For the first time in four years, the U.S. Congress is engaged in a full-throated budget debate. Take a moment for at least a quiet “Hurrah!” The federal government has at last embarked on its most basic responsibility. This was the price exacted by House Republicans from Senate Democrats for raising the debt ceiling in February. So far, so good.
Congress has four distinct budget plans to compare and contrast, and eventually on which to base its decisions. Two are from Republicans and two are from Democrats, each competing to be the guiding vision of America’s fiscal future.
President Obama is the only one still missing in action as he, in direct contravention of the law, is late in producing his own budget—not by days or weeks, as is his habit, but by months. The nation still awaits the release of the foremost governing document by the newly reelected commander in chief.
None of the congressional budgets offered to date is without blemish. But of the two budget committee plans, House Budget Chairman Paul Ryan’s (R-WI) “Path to Prosperity” is by far the more sensible, more credible, more responsible, and least gimmicky.
The Ryan budget would repeal the spending elements of Obamacare (notably the $1.8 trillion in new spending from the Medicaid expansion and the subsidies), reform Medicare, and slow the growth in spending overall. As importantly, the Ryan budget would balance the budget in 10 years. The notable blemish on the Ryan budget is that, while it repeals the spending elements in Obamacare, it also retains the revenue from its tax hikes.
The leading alternative to the Ryan budget is the offering by Senate Budget Chairman Patty Murray (D-WA). The Murray budget differs from Ryan’s in many respects, but the details are all reflected in these observations:
- The Murray budget reaffirms that Democrats are the party of tax and spend, and it reflects the President’s stated disregard for balancing the budget.
- The Murray budget would raise taxes by another $1.55 trillion over the next 10 years, and yet would still never balance.
Budget debates fare best when policymakers have clear choices. In the absence of a budget from the President, the Murray budget will have to do as the alternative to the Ryan budget. And the Murray budget is based on some fundamental and disturbing budget gimmickry.
Murray claims, for example, $1.85 trillion in total deficit reduction over 10 years. She also claims to have eliminated the across-the-board spending cuts from the sequester that went into effect March 1. However, as discovered by the minority staff of the Senate Budget Committee, Murray doesn’t replace the sequester savings and then offer $1.85 trillion in deficit reduction. The deficit reduction is the replacement for the sequester, meaning that even by her own numbers Murray only reduces the deficit by $700 billion, despite massive tax hikes.
And it gets worse. As Rea Hederman and John Ligon of Heritage’s Center for Data Analysis point out, the Murray tax hikes would do real damage to the economy. Economic growth and the revenues it generates is the most powerful tool we have for deficit reduction. Yet Murray would raise taxes, slowing business investment in particular and reducing employment by 853,000 jobs. (continues below chart)
By slowing the economy, the actual additional revenues the Murray budget would generate are not the average $155 billion she claims, but about $88 billion a year. Normally, less of a tax hike might be cause for relief, if not jubilation. But in this case the lesser tax hike comes along with fewer jobs and lower wages. When the spending gimmicks and reduced revenues are all taken into account, Hederman and Ligon project that the Murray budget would reduce the deficit by a total of $200 billion. That’s not $200 billion a year—it’s spread out over 10 years.
Therein lies the basic choice facing Congress and the country. The Murray budget raises taxes, allows spending to continue to soar, and would have the national debt continue on its sharp upward path toward crisis. The better choice is the Ryan budget—rejecting new tax hikes, tackling entitlements, slowing the growth in spending, and balancing the budget, and hopefully restoring a culture of fiscal discipline that would prevent the coming debt crisis before it ever really gets started.
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