Dueling Budgets – Republicans and Democrats

     Good evening everybody and welcome to In the News.  Glad you could be with us again today.  We have a good show for you today.  We’re going to talk a little bit about the dueling budgets that were put out last week in Washington DC.  Both the Republican and Democratic parties have put out competing budgets for the Federal Government.  And we want to go over them a little bit and explain the differences in them and in the visions both parties have for the country. 

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It’s budget season in Washington DC.  Every year at this time budgets are put forth for the federal government.  The reason they’re put forward is so Congress can vote on and approve them.  Only Congress has the “power of the purse” as it is known, it’s granted to them by the Constitution.  So only Congress can vote on spending and appropriations bill and that includes budgets. 

So every year at this time budgets sent through all of the Committees and once they pass Congress, if they pass Congress, they’re sent to the President for his signature and that’s how they become law.  A new budget needs to be in place by Oct. 1st.  That’s when the Federal Government’s Fiscal Year starts.  So a new budget needs to be in place by then.  It’s done at this time to give Congress enough time to…well…fight over them.  They’re proposed way in advance so there could be enough time for them to work their way through the Congress.

Now it’s been 4 years since the Democratic controlled Senate has passed a budget.  Why have they not passed a budget in 4 years?  Well, your guess is as good as mine.  They really should have.  But it’s been 4 years since their last one.  But they put one out this year.  And we’d like to go over it now.  But we’re going to start with the Republican budget because that’s the one that seems to be getting a little more attention.

The House Budget Committee is responsible for creating a budget.  The Republicans currently control the House of course so that means that committee is chaired by a Republican.  And it’s chaired by Rep. Paul Ryan of Wisconsin.  Yes, that Paul Ryan.  The one who ran for Vice President last year.  Now, Paul Ryan is known as being a conservative and for wanting to tackle the tough issues.  He’s put out several budgets in the past that aim to do just that.  And this one is no different. 

The first thing to be said about this year’s version of his budget is that it looks to balance the federal budget within 10 years.  Ryan’s previous budgets aimed to do that in 30 years, so this is a little more ambitious.  The plan looks to cut $4.6 trillion dollars from the Federal budget over the next 10 years, looking to balance the budget by 2023.

Now the way it does that is by making some pretty major changes to entitlement programs.  As in previous Ryan budgets, this one looks to change Medicare into a Voucher program.  So the way it would work is, seniors would be paid an annual stipend, and then they would be responsible for going out and shopping for health insurance on the open market.  It doesn’t do this for current seniors or even those close to retirement age.  It does it for future retirees.  So everyone under the age of 55. 

It also overhauls the tax code.  It creates just two tax brackets, 10% and 25%.  Ryan does this to simplify the tax code and make it fairer to both individuals and businesses. 

And the interesting part of the budget, it completely repeals Obamacare.  Ryan cites the additional taxes as well as the spending that Obamacare calls for and calls for the law to be repealed.  He cites repealing it as the only way to make the budget balance.  So that’s the Ryan plan.  Even more conservative than his previous budgets have been.  And that’s saying something. 

Now as we mentioned, for the first time in 4 years, the Democrats in the Senate have put forward a budget of their own.  They avoided getting into the budget battles in the past but Republicans were beating them up pretty good over this point as well they should.  And so this year they put one out.

Now, the most controversial thing about the Democratic budget is really how uncontroversial it is.  It doesn’t really offer any bold fixes, or bold proposals.  It’s really as I see it, kind of vanilla.  The plan offers about $1.95 trillion of deficit reduction over the next 10 years.  That $1.95 trillion would be achieved by equal parts spending cuts and tax revenues.  It proposes $975 billion in spending cuts and $975 billion in tax revenues.  The tax revenues would be achieved by closing tax loopholes.

The plan largely leaves the major entitlement programs alone.  It does little to address structural problems with Medicare, Medicaid or SS.  But it does include $275 billion in cuts to Medicare over the next 10 years.  But the cuts would come from providers and not beneficiaries. 

Democrats say the $1.95 trillion in deficit reduction included in this plan along with the $2.5 trillion already enacted brings the total deficit reduction enacted over the last several years up to about $4.5 trillion.  They point out that this number is consistent with what many economists, and even the Simpson-Bowles plan calls for in deficit reduction to help bring the deficit to a more manageable level. 

Now one note, the $2.5 trillion Democrats cite includes the Sequester so it doesn’t seem like they’re going to be rolling those back any time soon.  Now one thing you’ll notice right away in the Democratic plan is the ratio of spending cuts to tax increases.  It’s precisely one to one.  $975 billion for spending cuts, $975 billion for tax increases.  It seems that Democrats wanted to present a plan that they could point to and say, look, it’s perfectly balanced.  So, if nothing else they have achieved that. 

