Democrats' new budget proposal: why it's balanced ... but not balanced (+video)
Senate Democrats have put forward a new budget proposal that offers balanced deficit reduction (between cuts and new tax revenue), but doesn't balance the budget.
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Senate Democrats say deficit reduction should include $975 billion in new tax revenue, beyond the $600 billion or so that will be raised by the “fiscal cliff” deal in January. That agreement boosted tax rates on the highest earning Americans while keeping Bush-era rates in place for 98 percent of households.Skip to next paragraph
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The new revenue would come not from higher tax rates, but closing loopholes and limiting deductions that benefit “the wealthiest Americans and biggest corporations,” the summary of the plan says.
The House Republicans seek to hold the line against further tax hikes, which would leave federal revenue at 19 percent of GDP. That makes it hard to bring the national debt down without a sweeping overhaul of entitlements including Medicare and Medicaid.
New stimulus spending: $100 billion
Democrats, with an eye on the still-high unemployment rate, allocate $100 billion to “start creating new jobs quickly, begin repairing the worst of our crumbling roads and bridges, and help train our workers to fill 21st century jobs.”
They call it a “targeted recovery protection plan” rather than stimulus, the traditional economic term for such an effort.
Defense spending: $6 trillion
Like the Republican plan in the House, the Senate Democrats back away from most of the sequester’s cuts to projected military spending. The Democratic plan slows the projected rate of defense spending, but only by a bit more than the Republican plan does. Both sides show total outlays for the decade through 2023 at $6 trillion, or close to that amount.
Medicare and Medicaid spending: $13.4 trillion
The Democrats in the Senate pledge to keep federal promises to older Americans and the poor, notably on Medicare and Medicaid. But those promises look costly to keep.
The Democratic budget would spend $13.4 trillion over 10 years on Medicare and other health programs. The plan crafted by Senator Murray pledges to keep in place the expansion of Medicaid coverage to more Americans under Mr. Obama's health-care reform law.
By comparison, House Republicans would spend $10 trillion on Medicare, Medicaid, and other health programs.
The House Republican plan contains Ryan’s proposal to shift Medicare toward a “premium support” model, which critics say turns a guarantee into a “voucher” that shifts the burden of rising costs from the government to families. That idea is a nonstarter with Democrats.
The Senate plan seeks to pare back Medicare costs over the next decade (the plan claims $275 billion in “health savings") without cutting promised benefits. Republicans on the Senate Budget Committee voiced doubts about whether those adjustments would provide a lasting fix.
A key question ahead is whether the two sides can find a middle ground.
Sen. Ron Johnson (R) of Wisconsin said Wednesday that Obama has acknowledged, in private meetings with lawmakers, the central role that health-care entitlements play in America’s fiscal challenge. He said the president cited a statistic that Republicans are also focused on: the government is only taking in about $1 in Medicare payroll taxes for every $3 that will be spent on the typical beneficiary.
Total spending: $46 trillion
Murray's plan would see federal spending total $46 trillion over the next 10 years, compared with the roughly $41.5 trillion in Ryan's plan. In both plans, federal revenue would be near its historical average, at about 19 percent of GDP. Where the Ryan plan aims to bring spending down to that same level by 2023, spending in the Murray plan would be 21.7 percent of GDP for the period, above its long-term average.