The Corner

House Dems Offer Higher Taxes, Ryan Offers Gimmicks

Two conflicting visions of the role of government and the path to reduce our debt to GDP ratio are on display this week in the House of Representatives. In their budget proposal, House Democrats are clear about their goals: They want to spend more, and they don’t care that much about balancing the budget. To the extent that they pay lip service to reducing the debt, they will do it by raising taxes — a lot. According to CQ:

The substitute fiscal 2015 budget resolution unveiled by House Democrats would reduce the deficit by $1.8 trillion over a decade by raising revenue by almost $1.8 trillion and cutting spending by $27 billion, presenting a stark contrast with the budget plan House Republicans will bring to the floor this week. . . .

Over the 10-year budget window, the Democratic proposal would lift the sequester from nondefense discretionary spending beginning in 2016, reflect the defense spending levels proposed by Obama, and assume funding of the president’s proposed four-year, $302 billion surface transportation reauthorization. The plan would eliminate the portion of the sequester that is scheduled to make automatic cuts to mandatory spending programs, including Medicare, through 2024. Although it assumes $1.759 trillion in additional revenue collected over a decade, the Democratic budget provides few details about which taxes would be raised. The plan says it would “accommodate action to simplify the tax code and eliminate special interest tax breaks without increasing the tax burden on middle-class taxpayers.

I suppose the Democrats’ proposal has the merit of being clear and in line with the goals they set for themselves — it is destructive but consistent. There is no way the Democrats’ budget will either reduce the debt or lead to growth, but that doesn’t seem to be their main goal.

By contrast, take the Ryan plan. It is also clear about its goals: Balance the budget in ten years, reduce the debt within that same budget window, and engage in entitlement reforms — including premium support starting in 2024 — to put the country on a sustainable fiscal path. These are great goals.

But it’s less straightforward about achieving them. For instance, if entitlement reform is so important, why does Ryan plan wait ten years before its centerpiece reform, premium support, is begun? Today’s Congress can’t tie the hands of future Congresses. As Reason’s Peter Suderman explains, legislators have repeatedly done this with other scheduled Medicare cuts.

And then there’s the matter of the balanced budget. House Republicans resorted to many gimmicks that make their budget look good on paper, but aren’t going to get it done in real life. The plan this year includes a $175 billion in savings from a new assumption of a “fiscal dividend” or higher growth resulting from debt reduction.

As with last year, we find $25 billion in “war savings.” What happened to the Chairman Ryan who said “an honest budget cannot claim to save taxpayers’ dollars by cutting spending that was not requested and will not be spent”?

Moreover, by using the CBO’s baseline revenue projections, the plan conveniently keeps Obamacare’s tax revenues while repealing its spending and claiming to eliminate the law. I understand that that helps achieve a balance budget on paper, but the tax revenues have to come from somewhere. (Ask Detroit lawmakers how gimmicks worked out for them!)

Now, I totally get that these ten-year budget resolutions are mostly meaningless, except as a guide for what the Appropriations Committee can do in one year and one year only, 2015. The rest of the ten-year projections are mostly window dressing, so they typically involve a lot of wishful thinking. But if Republicans know they won’t actually balance the budget by FY 2024 because the savings are phony, why pretend?

They aren’t fooling anyone. Why not use this opportunity to put out a real budget plan to show what they would actually do — in the coming fiscal year, at the very least — if they could? This budget could have been an honest exercise in finding out what is actually needed to indeed balance the budget in ten years, which means dealing with the loss of Obamacare revenue, for one. In the process, maybe they’d find out that ten-year balance may not be the biggest priority, but that starting entitlement reform now is.

Balancing the budget in ten years without gimmicks is actually not that hard. One, for instance, can simply grow spending at the rate of inflation. That will never last, though, if you don’t fix Medicare, Medicaid, and Social Security and end Obamacare. Doing those things is hard and would have some political cost (though that cost would not be as high as the Republicans have made it out to be). It’s a harder task than suggesting higher taxes on a few Americans like the Democrats. But it’s why many Americans have sent Republicans to Congress, and it ends with a great reward: the restoration of America’s fiscal stability.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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