by Faiz Shakir, Benjamin Armbruster, Zaid Jilani, Alex Seitz-Wald, Tanya Somanader, and Travis Waldron

The CAP Budget Plan

This week, the Senate summarily rejected House Budget Committee Chairman Paul Ryan's wayward budget proposal. Taking a serious shellacking for the proposal's plan to end Medicare, Republican lawmakers are now dogging Democrats to produce a budget of their own. "The Democrats campaigned for control of this chamber," said Budget Committee Ranking Member Jeff Sessions (R-AL). "They asked for the job. Let's see their budget." Sen. Rob Portman (R-OH) joined in on Twitter to add "We're in a fiscal crisis, yet the #Democrat led Senate has not passed a #budget in 748 days." But a responsible budget requires more than a slash-and-burn mentality driven more by politics than sound policy. To seriously reign in the deficit while promoting a strong and vibrant economic future, the government must pursue policies that avoid the extremes in cuts or tax raises and succeed in balancing the budget without doing so on the backs of the middle class. The Senate already opted out from considering President Obama's budget this week -- a plan, as Center For American Progress's Michael Ettlinger noted, made a start towards that path. This month at the Peterson Foundation's second annual Fiscal Summit, the Center For American Progress (CAP) offered its own budget plan that does more than balance the budget. Recognizing the important role in honoring public responsibilities, CAP's plan targets spending on investments that bolster economic growth, reform the tax code to reduce inequality that hurts prosperity, and effectively reign in health costs -- all to not only protect, but strengthen, American's middle class.

BE MORE EFFICIENT, INVEST RIGHT:  To deliver on talking points, Republican lawmakers are pushing to balance the budget as quickly as possible by cutting trillions and cleaving programs that bolster the middle class. Not only are such cuts deeply unpopular, but as CAP's Ettlinger, Michael Linden, and Seth Hanlon point out, "a balanced budget is far from what is needed" to ensure sustained economic growth and competitiveness. As the timing of deficit reduction is important to be effective, the CAP plan addresses the budget in two distinct stages. First, an interim budget target of "primary balance" in 2015 -- "with revenues equal to spending except for interest payments on the debt." In 2016, a "unified security budget" -- combined defense, homeland security, and international affairs budgets -- would be capped at about $700 billion, a level reflecting the same spending at the height of the Cold War. But such cuts must be coupled with targeted investment in education, basic science, technology, and infrastructure to maintain the U.S.'s role as a global leader. As CAP notes, the private market "will chronically underinvest in public goods, because there is no easy way to make consumers pay for benefits they derive." By doubling federal investment in basic science and technology research, doubling funding for pre-kindergarten, increasing federal contribution to total K-12 funding to 12 percent by 2035, boosting Pell Grant funding by 25 percent, doubling investment in clean energy technology research and deployment, and increasing transportation and infrastructure investment by 20 percent, the government can ensure an educated workforce, greater productivity and employment growth, and -- most importantly -- a strong middle class that is vital to global economic competition and American industry. According to CBO scoring methods and verified by the Peterson Foundation’s independent scorekeepers, this plan will fully balance the budget by 2030. By contrast, Ryan's budget -- which makes drastic cuts to Pell Grants, energy research, food nutrition programs, and more -- doesn't balance the budget until 2040. CAP is also calling for "instituting a high and rising CO2 price," which would include a 42 percent cut in carbon (in 2005 levels) by 2030 and an 83 percent cut by 2050.

TACKLE THE TAX CODE: The tax system should bolster economic growth and address the growing inequality that hinders national prosperity. However, Ryan’s plan includes enormous tax cuts for the rich, going beyond even the failed Bush tax cuts for the rich by lowering taxes on millionaires to levels not seen since Herbert Hoover was President. CAP's plan suggests a flat 15 percent rate for couples with incomes under $100,000. To simplify the system, many loopholes, deductions and exemptions are eliminated "but the ones middle-class families most rely on are replaced by better-targeted credits. A flat “alternative credit" of $3,100 for singles and $6,200 for couples achieves vast simplification while giving most middle-class families a significant tax cut and lowering taxes, on average, for 95 percent of households. The wealthy will return to the Clinton-era tax rate of 39.6 percent and a temporary surtax of 5 percent on income over $1 million will occur until the federal budget is balanced. As CAP notes, this rate "will still be lower than during most of the postwar period, including our country's greatest period of economic growth." CAP’s plan reduces our destructive reliance on foreign oil and addresses climate change by imposing a fee on oil imports and establishing a price on greenhouse gas emissions. The effect on energy prices for low and moderate-income families is offset by an energy rebate program as well as the income tax cuts they will receive under CAP’s plan. The plan also delivers on the public demand to eliminate tax expenditures for the oil industry. Overall, the tax reform here causes modest changes and "is hardly burdensome on the wealthy," but will go a significant way in reducing the deficit.

CONTROL HEALTH CARE COSTS: Whatever Ryan may insist, his controversial plan to end Medicare does nothing to actually control health spending. As former OMB director Peter Orszag notes, Ryan's plan only reduces Medicare spending and does so by shifting the costs onto patients to "substantially increase total health-care spending." CAP's proposal focuses on inefficiencies throughout the whole health care system  and "brings down the costs of health care for everyone." By aggressively implementing the new health care reform law's "dozens of mechanisms, reforms, and pilot programs designed to bring down the costs of health care," enhancing the law with a public health insurance option to create competition in insurance market and maintain a baseline of quality standards, creating a Medicare rebate program to reduce pharmaceutical prices, and other cost-saving policies, CAP's plan will reduce federal health spending by about $230 billion over the next decade. What's more, the plan vests the Independent Payment Advisory Board with a "failsafe mechanism" that would trigger if, in 2020, "total economywide health care expenditures grow at a rate faster than the economy." As Matt Yglesias points out, it's unclear whether this will actually work given a political system "held hostage to health care providers who want to push spending up. But if Congress does in fact want to slow the growth in health care spending, this or something very much like it is the way to do it."

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"Now, at times this issue has tended to degenerate into an "either-or" type of debate. Either we protect our people from terror or we protect our most cherished principles. But that is a false choice. It asks too little of us and assumes too little about America."
-- Then-Sen. Barack Obama (D-IL), explaining the need for vigorous debate about USA PATRIOT, 02/16/2006

VERSUS

"This is unprecedented. We don't think the risk is worth it."
-- Unnamed Obama administration official condemning the prolonged debate over USA PATRIOT, The New York Times, 05/26/2011