CHN: Starkly Different House and Senate Budget Plans Offered for FY 2014
Both the House and Senate Budget Committees have approved Budget Resolutions outlining plans for the fiscal year beginning October 1, 2013. The House Budget Committee plan balances the budget in ten years by slashing spending for domestic programs massively while protecting the Pentagon from cuts. At the same time, the House proposal reduces taxes on individuals and corporations by a whopping $5.7 trillion through FY 2023, with the benefits overwhelmingly going to those at the top, to be paid for by other unspecified tax increases. In stark contrast, the Senate Budget Committee proposal reduces the deficit through a combination of revenue increases and spending cuts, and aims for stabilizing the debt rather than budget balance. The Senate plan’s new revenues will be paid by upper-income people and corporations. The Senate cuts the Pentagon and reduces domestic spending far less than the House. It adds $100 billion in job creation initiatives.
House Budget Committee Chair Paul Ryan (R-WI) got party line (22-17) approval of his Budget Resolution in Committee on March 13; the next day Senate Budget Committee Chair Patty Murray (D-WA) secured a similar party line vote (12-10). Both the House and Senate will take up their budget proposals during the week of March 18 in hopes of approving them before recessing at the end of the week. Recent legislation required the House and Senate each to pass its budget by April 15 or each legislator would forfeit his or her pay. But there is nothing to force the House and Senate to agree on a final joint resolution, and a policy chasm separates the two.
Revenues. The House plan is notable both for what it says it will do and for what it leaves out. Its $5.7 trillion tax cut is pretty specific: it proposes to drop the individual income tax down to just two brackets, 10 and 25 percent. It reduces the corporate income tax rate to 25 percent, repeals taxes enacted as part of the Affordable Care Act, and repeals the Alternative Minimum Tax. Together, according to the Brookings-Urban Institute Tax Policy Center, those massive reductions add up to $5.7 trillion. Reducing the top rate from its current 39.6 percent down to 25 percent provides mammoth tax cuts to millionaires, who stand to gain an average of at least $200,000 each just in 2014, in an analysis by Citizens for Tax Justice. The House budget proposal is also specific in saying that its tax changes will be revenue neutral. But other than a general statement about closing tax loopholes, it says nothing about how tax cuts as large as $5.7 trillion would be made up. It is clear, though, that there are not enough loopholes for rich individuals to offset the cost of the huge income tax rate reduction, especially if Chairman Ryan keeps to his stated intention not to increase taxes on capital gains or dividends. Citizens for Tax Justice estimates that even if millionaires lose every single one of their tax expenditures, they would still gain over $200,000 from the proposed tax rate reduction. That means the only way to pay for the rate reduction would be to raise taxes on low- or middle-income taxpayers.
The Senate’s budget plan includes $975 billion in tax increases over ten years. It does not specify the precise nature of the tax increases, except to say that it is the intent of the Committee that the increases come from the wealthiest individuals and from large corporations. The budget includes a fast track procedure called “reconciliation” for consideration of increased revenues. In this case, the Senate Finance Committee will be given instructions to come up with a set of revenue-raising proposals totaling $975 billion, and must report its proposal to the full Senate by October 1. The budget discusses at length the opportunities for increasing revenues by reducing tax expenditures that provide the greatest benefit to upper-income taxpayers, without specifying which should be reduced or eliminated. It is specific in suggesting placing limits on the value of tax deductions or other preferences for the top two percent, and recommends reducing business tax loopholes.
Spending Reductions. The House budget makes extreme cuts both in mandatory programs including Medicaid and SNAP/food stamps and in discretionary programs such as education, housing, social services, environmental and consumer protection, and some nutrition assistance. Its aim is to shrink the federal role, and does so by turning Medicaid and SNAP into block grants, drastically cutting the funding of each. The proposal cuts Medicaid and the Children’s Health Insurance Program by $756 billion over ten years. It cuts other mandatory programs by nearly $1 trillion more, without specifying where those cuts would occur beyond SNAP. Those cuts would necessarily hit low-income people hard, since these other mandatory programs prominently include Supplemental Security Income (SSI) for poor elderly and disabled, child nutrition programs, unemployment insurance, child care, Temporary Assistance for Needy Families (TANF), and child welfare services. In addition, the budget would repeal the health care reform law, ending the subsidies for health insurance and the Medicaid expansion called for in that legislation. The budget turns Medicare into a voucher program which starts to take effect in 2024. Analyses of last year’s Medicare “premium support” voucher plan showed that the savings projected for the federal government would be achieved by passing higher costs on to Medicare beneficiaries.
The House budget retains the cuts imposed by sequestration for domestic programs, and then cuts the domestic discretionary programs another $700 billion. In contrast, it stops the sequestration cuts for the Pentagon, spending about $500 billion more on defense than would have been allowed under the Budget Control Act.
In all, the Center on Budget and Policy Priorities estimates that about two-thirds of the House spending cuts will target programs for low- or moderate-income people.
The Senate Budget Committee plan replaces the cuts that begin with sequestration in FY 2013 and continue through FY 2021 with $240 billion in Pentagon savings, $275 billion in health care savings, $76 billion in other mandatory program savings, $142 billion in domestic discretionary program reductions, and $242 billion in reduced interest payments, for a total of $975 billion. Advocates had hoped the Senate plan would have spared domestic discretionary programs entirely, since they have already been cut substantially in the first deficit reduction round. The budget narrative says that the health care savings (expected to be primarily in the Medicare program) will not be achieved by reducing benefits or eligibility, but by systemic savings such as negotiating for lower prescription drug prices.
Further Action in the Senate. Under Senate rules, budget resolutions are adopted with a simple majority; debate is limited to 50 hours and the budget cannot be filibustered. However, unlimited amendments are possible. When all time for debate has expired, the Senate takes up amendment after amendment with no debate – known in Senate speak as “vote-a-rama.” Advocates will be wary about amendments that could undermine the constructive approach of the Senate Budget Committee’s budget in the ensuing fast action.
Alternative Budgets. The proposals developed by the House and Senate Budget Committees are not the only budgets prepared by members of Congress. The House Congressional Progressive Caucus and Congressional Black Caucus have each developed an alternative approach. Both make substantial investments in job creation and increase revenues far more than the Senate Budget Committee plan. The Progressive Caucus budget would create 7 million jobs in the first year (in marked contrast to the House Budget Committee version, which is estimated to lose 2 million jobs over the same time period). The Progressive Caucus budget also cuts the Pentagon while increasing funding for domestic priorities. In addition, the House Budget Committee Democrats are expected to develop an alternative, also likely to increase revenues from fair sources and to protect human needs programs. At press time, it was not yet known whether Senate Republicans would be releasing their own alternative.