For the second consecutive year, House Budget Committee Chairman Paul Ryan (R-WI) is proposing to balance the budget within a decade, a move that would require $5.1 trillion of additional savings over ten years through tight spending caps, entitlement overhaul and repeal of Obamacare, including cancelation of Medicaid expansion.
“The budget stops spending money we don’t have,” the budget says. “A balanced budget will foster a healthier economy and help create jobs. This will ensure the next generation inherits a stronger, more prosperous America.”
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However, critics noted that the budget boosts defense spending by hundreds of billions of dollars over ten years, while slashing non-defense discretionary spending. That category, which encompasses everything from law enforcement to food inspectors, would be scaled back so severely that in 2024 the government would be spending less in nominal dollars on those functions than it will in 2015.
For a while it looked as if the federal budget process would grind to a halt again as both parties shied away from another bruising battle over spending before the mid-term election. Speculation that Congress would punt on a new fiscal 2015 budget was fueled by Senate Budget Committee Chairwoman Patty Murray (D-WA), who revealed last month that the Democratic-controlled Senate would rely on the spending levels set by the two-year budget document that she and Ryan hammered out last December.
Ryan asserted on Tuesday that while the Bipartisan Budget Act was a good first step, Congress can do a lot more. “As the House majority, we have a responsibility to lay out a long-term vision for the country, and this budget shows how we will solve our nation’s biggest challenges,” Ryan said in a statement.
Murray said that she was proud to work with Ryan last year on the two-year deal that rolled back damaging across-the-board cuts, prevented another government shutdown, and restored some much-needed certainty to the budget process. But she was less happy with her counterpart’s proposal released this morning.
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“I am disappointed that instead of working with us to build on that bipartisan budget deal, House Republicans are doubling down on failed Tea Party policies that would hurt seniors and families, hollow out investments in long-term economic growth, and protect the wealthiest Americans and biggest corporations from paying their fair share,” she said in a statement.
Ryan noted that nearly five years after the financial crisis, many families haven’t recovered, and says the typical household’s income, when adjusted for inflation, is lower now than it was in 2007. By paying down the debt, he says, “the federal government will help keep interest rates low, which will spur greater investment and productivity. And by giving job creators some certainty and workers some relief, the Path to Prosperity will give free enterprise some much-needed help.”
A sharp decline in the deficit in the past several years has stolen some of the thunder of Ryan and other deficit hawks who have clamored for tough long-term deficit strategies like the ideas proposed by the Simpson-Bowles presidential commission. The federal budget deficit is on a path to decline further this year and next year.
The Congressional Budget Office estimates that under current law, the deficit will total $514 billion in fiscal year 2014, compared with $1.4 trillion in 2009. At that level, this year’s deficit would equal 3.0 percent of the nation’s economic output, or gross domestic product (GDP)—close to the average percentage of GDP seen during the past 40 years.
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But Ryan argues that Washington hasn’t done nearly enough to make a “serious dent” in the debt, and that under current law the deficit will start growing again in two years. By 2022, the U.S. will be running trillion-dollar deficits again, largely because spending will be running far ahead of historically high revenues. Over the next ten years, the gross national debt will grow by $10 trillion – for a grand total of $27 trillion.
President Obama, by contrast, proposed $56 billion of additional spending in 2015 and a total of $791 billion through 2024, as Congress and the administration agreed to lift tight spending caps for two years under last December’s bipartisan budget deal. Ryan says the president has “doubled down” on deficit spending which is eroding the economic recovery.
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Yet Ryan’s prescriptions for long term deficit savings say as much about conservative Republican political aspirations and rhetoric than realistic spending goals. According to a breakdown of the $5.135 trillion of proposed cuts between 2015 and 2024 – a full 40 percent or $2 trillion would come from repealing Obamacare. That is tantamount to budgetary wishful thinking as long as President Obama or some other Democrat is in the White House. Ryan’s budget would also be balanced through $732 billion of Medicaid and other health savings, $129 billion net Medicare savings, $460 billion of discretionary spending savings and $966 billion of other savings in mandatory programs.
Ryan says that budget and the economy are closely linked. “Just as a weak economy can drag the budget into the red, a responsible budget can help propel the economy forward.”
The economy is losing steam, he added, with CBO projecting economic growth of only 2.5 percent this year and only slightly higher in coming years. His solutions would include higher education and job-training initiatives – such as tailoring higher education aid to the “truly needy,” consolidating job training programs and adopting a sustainable maximum-award level for Pell grants. Moreover, he would simplify the tax code, reduce tax rates for individuals, consolidate the current seven tax brackets to two and repeal the Alternative Minimum Tax.
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The administration’s budget request, submitted early last month, sought $496 billion for the Defense Department, but added an additional $28 billion through a program called the Opportunity, Growth and Security Initiative, bringing the total Defense spending request to $524 billion. This is actually $3 billion more than the budget deal that Ryan negotiated with Democratic Senator Patty Murray last year.
While conceding that the size of the military needs to come down, Ryan’s budget calls the administration’s proposal on troop reforms “risky” given the global environment and promises to restore the defense budget “to the levels dictated by the national-security interests of the nation.” To do so, it proposes total outlays of $566.5 billion on Defense in 2016, an 8.1 percent increase over the Administration’s 2015 proposal.
To get there, Ryan essentially breaks down the firewall between defense and non-defense discretionary spending. His increase in Defense spending in 2016 is offset by cutting non-defense discretionary spending to $450 billion, a decrease of $42 billion in a category that includes everything from the Department of Education to the Food and Drug Administration. Over the Ryan Budget’s ten year window, Defense-related discretionary spending climbs every year, to $696 billion in 2024 – 34 percent higher than where it began. By contrast, non-Defense discretionary spending falls through 2017 before slowing beginning to climb again. However, by 2024 it remains 5 percent lower than it was in 2015.
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On healthcare spending, in addition to his assumption that Obamacare will be repealed, Ryan returns to his plan to block grant Medicaid – meaning that rather than being an open-ended entitlement, states would each get a fixed pot of money to spend as they see fit on serving Medicaid-eligible patients.
Ryan also brings back his proposal to create a voluntary premium-support system for Medicare. The program, which would not take effect until January 1, 2024, would give seniors entering the program on or after that date a “premium support” voucher that they could use to purchase coverage either from the traditional fee-for-service Medicare plan or from a private insurer.
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