Now the one thing I have to say is that both of these plans are more political documents than they are real budget proposals.  Neither one has a very good chance of passing in their current form.

On the Republican, or Ryan plan, I have to say is, I completely admire Paul Ryan’s courage.  He is definitely not afraid to stand up and put his ideas forward and tell the world what he believes in.  And he’s obviously willing to take the heat for it.  But I just don’t know how reasonable it is to believe that the elderly are going to be able to find adequate health insurance on the open market.  I mean, the whole reason we have Medicare is because seniors were having so much trouble getting adequate health care on their own.  That’s why the program exists.  I mean, we should all want to get Medicare costs under control.  It is one of the biggest, if not the biggest driver of our national debt.  But is the voucher method really the way to go?

Another issue with this budget is the proposal on Obamacare.  Paul Ryan wants Obamacare repealed.  Obamacare passed the Congress, it was upheld by the Supreme Court and President Obama was re-elected even though his opponent’s ticket, which included Paul Ryan ran repealing it.  Obamacare is settled law.  It’s time to move on.

But even beyond that, Paul Ryan’s budget is kind of contradictory when it comes to Obamacare.  You see, Paul Ryan’s budget keeps the cost savings of Obamacare but gets rid of the costs.  There’s $700 billion in Medicare cuts that it’s included in Obamacare’s legislation.  The Ryan budget counts that $700 billion as savings in his budget even though he heavily criticized the President for those cuts all through last year’s election. 

He also wants Obamacare repealed, and if it were repealed, then obviously those cuts would no longer count in the budget.  And yet he counts them.  There’s also about a $1 trillion worth of tax increases associated with Obamacare that he does count in the budget.  So it seems that Paul Ryan is counting on the repeal of Obamacare for the costs, but not counting on it for the cuts.  So it’s a little contradictory.  And that’s where the Ryan budget gets a little iffy for me.

Now as for the Democratic budget, as I’ve mentioned, the most remarkable part is, really, how unremarkable it is.  The plan makes one to one spending cuts to revenue increases.  But it doesn’t address the entitlement programs.  It doesn’t make any ambitious proposals, in either direction.  So basically as bold as the Ryan budget is, that’s how timid the Democratic budget is.

What is interesting though is where the Democratic plans are in relation to the President’s plans.  The President has repeatedly said that he wants to tackle entitlement reform.  Last December, in the Fiscal Cliff negotiations, he put some forms of entitlement reforms on the table.  Including Chained CPI, which is a less generous way of calculating Social Security benefits, for example.  But Democrats in Congress seem to be saying don’t count on our support for any such deal.  The Democratic budget offers much less in terms of Medicare cuts for example.  Even the Center for American Progress, which is a left leaning organization, has outlined ways to cut more from Medicare than the Democratic budget. 

The Democratic budget also asks for more tax revenue.  Now it could be that the Democrats are sending a message to the President to be careful just how far to the right he goes with his budget and his proposals.  It may also be that the Democrats in the Senate are giving the President some political cover.  This way he could stand up to Republicans and say look I’m taking risk too in angering my base.  You’ve got to do the same and give a little on tax revenue.  Of course we’ll know a lot more once the President releases his budget.

Now the president is required to submit a budget in early February.  But he has not done it yet.  Last we heard the White House is planning to release its budget in early April.  So the President’s budget is two months late.  Why is it two month’s late?  WH says it was it’s because they were tied up with the Sequester.  But I don’t think that’s it at all.  I think they knew that the Democrats were going to be releasing a budget this year after a long while of not doing it.

And I think they had an idea of what the Republican budget was going to look like.  And so they knew there was going to be a real debate happening on these things.  Entitlement reforms and taxes etc.  So perhaps they wanted to see how things were going to shake out.  How the debate was going to shake out before releasing their budget.  Not that what they were going to propose was going to depend so much on what others did, but maybe it was going to affect it a little bit around the edges.

If nothing else, it was probably going affect how they were going to form their talking points.  Anyway the budget when it is released has the potential to be a big one.  And so it’ll be very interesting to see what the President decides to do.  So it’s set to be released in a few weeks and once it is we’ll be here to go over it with you and bring you the news you need to know on it.  So those are the competing budgets.  Stay tuned over the next couple of weeks and we’ll be bringing you further developments as they happen.  It’s going to be a while before these particular budget issues are settled. 

Well that’s our show for today.  Thanks for being with us everyone.  Remember to keep up with In the News on Facebook and Twitter @itnshow.  That’s @itnshow, one word.  Thanks for being with us everyone.  Until next time.  Good night.