House Budget Chairman Paul D. Ryan unveiled a fiscal 2014 budget plan Tuesday with an aggressive aim to erase the deficit in 10 years by cutting projected spending by some $4.6 trillion and calling for politically contentious changes in federal laws, including eliminating the 2010 health care law and overhauling the tax code.
The budget resolution for the year beginning Oct. 1, which has already drawn sharp criticism in Democratic circles, is very similar to the plan the Wisconsin Republican issued last year, when it became a template for GOP election-year economic policy priorities. The new outline gets to balance with cuts similar to those in the earlier plan, which set a longer path to balance, and benefits from improved economic circumstances and the tax increases (PL 112-240) that were enacted at the start of this year.
Ryan said at a press conference formally releasing his budget resolution that there is no conflict in accepting the deficit reduction that comes from an estimated $617 billion in tax increases over 10 years and his own plan.
“We’re not going to refight the past,” he said. “Law is law. We know that that’s not going to change, especially with respect to these issues. That’s why we’re saying not only can we now balance the budget faster. ... But we want to do it with a better pro-growth tax code.”
“This is perfectly consistent with our plans,” Ryan said.
The new document, which Ryan called “The Path to Prosperity: A Responsible, Balanced Budget,” would reduce the deficit by $4.6 trillion over the 2014-23 period, eliminating it by 2023. It would reduce overall spending from the current 5 percent projected annual growth to 3.4 percent yearly increases.
A Budget Committee markup is scheduled for Wednesday, serving as a first round of fierce budget battles between Democrats and Republicans this year as lawmakers try to return to regular order with spending plans for the federal government.
“This budget builds on the efforts achieved under the Budget Control Act of 2011 to cap spending,” the plan says. “It would achieve spending reduction, not just through across-the-board cuts, but by scaling back funding for agencies whose recent budgetary increases have fueled crony politics and government overreach that has weakened confidence in the nation’s institutions and its economy.”
A committee spokesman said Ryan’s budget resolution instructions to appropriations committees will set the discretionary spending level at an effective $966 billion for the next fiscal year, after allowing for the impact of sequester. That would present a major conflict with the Senate if the plan that chamber adopts sets a different level for discretionary programs.
Democrats immediately dismissed the budget resolution as a call for “draconian cuts” on education and other programs to fund “tax breaks for the wealthy.”
“If the Paul Ryan budget means the wealthiest Americans get a tax cut while working families see a tax increase, if the Paul Ryan budget means that Medicare will be fiscally solvent but unaffordable for most working Americans, this is a budget we need to reject out of hand,” said Richard J. Durbin of Illinois, the No. 2 Democrat in the Senate.
Like the past two years, Budget Committee ranking member Chris Van Hollen of Maryland will introduce a Democratic plan, one he said would be “on the same page” as the plan Senate Budget Committee Chairwoman Patty Murray of Washington plans to unveil Wednesday as a Democratic alternative in the Senate.
Flat Line for Discretionary Dollars
The Ryan plan would keep discretionary spending virtually flat over the 10-year budget period. Discretionary spending — essentially the operating expenses of the government — would go from $1.114 trillion in the 2014 fiscal year to $1.209 trillion in 2023, for average annual growth of less than 1 percent. Over 10 years, discretionary spending would total $11.3 trillion as measured by outlays, or money as it is spent. That would be $249 billion less than what would be spent if current policies were followed, according to the plan.
The plan did not describe how that spending would be split between defense and non-defense discretionary spending, but a Ryan spokesman said the budget would meet the overall spending caps under the 2011 budget law (PL 112-25) but not abide by the split envisioned in the law between the two spending categories.
Overall, the proposal envisions $41.5 trillion in spending as measured by outlays over the 10-year period, $4.6 trillion less than would be spent under current policies. However, it assumes total revenues of $40 trillion over the decade, the same amount as would be collected under current policy. Ryan had earlier said the $617 billion in new taxes raised by the fiscal cliff law would be included in the plan and would make it easier to achieve balance in 10 years.
Increases in outlays would grow from $3.531 trillion next year to $4.954 trillion, largely from growth in mandatory spending on entitlements, which would expand as a result of inflation and the aging population.
Creating a Surplus?
The result of the budget plan, Ryan says, would be a sharp decline in the deficit, which would slide from $845 billion this year to $528 billion next year and then fall to double digits by 2016 and to a slight surplus in 2023. Ryan has said he is helped in the goal by new revenue and changed economic circumstances since last year, including the $617 billion in tax increases that were part of the fiscal deal struck on Jan. 1. Growing tax receipts are partly behind what the Congressional Budget Office says will be a 22 percent decline this year in the deficit, which has fallen by about a third from its peak of $1.4 trillion in 2009.
For fiscal 2014, the budget would hold combined discretionary and mandatory defense spending to $560.2 billion, as measured by budget authority, which allows obligations to be incurred.
According to a GOP aide, the plan would limit defense discretionary spending to $552 billion in fiscal 2014, the same amount as a cap for that year in the 2011 budget law.
In past years, Ryan compared the House plan to President Barack Obama’s proposed budget. That comparison is not possible yet this year because Obama’s budget is running late and is not expected to be released until early April.
Instead, the GOP plan is compared to a current policy baseline, which is based on the CBO’s current-law baseline, issued in February. Unlike the CBO baseline, the current policy baseline assumes that war and emergency spending will fall by $1 trillion over the decade as U.S. troops leave Afghanistan.
Few changes are apparent in the fiscal 2014 budget resolution compared to the fiscal 2013 plan. As was the case last year, it includes a plan to replace the current fee-for-service Medicare system with a voucher-like model, beginning in 2024. No one 55 or older would be affected by the change.
The plan assumes the elimination of the Affordable Care Act (PL 111-148, PL 111-152), something that would be unlikely unless a Republican wins the White House in 2016 and the GOP gains strong control of the House and the Senate.
”We will never be able to balance the budget if you keep Obamacare going because Obamacare is a fiscal train wreck,” Ryan said.
The CBO said in a report last July on a House bill to repeal the health care law that dropping the law would add $109 billion to the deficit over 10 years.
The proposal also recommends turning Medicaid and food stamps into block grants to states, giving local officials more flexibility in designing and administering the programs.
Like his last two budget resolutions, Ryan’s 2014 plan would call for an overhaul of the tax system to reduce the top individual and corporate rates to 25 percent and collapse the current seven tax levels to two, at 25 percent and 10 percent. Ryan said revenue as a percentage of GDP under his plan would reach 19.1 percent in 2023, up from 18 percent in 2014, largely because of economic growth. The deficit as a share of GDP would fall from the estimated 5.3 percent this year to 3.2 percent in 2014 and then slip below 1 percent of U.S. economic output until the budget is balanced in 2023.