Paul Ryan, Chairman of the House Budget Committee unveiled the GOP's "Path to Prosperity" budget on Tuesday. Ryan states that his plan balances the federal budget by the year 2023 without raising taxes.
The plan has four major initiatives. First, it encourages the development of domestic energy supplies that will stimulate the economy. Second, it repeals the Affordable Care Act, or "Obamacare." Third, the budget reforms welfare and lastly, it comprehensively reforms the tax code.
In an op-ed written for the Wall Street Journal, Representative Ryan described the federal budget process as "broken." Because the Senate or the president haven't passed a budget in almost four years, Ryan explains, "Washington lurches from crisis to crisis"(http://1.usa.gov/10Jjj3v).
It was during the debt limit "crisis" of Aug 2011 that the automatic sequestration spending cuts of Mar 1 were written into law. It was the fiscal cliff "crisis" of Jan 1 that brought tax rate increases on the higher tax brackets and there is another debt ceiling "crisis" looming on Mar 27.
The Ryan plan's first initiative is to cut government spending. More accurately, it calls for a decrease in the projected annual increase in government spending.
Currently, federal spending is expected to increase at a rate of 5% a year. Ryan's budget will slow that pace, but spending will still increase at a rate of about 3.4%. That totals $5 trillion less over 10 years than will be spent under current law. The national debt will be 55% of GDP, as opposed to current projections by the Congressional Budget Office of debt being 70% in ten years.
This decrease will, according to the plan, spur economic activity which will lead to a balanced budget in 2023. As Ryan stated "the U.S. economy will grow faster than spending, the budget will balance by 2023, and debt held by the public will drop to just over half the size of the economy. (http://1.usa.gov/10Jjj3v).
The Ryan plan also calls for the government to open up federal land for energy development and approve the Keystone XL Pipeline. The Keystone Pipeline is a project designed to bring oil from Canada to U.S. refineries.
The Obama Administration has been either blocking or denying the required federal permits to construct the pipeline since at least Nov 2011. Ryan estimates that construction of the pipeline will "create 20,000 direct jobs—and 118,000 indirect jobs" and his budget "puts the country on the path to North American energy independence" (http://1.usa.gov/10Jjj3v).
Ryan's plan also relies on the repeal of the Affordable Care Act, which is still President Obama's signature piece of legislation. According to a report in the Weekly Standard, the estimated cost of Obamacare is now $2.6 trillion. This budget repeals that law and replaces it with a "patient centered plan" whose details were not yet explained.
His budget also reforms Medicare. According to the plan, for the next ten years, there is no change to the current Medicare program. Then, "starting in 2024, we'll offer eligible seniors a range of insurance plans from which they can choose—including traditional Medicare—and help them pay the premiums."
The odds that the Democratic Senate and the president will sign any law that repeals Obamacare are slim to none. So, if for no other reason, this piece of the Ryan plan will have it DOA at the Senate. Also, the Obama Administration, according to Forbes Magazine, cut Medicare funding by $716 billion to pay for Obamacare (http://onforb.es/PSmolY). It is unclear if Ryan is using the Medicare funding before or after those Obamacare cuts as his baseline.
The third initiative in the Ryan budget is Welfare reform. Citing the success of President Clinton's 1996 welfare reform, Ryan then proposes giving "states flexibility so they can tailor programs like Medicaid and food stamps to their people's needs. It encourages states to get people off the welfare rolls and onto payrolls."
As of way back on Oct 18, 2012, according to the Washington Times, Obama's welfare spending has risen 32% since he's taken office. "Federal spending on more than 80 low-income assistance programs reached $746 billion in 2011, and state spending on those programs brought the total to $1.03 trillion" (http://bit.ly/RRPcBl).
The last initiative in the Ryan budget is tax reform. The plan will "simplify the code by closing loopholes and consolidating tax rates." Under his plan, there will only be two tax rates 10% and 25%.
Dave Camp, chairman of the House Ways and Means Committee, in a letter last week itemized GOP priorities: simplify the tax code; reduce the number of individual income tax rates to two (10% and 25%); repeal the Alternative Minimum Tax; lower the top corporate tax rate to 25%; and change the rules for international taxation. Camp added, "the committee will continue to oppose any and all efforts to increase tax revenues by any means other than economic growth" (http://cnnmon.ie/13UR3M6).
The White House is already attacking the plan.
"By choosing not to ask for a single dime of deficit reduction from closing tax loopholes for the wealthy and well-connected, this budget identifies deep cuts to investments like education and research – investments critical to creating jobs and growing the middle class," White House spokesman Jay Carney said Tuesday. "And to save money, this budget would turn Medicare into a voucher program — undercutting the guaranteed benefits that seniors have earned and forcing them to pay thousands more out of their own pockets. We've tried this top-down approach before. The president still believes it is the wrong course for America" (http://politi.co/ZwO0mc).
Wednesday, Democratic Senate Budget Chairman Patty Murray is expected to publish the Senate's budget proposal. This will be the first budget produced by the Senate in over four years.
The two budgets are expected to be as different as the two parties are divided.