6.1 percent in 2013, to 2.7 percent by 2022. Yet despite Holland's contention that his plan will "reduce the deficit in a balanced and credible way, making difficult choices while providing investments that help create jobs now and build an even stronger economy for the future,” there is no point in his timeline where a balanced budget is achieved. After the year 2017, the point where the debt as a percentage of GDP reaches a low of 2.3 percent, and remains there through 2018, that percentage begins to rise again, reaching 2.7 by 2022.

The same goes for the level of deficit spending. The lowest level of deficit spending Holland's budget achieves is $451 billion in 2017. (For perspective's sake it is worth noting that the highest level of deficit spending during the eight years of the Bush administration was $458 billion). After 2017, the deficit begins to rise again, reaching $675 billion in 2022. As for the national debt, Holland's plan burdens the nation with another $6 trillion-plus, added to the already unconscionable $16.7 trillion debt we have already accrued.

The short-term aspects of Holland's plan are a rehash of President Obama's proposals. On the spending side, the plan includes $80 billion education spending, $5 billion for police and firefighters, and $50 billion for infrastructure. Apparently the $865 billion stimulus program, purportedly aimed at the same targets, was insufficient. On the tax side, class warfare remains in play, as the "Bush tax cuts" would remain permanent for the "middle class," while another $1 trillion will be raised by raising taxes on "millionaires," closing tax loopholes, and enacting the so-called “Buffett Rule,” where millionaires will not be able to pay lower tax rates than the middle class. With respect to spending cuts, Holland proposes $80 billion in reductions to mandatory government programs, including "agriculture direct payments, improvements to the solvency of the Pension Benefit Guaranty Corporation," and "no funding for Overseas contingency Operations after 2014." In other words, unspent money on un-fought wars is also counted as a "reduction" in spending.

Entitlement programs? Nothing in this budget proposes any concrete reductions in Medicare, Medicaid, Social Security or the Supplemental Nutrition Assistance (SNAP) program, despite the reality that those programs, along with military spending, are the main drivers of our unsustainable debt load.

The House Republican budget, authored by Paul Ryan, is a 91-page plan designed to balance the federal budget by 2023, cutting $4.6 trillion in federal spending over the same period. In Ryan's plan, projected revenue would remain the same, including the recent tax increase on upper income earners that was part of the fiscal cliff deal. And like Holland, Ryan proposes an overhaul of the tax code, eliminating a number of deductions that Americans currently enjoy. Ryan gets more specific on the end game, proposing only two different tax brackets of 10 and 25 percent for individual Americans, and lowering the corporate tax rate from its current 35 percent, the world's highest when state taxes are included, to 25 percent.

Unlike Holland, Ryan tackles entitlements. First and foremost, he would repeal Obamacare, eliminating the insurance exchanges the administration tried to make mandatory before they were ruled unconstitutional. A $750 billion reduction in Medicare spending enacted as part of health care reform would be used to shore up the Medicare trust fund. Medicare's retirement age would eventually be increased for Americans under age 55, and its costs would be controlled by offering seniors federally funded vouchers to buy private insurance at a level that would be capped. Spending on Medicaid and food stamp programs would be would be sent back to the states in the form of block grants, reducing overall spending on the programs in the process.

Regarding deficit spending, the plan envisions deficits of  $528 billion in 2014, $125 billion in 2015 and $69 billion in 2016, as well as a $700 billion reduction in interest payments on the debt, due to less borrowing.

A third plan is reportedly in the works, courtesy of Senate Democrats who will unveil the details today. Anything proposed by them would be an improvement on their recent track record, in that they have failed to produced a budget of any kind in over four years. Their plan will call for a $1.85 trillion reduction over the next decade, achieved through a fifty-fifty combination of taxes and spending cuts. the $85 billion in cuts triggered by the sequester will be replaced by "targeted cuts" that give the president more flexibility. Yet once again, like their counterparts in the House, Senate Democrats will keep Medicare spending off the table.

As for President Obama's budget plan, right now there isn't one. Yesterday the White House announced it would delay the release of it budget until early April--even though that is two months past the legal deadline for doing so. In other words, once again Obama is "leading from behind." Yet even as Obama the took a pass on his legally required duty, White House Press Secretary Jay Carney was sent out to read a statement trashing Ryan's proposal. "While the House Republican budget aims to reduce the deficit, the math just doesn't add up," it said. "Deficit reduction that asks nothing from the wealthiest Americans has serious consequences for the middle class. By choosing to give the wealthiest Americans a new tax cut, this budget as written will either fail to achieve any meaningful deficit reduction, raise taxes on middle class families by more than $2,000--or both."

Thus, the battle begins, with the idea of reaching an agreement by late July or early August. Considering that both sides remain at ideological loggerheads, such a timeline may be optimistic. Add  an overhaul of the tax code to the mix, a gargantuan effort despite being an idea shared by both parties, and the timeline becomes almost fantastical.

As for the public, two surveys show that Americans have a real appetite for reducing government spending--as long those reductions are applied to "someone else's" programs. A poll taken in December 2012 by Politico/GWU/Battleground revealed that more than three-out-of-four Americans favored cutting government spending "across the board." Pew Research Center survey taken a month ago reveals that "across the board" is a euphemism. Of the 19 categories surveyed, including such items as aid to the world's needy (foreign aid), environmental protection, Medicare, education and 14 others, not a single item garnered a majority of Americans willing to cut spending. The closest was foreign aid with 48 percent of Americans willing to cut back spending overseas. Yet 49 percent said keep it the same or increase it.

The ideological divide between the parties can only be exacerbated by such a public disconnect--meaning genuine leadership will be necessary to bring the public around. Around to what remains a mystery. Yet one thing remains completely un-mysterious: our current fiscal course is unsustainable, and despite all contentions to the contrary, entitlement programs must be overhauled. Democrats may call that reality "draconian." Yet absent draconian changes, nothing less than bankruptcy awaits. Denying reality may be politically advantageous for Democrats--but only until reality itself can no longer be denied.

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