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