How will Obama react to the House's budget proposal?
The House Budget Committee just released a budget proposal that includes major cuts in spending and revisions to the federal income tax code
House Budget Committee Chairman Paul Ryan has released his budget proposal, which he explains in the very polished video below. (Q: Did “taxpayer dollars” pay for the production of that video?…) Here’s the link to information on the Ryan budget on the House Budget Committee’s website.
Major contours of his proposal are that the deficit is brought down to economically sustainable levels, but not eliminated, within a few years; revenues never rise above the (”magic”) historical average of just over 18 percent of GDP; spending is brought down to around 20 percent of GDP within ten years and below 15 percent by 2050(!)–which is what it takes to get debt/GDP to come down while holding onto the revenue ceiling.
Ryan does the right thing by recognizing that a lot of “entitlement” spending in the federal budget actually operates through the tax code: he proposes fundamental tax reform that virtually eliminates tax expenditures–those deductions, exclusions, and other special provisions in the federal income tax. Doing that alone would raise a lot of revenue (in an economically efficient way) that could be used entirely for deficit reduction, but Ryan effectively “spends” it on reducing marginal tax rates instead. That’s my biggest complaint about his proposal, strengthened by my opinion that it’s unrealistic and perhaps downright cold-hearted to cut direct spending by as much as he’s proposing.
[The Ryan budget] also creates the pivotal moment of truth for President Obama. Will he come up with his own counterproposal, or will he simply demagogue the issue by railing against “savage” Republican cuts and ignoring the long-term fiscal realities? Does he have a sustainable vision for government, or will he just try to rise above the fray while Nancy Pelosi and others attack Ryan?
And what about the Senate Republicans? Where do they stand? Or the voters? Are they willing to face reality or will they continue to demand more government than they are willing to pay for?
Paul Ryan has grasped reality with both hands. He’s forcing everybody else to do the same.
More later; Concord is working on our press release.
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