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Tuesday, March 12, 2013

Bottom Line On Competing Budgets: GOP's Balances Budget In 10 Yrs, Dems Plan Won't

By Susan Duclos

[Update] Paul Ryan's Fiscal Year 2014 Budget Resolution is embedded in a followup post.

Two articles, two budget proposals, one with specifics and one that is vague.  One that reforms the tax code to generate revenue and the other talking $1 trillion in new tax revenue with no explanation of how that would be generated.

The most important difference between the two plans is that one would balance the nation's budget within 10 years and the other admittedly won't.

The GOP budget plan is explained by the chairman of the House Budget Committee, Rep. Paul Ryan, who writes the one statement that should be the basis of any budget proposal when he says "Under our proposal, the government spends no more than it collects in revenue."

The GOP plan, in a nutshell, via Ryan's WSJ op-ed:

On the current path, we'll spend $46 trillion over the next 10 years. Under our proposal, we'll spend $41 trillion. On the current path, spending will increase by 5% each year. Under our proposal, it will increase by 3.4%. Because the U.S. economy will grow faster than spending, the budget will balance by 2023, and debt held by the public will drop to just over half the size of the economy.

  The four specific areas addressed to balance the budget:

First, energy. America has the world's largest natural-gas, oil and coal reserves—enough natural gas to meet the country's needs for 90 years. Yet the administration is buying up land to prevent further development. Our budget opens these lands to development, so families will have affordable energy. It approves the Keystone XL pipeline, which will create 20,000 direct jobs—and 118,000 indirect jobs. Our budget puts the country on the path to North American energy independence.

Second, health care. Our budget repeals the president's health-care law and replaces it with patient-centered reforms. It also protects and strengthens Medicare. I want Medicare to be there for my kids—just as it's there for my mom today. But Medicare is going broke. Under our proposal, those in or near retirement will see no changes, and future beneficiaries will inherit a program they can count on. Starting in 2024, we'll offer eligible seniors a range of insurance plans from which they can choose—including traditional Medicare—and help them pay the premiums.

Third, welfare reform. After the welfare reforms of 1996, child poverty fell by double digits. This budget extends those reforms to other federal aid programs. It gives states flexibility so they can tailor programs like Medicaid and food stamps to their people's needs. It encourages states to get people off the welfare rolls and onto payrolls. We shouldn't measure success by how much we spend. We should measure it by how many people we help. Those who protect the status quo must answer to the 46 million Americans living in poverty.

Fourth, tax reform. The current tax code is a Rubik's cube that Americans spend six billion hours—and $160 billion—each year trying to solve. The U.S. corporate tax is the highest in the industrialized world. So our budget paves the way for comprehensive tax reform. It calls for Congress to simplify the code by closing loopholes and consolidating tax rates. Our goal is to have just two brackets: 10% and 25%. House Ways and Means Chairman Dave Camp has committed to pass a specific bill this year.

Via Politico, vague details of the Democrats' Plan:

Sen. Patty Murray’s new budget plan calls for raising tax revenues by nearly $1 trillion while cutting spending by roughly the same amount over the next decade, according to people familiar with the proposal.

The Budget Committee chairwoman plans to brief fellow Democratic senators over the new proposal in a closed-door lunch Tuesday that President Barack Obama is also scheduled to attend. Committee deliberations will begin Wednesday, and the panel expects to vote on the plan Thursday before floor debate next week.
Evidently there is a plan if it is expected to be voted on in committee, but they aren't willing to provide details to the public yet, hence the vagueness of the description.
One specific is acknowledged though in the same Politico article:
The Murray plan would not balance the budget in a 10-year timeframe like the Ryan proposal would. But Murray’s 50-50 split between taxes and spending is supposed to be consistent with Obama’s call for a “balanced” approach for deficit reduction, something they argue voters largely support rather than the cuts-only approach backed by Republicans......

The Democratic plan does not balance the budget, leaving debt and deficits to increase rather than decrease, plus a misrepresentation of the GOP plan, which specifically addresses revenue by closing loopholes and consolidating tax rates, making it not a "cuts-only plan, but a balanced plan without raising tax rates.

When specifics of the Democratic proposal do come out, it is already known that they will propose raising tax rates on upper income Americans, yet again. They plan to suggest this despite the fact that tax bills for rich families are already approaching 30-year high, yet our debt is over $16 trillion, increased by $6 trillion in just the last four years and we have been running trillion dollar deficits for the last four years as well.

A couple points here.

First point- Everyone knows, but Democrats refuse to acknowledge, that generating tax revenue is not the same thing as raising tax rates. Revenue can be raised without raising the rate for any individual or family.

Second point: More importantly, every cent Obama increased taxes during the fiscal cliff deal, did not go toward the deficit nor our debt, but has already been spent.
Furthermore, updated studies show that historically that over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending.

We don't have a revenue problem, we have a spending problem.