By Christine Harbin
This is the first in series of blog posts focusing on the federal budget proposals in Congress. The first post will focus Chairman Ryan’s plan, the second post will focus on the Senate Democrats’ plan, and subsequent posts will focus important differences between the two plans.
On Tuesday, House Budget Committee Chairman Paul Ryan released his budget for the next fiscal year. Chairman Ryan’s budget takes on Washington’s budget problems, putting the country on a path of lower spending, lower taxes, and lower debt. It provides a starkly different vision than the one Senate Democrats proposed today, or what the President will likely propose in April. Overall, AFP supports the Ryan plan because it includes a number of positive policy provisions. But his plan is not without some substantial flaws. The following are highlights from the plan.
OVERALL SPENDING LEVELS
Chairman Ryan’s plan reduces future projected spending by $4.6 trillion over the next ten years. It also cuts annual spending growth to 3.4 percent, down from 5 percent. Ryan’s plan also keeps the sequester in place, the automatic spending cuts beginning with $85 billion that went into effect on March 1. In addition, he extends the discretionary spending caps from the Budget Control Act and outlines a number of plans to cut down on wasteful spending in government. His budget balances in 10 years, meaning that it eliminates the budget deficit in 2023, although such balance is obtained by relying on $620 billion in tax increases from the fiscal cliff deal.
Although tax reform is the responsibility of the House Ways and Means Committee, led by Chairman Dave Camp, Chairman Ryan lays out a framework for tax reform in his plan. His budget proposes much-needed tax reforms that get rid of deductions and credits, lowers rates, simplifies seven income tax brackets into two (10% and 25%), reduces the corporate tax rate to 25%, moves to a territorial system, and abolishes the Alternative Minimum Tax. Overall, these proposals are positive reforms that will allow more Americans to keep more of their income.
Chairman Ryan’s budget includes a number of changes to Medicare and Medicaid. His changes to health care programs account for more than half of his spending savings, $2.7 trillion. He proposes turning funding for Medicaid into block grants to the states. (He turns food stamp funding into block grants, too.) Putting states in control of entitlement programs like Medicaid will result in much-needed reform and restore sanity to these bloated programs. This budget also proposes to reform Medicare by providing the option in 2024 for individuals born in 1959 or after to choose from various private plans in a newly-created Medicare exchange. These reforms begin to address runaway health care and entitlement spending.
In addition, Chairman Ryan’s plan repeals the spending provisions of President Obama’s job-killing health care law. It repeals the Medicaid expansion and health insurance exchanges from the President’s health care law and broadly repeals other spending components of that law. (Curiously and disappointingly, it does not repeal the new taxes from the President’s health care law.)
Chairman Ryan’s plan approves the Keystone pipeline and expands oil and gas leasing. These commonsense reforms create jobs and remove barriers in the energy market.
HOUSING AND FINANCIAL SERVICES
The plan proposes to reduce the influence of Fannie Mae and Freddie Mac by gradually cutting their taxpayer subsidies and government guarantees. Chairman Ryan also proposes to reform the Federal Credit Reform Act by changing the scoring standards for federal housing credit programs to reflect fair-value.
Relating to financial services, Chairman Ryan proposes revisiting certain flawed financial regulations, including Troubled Asset Relief Program (TARP) and the Dodd-Frank Act.
Chairman Ryan’s plan sadly fails to include a number of policies. In particular, we would like to see the following:
- This budget does not address the broken Social Security program, which is headed for insolvency. This is an oversight for any budget proposal. AFP would like to see Chairman Ryan propose to reform Social Security with the same enthusiasm that he brings to reforming other entitlement reforms, instead of simply calling on the President to come up with a plan.
- Chairman Ryan’s budget does not include repealing the death tax. AFP is consistently opposed to this damaging and immoral tax. Hopefully, House Ways and Means Committee Chairman Dave Camp will include repealing the death tax in his upcoming plan for comprehensive tax reform. Yet, it is still highly disappointing that this budget leaves the death tax untouched.
- Ryan’s plan doesn’t get rid of the $620 billion in higher taxes that kicked in after January’s fiscal cliff deal, which AFP opposed. Keeping these tax hikes is a major part of how Chairman Ryan is able to get his budget to balances in ten years. While achieving a “balanced budget” is important, it should not be achieved at through costly tax hikes on Americans, which is unfortunately what the Ryan plan relies upon.
AFP certainly does not believe this budget is a perfect proposal, but it is certainly a step in the right direction. Chairman Ryan proposes solid reforms to several of the biggest threats to our national fiscal health, instead of kicking our problems down road for our children and grand-children to solve.