Bud­get plan’s brack­e­tol­ogy Ryan urges in­come-tax re­form with flat­ter rates, less spend­ing

The Washington Times Daily - - Politics - BY STEPHEN DINAN

Rep. Paul Ryan, chair­man of the House Bud­get Com­mit­tee, pre­sented his col­leagues Tues­day a sweep­ing re­write of the fed­eral bud­get that would move to­ward a flat­ter in­come tax and dra­mat­i­cally cut spend­ing, bal­anc­ing the bud­get in the long run by hold­ing down the growth of Medi­care and shrink­ing Med­i­caid.

Mr. Ryan’s plan can­cels the deep de­fense-spend­ing cuts that are loom­ing af­ter last year’s deficit su­per­com­mit­tee failed to reach an agree­ment, and in­stead he slashes at other gov­ern­ment spend­ing, tak­ing on ev­ery­thing from food stamps to agri­cul­ture sub­si­dies to the fed­eral work­force.

Over the next decade, Mr. Ryan’s plan would spend $5.2 tril­lion less than Pres­i­dent Obama’s bud­get, would tax Amer­i­cans by $2 tril­lion less, and lead to a smaller deficit in each year go­ing for­ward.

But to get there, Mr. Ryan goes be­yond the out­lines of last year’s hard-fought debt deal, cut­ting an ad­di­tional $352 bil­lion out of dis­cre­tionary spend­ing over the next decade — and he chal­lenged Se­nate Democrats to join him.

“None of this works if the Se­nate de­cides not to bud­get again,” Mr Ryan said. “The Se­nate didn’t do a bud­get in 2010. They didn’t do a bud­get in 2011. And now they’re say­ing they’re not go­ing to do a bud­get again in 2012 at a time when we have the most pre­dictable debt cri­sis on our hori­zon.”

At root, the fight is over whether the spend­ing lev­els in last year’s debt deal, which were la­beled “caps,” amount to an up­per limit — as the Re­pub­li­can says — or were in­tended to be ex­act fig­ures the gov­ern­ment must spend, as House Mi­nor­ity Whip Steny H. Hoyer in­sisted again Tues­day.

“We made a deal. No­body, in my opin­ion, mis­un­der­stood that we had made a deal. Not a deal that was a cap. What kind of deal is that?” the Mary­land Demo­crat said. “Ev­ery­body un­der­stands that you sit around a ta­ble, and you try to come to an agree­ment, and each side gives on what their bot­tom or top line was, what their line was.”

Mr. Ryan’s bud­get out­lines spend­ing for fis­cal year 2013, for the rest of the com­ing decade, and out over a four-decade hori­zon.

But the 2013 num­bers are the most im­me­di­ate, since they set guide­lines for the spend­ing bills Congress must adopt by Oct. 1, which is the be­gin­ning of the fis­cal year.

Last year’s debt deal called for dis­cre­tionary spend­ing to be capped at $1.047 tril­lion in 2013, but that fig­ure drops to $949 bil­lion when the ef­fects of the fail­ure of last year’s deficit su­per­com­mit­tee are cal­cu­lated.

Both Democrats and Repub­li­cans say dis­cre­tionary spend­ing should be higher than that level, but they will strug­gle to reach agree­ment on a final num­ber.

House Democrats even raised the pos­si­bil­ity of a gov­ern­ment shut­down, say­ing the Re­pub­li­can spend­ing cuts will force one to hap­pen.

“To­day, the Re­pub­li­can bud­get res­o­lu­tion re­neges on that agree­ment, up­end­ing the FY 2013 ap­pro­pri­a­tions process be­fore it has a chance to be­gin and set­ting the stage for an­other round of gov­ern­ment shut­down brinkman­ship in the fall,” said Rep. Nor­man D. Dicks of Washington, the top Demo­crat on the House Ap­pro­pri­a­tions Com­mit­tee.

In the Se­nate, Democrats do not plan on pass­ing a full bud­get. In­stead, they ar­gue the debt deal’s num­bers con­sti­tute a bud­get, since they set en­force­able lim­its on dis­cre­tionary spend­ing.

But with­out a bud­get, there is lit­tle chance Congress would tackle the broader is­sues of Medi­care, Med­i­caid and other en­ti­tle­ment spend­ing that all sides now agree are the chief driv­ers of long-term spend­ing growth.

On taxes, Mr. Ryan’s plan re­duces the six ex­ist­ing in­come-tax brack­ets to two: a 10 per­cent rate and a 25 per­cent rate. He also re­peals the Al­ter­na­tive Min­i­mum Tax, which was de­signed to elim­i­nate tax breaks for wealth­ier Amer­i­cans.

He would leave it up to other con­gres­sional com­mit­tees to come up with a way to make sure those tax rates pro­duce enough rev­enue to hit his tar­gets.

Over the long run, Mr. Ryan’s bud­get would hold rev­enues be­tween 18 per­cent and 19 per­cent of gross do­mes­tic prod­uct, which is in line with the his­tor­i­cal av­er­age since World War II.

His chief changes come on the spend­ing side, which has av­er­aged about 20 per­cent to 21 per­cent of GDP in the post­war era. Mr. Ryan’s bud­get calls for low­er­ing that to less than 16 per­cent by 2050, ex­clud­ing in­ter­est pay­ments on the debt, ac­cord­ing to the Con­gres­sional Bud­get Of­fice.

By com­par­i­son, Mr. Obama’s bud­get would have spend­ing above the post­war av­er­age in ev­ery year.

White House Com­mu­ni­ca­tions Di­rec­tor Dan Pfeif­fer said Mr. Ryan’s bud­get “fails the test of bal­ance, fair­ness and shared re­spon­si­bil­ity.”

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