President Barack Obama several weeks ago laid out his budget proposal for fiscal year 2013 and his vision for the federal government over the coming decade. The president called for $4 trillion in deficit reduction accomplished though a mix of spending cuts and additional revenue. His blueprint identified savings in nearly every area of the budget, including Medicare and Medicaid.
Now it’s the House Republicans’ turn to present their vision. In 2011 the House Republican budget—the one that replaced traditional Medicare with a system of vouchers, slashed Medicaid by a quarter, and cut taxes for the wealthy while increasing the burden for the middle class—met some pretty stiff resistance from the American people. If the House Republican caucus, led by House Budget Committee Chairman Paul Ryan (R-WI), learned its lesson from last year, it will propose a far more reasonable plan this year and thus lay the groundwork for real negotiations that could perhaps result in actual progress.
That, or they could double-down on the unworkable and unpopular policy proposals that underpinned last year’s budget debacle.
How will we know which path they’ve chosen? There are a few areas that will tell us whether the House Republicans are truly serious about solving our budget problems or are merely ideologues unwilling to compromise: health care, taxes, adhering to the Budget Control Act of 2011, helping the economy and the middle class, and dealing responsibly with deficit reduction. Watch for the level of detail in the new House budget plan too, which will indicate just how serious they are about debating the merits of their proposals. Let’s begin with health care.
In 2011 House Republicans stirred up a hornet’s nest with their proposal to end the Medicare guarantee and replace it with a voucher system. The American people were not amused.
The lesson that Rep. Ryan and his colleagues should have learned from that experience is that Americans do not want to radically alter the structure of Medicare. They want the security of knowing that when they retire, they will have decent health insurance coverage. While some changes to Medicare may be necessary, those changes should be in the context of the current system.
Certainly, the House Republican caucus must know that proposing the same voucher plan again is likely to get them into even hotter water. So they will almost certainly try to disguise it or amend it in some way to make it more publicly palatable—perhaps by adopting some version of the so-called “Ryan-Wyden” plan. Gussied up though it may be, if the plan relies on fundamentally transforming the way the federal government provides health care for senior citizens, it will mean the lesson has gone unlearned.
But Medicare isn’t the only health care question. The House Republican FY 2012 budget proposed slashing Medicaid by more than $1 trillion and repealing the Affordable Care Act. If passed, such measures would have stripped at least 30 million people of their health insurance. Hopefully, these proposals won’t make a reappearance this year. Budget plans that rely on denying people health coverage to produce cost savings are not exactly likely to engender the kind of widespread support necessary for a plan to pass.
Every bipartisan budget plan proposed over the past two years has shared one thing in common: They all included both spending cuts and revenue increases. In fact, nearly all budget plans shared this common characteristic, whether they were bipartisan or not.
The major exception, however, was the House Republican budget proposed last year. Their proposal did not include any additional revenue and relied entirely on spending cuts to close the budget gap.
Moreover, last year’s House budget plan actually called for lower tax rates, especially for people at the top of the income spectrum. How they would pay for these tax cuts was left unsaid, but the only practical way to make the math work would have been to increase taxes for those in the middle.
One critical question this year is whether or not the House budget plan will amend these two poisonous positions: no additional revenues and lower taxes for the rich.
Revenues have been the sticking point in budget negotiations all year long. Over and over again, the president and his allies in Congress signaled their willingness to accept even very deep spending cuts so long as the sacrifice was shared with higher-income individuals in the form of added revenues. Over and over again, conservatives in Congress refused to budge. Will this year’s budget plan be any different?
Then there’s the issue of growing income inequality. The increasing concentration of income in the hands of the richest 1 percent has risen to the top of the national agenda. Any serious budget plan must grapple with these issues. Proposing lower tax rates for the 1 percent doesn’t really count as grappling.
The Budget Control Act
Eight months ago at the conclusion of the debt-limit fight, Congress passed the Budget Control Act, which set limits on so-called “discretionary spending” for each of the next 10 years. Discretionary spending is the approximately 40 percent of the budget that Congress must reappropriate each year during the annual budget process. If Congress cannot come to an agreement on spending levels for the discretionary category, it could lead to a shutdown, which is what almost happened last year.
It was hoped that including the caps in the Budget Control Act would prevent anything similar from happening this year. After all, the law was passed with bipartisan majorities, and it includes agreed-upon levels of discretionary spending for fiscal year 2013 and beyond.
Those levels are above what the House Republicans called for in their last budget resolution, but they are below what President Obama called for in his budget from last year. In his budget this year, the president adopted the compromise levels.
Will the House Republican budget do the same? If they do, it’ll mean they want to avoid another damaging budget battle this year. It’ll mean that there is a real chance that the ordinary congressional budget process can go forward. And most importantly, it’ll mean that a deal’s a deal.
If they don’t, that’s bad news. That would mean reneging on the agreement from last summer. It would set up another ugly fight over annual appropriations, and it could even potentially lead to another potential government shutdown. Most importantly, it would mean that House Republicans are not interested in finding common ground—not even on an issue where common ground had already been found not more than a year ago.
The economy and the middle class
Last year’s House budget proposal seemed to have been designed for an economy in perfect condition and a thriving middle class. It included no job-creation measures, no policies to boost growth, and no ideas for strengthening the middle class. It did, however, include draconian, immediate spending cuts that would have plunged the economy back into a recession, as well as shortsighted slashing of investments in future economic growth.
Although the past few months have given us reason to hope that the economy is healing, we are certainly not back to full health. Will this year’s House budget be another plan with no prescription for boosting the economy? (Tax cuts for rich people doesn’t count.) And after a decade of stagnant incomes and rising costs for middle-class families, will this version of the House Republican budget have anything to offer them?
For a budget plan that was billed as being “fiscally responsible,” last year’s House Republican plan sure took an awfully long time to actually achieve a balanced budget. Even after replacing Medicare with vouchers, even with all its other enormous spending cuts, last year’s House budget resolution still didn’t get to balance until 2040. That’s because it paired all those spending cuts with tax cuts that were almost equally enormous.
Hopefully this year’s version will do better. If you are going to ask the American people to accept painful reductions to their Medicare benefits, historically low levels of investment in education and infrastructure, and higher taxes for most in order to pay for lower taxes for the richest few, it sure would be nice if you didn’t also ask them to delay the supposed payoff from those sacrifices for another three decades.
This is one area where it would be better if the Republicans in the House did not learn a lesson from 2011. To their credit, last year’s budget included a fair amount of details—more than most budget resolutions. They even asked the Congressional Budget Office to provide a nonbiased assessment of the fiscal and health impacts of their proposed budget plan. Unfortunately for them, many of those details revealed just how dramatic, radical, unpopular, or unrealistic their plan really was.
The temptation will be strong to describe this year’s plan in much more vague terms. That CBO analysis from last year was especially damaging, reporting that their Medicare plan would cost seniors thousands of dollars in higher medical costs. But hopefully Rep. Ryan and his colleagues won’t succumb to that temptation and will again provide a lot of details and will again ask the CBO to evaluate their plan. If they don’t, you can bet that those hidden details will contain lots of little devils.
Michael Linden is Director of Tax and Budget Policy at the Center for American Progress.