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Conrad’s Budget ‘Framework’



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Senate Budget Committee chairman Kent Conrad (D., N.D.) on Monday offered members of the public a glimpse of the budget “framework” he unveiled to members of his caucus last week. Speaking on the Senate floor, Conrad presented a series of slides outlining the framework and seeking to draw a favorable comparison between the Senate Democratic plan and the budget passed by House Republicans. According to Conrad, his plan:

  • Reduces the deficit by $4 trillion over ten years
  • Stabilizes the debt by 2014; cuts the deficit to 1.3 of GDP by 2021
  • Holds federal spending at 22 percent of GDP, revenues at 19.5 percent of GDP
  • Reforms the tax code by closing loopholes, targeting offshore tax havens, and “restoring fairness”
  • Protects “investments” in education, energy and infrastructure
  • Offers a “balanced” approach to deficit reduction, with a 50-50 ratio between spending cuts and tax increases

On the tax side, Conrad’s proposal assumes:

  • A $2 trillion (net) increase in tax revenue over ten years
  • A top tax rate (individuals earning over $500,000 and couples earning over $1 million) of 39.6 percent
  • A reduction in the top tax rate on capital gains and dividends to 20 percent
  • A reduction in the corporate tax rate to 29 percent
  • Extension of the estate tax at 2009 level (45 percent)
  • Extension of Alternative Minimum Tax relief

However, GOP analysts on the Senate Budget Committee argue that the tax increases Conrad is proposing could be up to 40 percent higher than advertised, because Conrad has not identified the exact baseline he is using to achieve his figures (he simply calls it a “plausible baseline”). If, like the president’s February budget and one of two baselines produced by the Congressional Budget Office, Conrad’s plan assumes the expiration of the Bush tax rates for high-earning individuals, that would mean that some $800 billion is effectively hidden from the $2 trillion figure, bringing the overall tax increase called for closer to $3 trillion.

As far as recommendations on the spending side, Conrad proposes to:

  • Freeze member pay for three years
  • Freeze Legislative branch and White House budgets for three years
  • Freeze civilian pay for two years
  • Reduce federal vehicle fleet by 20 percent
  • Reduce travel costs of federal agencies by 20 percent
  • Reduce federal printing costs by $1 billion by 2015
  • Reduce number of contractors

Conrad claims $2 trillion in spending cuts, but again, this figure is firmly disputed by Republican budget analysts because it includes $600 billion in lower interest payments on the federal debt. “While reducing the deficit does reduce interest payments, those savings should not be counted as spending reductions, and do not reduce the size and scope of the federal government,” the analysts write. “Counting interest savings as spending cuts is simply a gimmick that makes it look like the actual cuts are greater than they are (particularly when the reduced interest payments are the result of increased taxes).”

Therefore, a more accurate description of the “balance” of Conrad’s plan would likely be $2.8 trillion in tax increases to $1.4 trillion in spending cuts — a ratio of 2 to 1.

And regarding the composition of the spending cuts, the vast majority ($900 billion) comes from the defense budget, while just $80 billion (6 percent) comes from cuts and reforms to federal entitlement programs, the primary driver’s of the debt and deficit. In fact, when it comes to health-care and entitlement spending, Conrad offers two “solutions”:

  1. Reject the House Republican plan to “end Medicare as we know it.”
  2. Do nothing (because Democrats already enacted large health-care savings in Obamacare).

That’s all Conrad has been willing to reveal publicly thus far, and it’s still been over 800 days since Senate Democrats actually passed a budget. If Conrad and the rest of the Democratic caucus really think so highly of this plan, it makes you wonder why they are so hesitant for the American people to find out what’s in it (as required by law).



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