WASHINGTON — When Congress returns to work this week, the conversation about how to fix the federal budget deficit will resume, with markedly differing proposals from the Republican-controlled House and the Democratic White House providing a starting point.
The issues to be resolved range from where to cut federal spending to whether to raise federal taxes, to how to heal the Medicare system. The differing approaches represent competing views on the proper role and size of government in American lives.
Republican Rep. Paul Ryan of Wisconsin, chairman of the House Budget Committee, released a sweeping budget plan, the outline of which was approved by the House on April 15 on a largely party line vote of 235-193. The plan would reduce the debt by chopping federal spending, lowering tax rates and dramatically restructuring the Medicare program.
But that plan has little chance for passage in the Senate, where a “Gang of Six” bipartisan senators is working to come up with a widely anticipated plan based largely on the recommendations released in December by President Barack Obama’s bipartisan National Commission on Fiscal Responsibility and Reform. That plan called for a combination of spending cuts and tax increases to reduce the deficit.
Meanwhile, Obama released his own updated budget framework - with a speech April 13 - that also relies on a combination of spending cuts and tax increases, but would not reduce the debt as much as the fiscal commission’s proposals. It updated his original and more out-of-balance budget, released Feb. 14.
Following is a comparison of key provisions in each of the three budget proposals - the House Republican plan, the updated White House plan and the fiscal commission plan.
DEFICIT REDUCTION
The House Republican proposal would result in $4.4 trillion in deficit reduction over 10 years. The deficit as a share of the economy - measured as a percentage of the gross domestic product, or GDP - would be 2.4 percent in 2015 and 1.6 percent in 10 years. The proposal “puts the budget on a path to balance,” but specifies no date.
The GOP plan also would establish a binding cap on total federal spending as a percentage of GDP.
The fiscal panel’s proposal would result in $3.9 trillion in deficit reduction over 10 years. It would reduce the deficit as a share of GDP to 2.3 percent by 2015. The plan would achieve a balanced federal budget in 2035.
The updated White House plan would result in $4 trillion in deficit reduction over 12 years. The deficit as a share of GDP would be reduced to 2.5 percent in 2015 and 2 percent in 10 years. It does not offer a timeline for a balanced budget.
The president’s plan would enact a “debt fail-safe” to trigger across-the-board spending cuts if debt is not decreasing as a percentage of GDP by 2014.
HEALTH-CARE SPENDING
All three plans make changes to Medicare, the federal government-run health-insurance program for the disabled and those over age 65; and to Medicaid, the health-care program for low-income Americans that is funded with both state and federal money.
The House Republican budget plan would repeal the health-care law enacted in 2010.
The plan also would restructure Medicare so that, for those currently under age 55, beginning in 2022 when they start reaching age 65, eligible participants would receive premium-support payments to help them purchase private health insurance that would be administered by the federal government.
In terms of Medicaid, the House Republican plan would convert the federal government’s portion of funding into block grants administered by the states beginning in 2013. As a result, federal spending would be $771 billion lower over the next decade.
The president’s plan would continue the health-care legislation passed last year. Through changes to both Medicare and Medicaid, the plan would generate savings of $340 billion over 10 years.
For Medicare, the White House plan includes modifications to the prescriptiondrug program, along with other cost-saving changes such as improving patient safety,reducing fraud and increasing oversight. For Medicaid, the president would create a uniform matching rate for the federal share of money provided to states to replace the current system that relies on various formulas.
The fiscal commission plan would save $400 billion through a variety of changes including an increase in the portion of Medicare paid by individuals.
FEDERAL SPENDING
The House Republican plan would return federal spending for programs other than defense and homeland security to 2008 levels and freeze it there for five years. The plan also includes $178 billion in defense-spending cuts identified by Defense Secretary Robert Gates, but does not call for further reductions.
The fiscal commission proposal would freeze spending levels for all programs, including defense, beginning in 2012 and subsequently return them to 2008 levels in 2013.
The White House plan would cut non-defense spending to the same levels as proposed by the fiscal commission. It also includes $400 billion in current and future defense-spending cuts identified by Gates, and would hold the growth in defense spending below inflation levels.
TAXES
All three plans call for overhauling the tax code to simplify and streamline it.
The House Republican plan would consolidate the existing six brackets and reduce the top individual and corporate rates from 35 percent to 25 percent.
The White House plan would raise $760 billion, in part by allowing the expiration of the George W. Bushera tax cuts for the top 2 percent of earners, couples earning more than $250,000 or individuals earning more than $200,000. It also would lower the corporate tax rate.
The fiscal commission would raise about $1 trillion in tax revenue, largely by eliminating tax breaks, such as the mortgage-interest deduction.
In an analysis of the three plans, the Committee for a Responsible Federal Budget - a bipartisan Washington think tank that addresses federal budget and fiscal-policy issues - found different strengths in each proposal.
The House Republican version, the committee said, “saves substantially more from nonsecurity discretionary, health care, and other mandatory spending,” while the fiscal commission version “saves more from security discretionary, health care, Social Security, and tax reform.”
The group also noted that the White House and fiscal commission versions “propose special processes for ensuring debt is at least stabilized - or falling, under the president’s framework - as a share of the economy.”
Such an enforcement mechanism, the group said, “could be a powerful and useful tool to help ensure the debt remains under control.”Plan comparisons To view the different plans:
Fiscal commission - “The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform” is available at www.fiscalcommission.gov.
House Republicans - “The Path to Prosperity: Restoring America’s Promise” is available at www.budget.house.gov.
White House - “The President’s Framework for Shared Prosperity and Shared Fiscal Responsibility” can be found at www.whitehouse.gov by using the search function and document title.
The original White House budget proposal, released Feb. 14, can be found at www.whitehouse.gov/omb.
Front Section, Pages 9 on 05/01/2011