Three Budgets, Zero Sense

The United States Congress is now the proud owner of three entirely conflicting budget bills. The House of Representatives passed a Republican-sponsored bill hated by the Democrats. The Senate passed a Democratic-sponsored bill hated by the Republicans. The White House released its own budget proposal, which is of course hated by everyone.

Putting together the federal budget is not easy, but it ought to be relatively straightforward. You can try your hand at budgeting with informative and interactive programs from The New York Times and the Concord Coalition. How much will the deficit will grow if you cut Obamacare? Can you close the deficit without raising taxes on the wealthiest 1 percent?

Dylan Matthews of The Washington Post compares all of the competing budgets side-by-side here. All of the information from each budget is available to compare.

Defense

The White House budget cuts defense spending by roughly $950 billion over the decade. The Republican budget cuts a paltry $133 billion from defense over the decade. The Democratic  proposal cuts $626 billion over the same period.
Military budget 00-12

Cutting the defense budget is overwhelmingly more popular than cuts to Medicare, Medicaid, Social Security and other social programs. Polls show clear majorities of the public supporting steep cuts to defense. The plan authored by Representative Paul Ryan (R-Wisc.) is by far the weakest on defense cuts. An argument could be made that the Obama plan is too steep and might trigger recessionary pressure.

 

 

Discretionary

In addition to cutting the defense budget, the White House has offered $282 billion in other cuts to non-defense discretionary spending. Senate Democrats offered just $41 billion in cuts, while House Republicans gouged an enormous $1 trillion out of the discretionary budget over the next ten years.

Discretionary cuts are a tricky subject. The United States absolutely must get its fiscal house in order, but it may not survive another $1 trillion of spending cuts. Congress and the President have already signed off on more than $1.5 trillion of spending cuts from 2013-2022. Severe budget austerity has sent the United Kingdom back into recession and driven unemployment rates through the roof in Greece, Spain, Italy, Portugal and Cyprus. There is a reason that all economists suggest increased spending during tough economic times. One need only look at the negative effects of the budget sequester thus far in 2013 for proof.

Social Security

President Obama has proposed $13 billion of Social Security cuts over the next decade. Neither the House nor Senate plans included any Social Security cuts.

Social Security does not contribute to the deficit. It is fully funded through the payroll tax. The payroll tax is capped at $113,700 annually. If the payroll tax cap was lifted Social Security would be infinitely sustainable, but tax lobbies representing wealthy interest groups have successfully kept the tax cap in place. The American Association of Retired Persons (AARP) is in favor of raising the payroll tax cap to $250,000.

Medicare

The Obama budget offers $378 billion in Medicare cuts, largely through decreasing redundant payments and cracking down on fraud. The Republican budget has called for $129 billion of cuts, while the Democratic budget cuts Medicare by only $41 billion.

The Obama budget plan has created uproar among members of the political left and retirees. His plan promises that it will largely serve as an extension of cost-saving measures from Obamacare but there are real worries that the plan would hurt seniors.

The Ryan budget specifies a smaller Medicare cut ($129 billion) but it also includes a full repeal of Obamacare. Repealing Obamacare would immediately cost the government roughly $120 billion. A full repeal would also increase the national debt by more than $1 trillion over the decade. A repeal would also dramatically set back necessary healthcare industry reforms while never addressing the rising cost of care.

Other Mandatory Cuts

The Obama budget proposes increased spending by $337 billion over the next decade on stimulative projects and job creation initiatives. The Democratic budget proposes just $67 billion of stimulative spending. Meanwhile, the Republican budget includes a staggering $3.6 trillion in additional randomized spending cuts.

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The largest portions of the federal budget are spent on healthcare and defense. Medicare is costly due to its enormity; the program itself is more efficient than private insurance. Cutting $3.6 trillion more dollars from the budget, on top of the $1 trillion of discretionary cuts mentioned above, would absolutely send the United States into a deep and prolonged recession. Austerity breeds recession. Perhaps the federal budget was bloated with pork in 2009, but we have already cut hundreds of billions of dollars out of that budget. As evidenced by the sequester, virtually the only things left are air traffic control, pre-school, and funding for police.

Tax Revenue

President Obama’s proposal would raise roughly $1.3 trillion through new tax revenue – mostly through cutting corporate and personal income loopholes for top earners. The Democratic proposal from the Senate would raise $923 billion, while the Republican House proposal fails to raise a single penny in revenue.

What It All Means

At the end of the day, none of this actually matters. Neither President Obama nor Senate Democrats are expected to see any forward progress with their budget proposals. Despite offering hundreds of billions of dollars in coveted spending cuts to their Republican opposition, the GOP is entrenched in opposition to every point in each plan.

What we are left with is a fundamental disagreement about math and basic theories underlying the study of economics. It is not even that the two sides disagree about Economics 101, they disagree about elementary addition and subtraction.

Moreover, they disagree about the existential role of government.

The Republican budget is essentially an attack on the federal government. If implemented and observed for ten years the federal government as we know it would cease to exist. Perhaps that is the best option for whatever unknown future we might face, but it is certainly not what most Americans are asking for from Washington.

Americans want to see compromise. The Obama budget has offered many compromises, some would argue too many. We may never know what might have come of these budget proposals because the two parties simply cannot work with one another on any issue regarding money.

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