As Congress enters a two-week recess, the future of America’s fiscal health remains hazy at best. Here are three possible routes Congress could take to deal with the national budget:
1) House Republicans
Chairman of the House Budget Committee Rep. Paul Ryan’s (R-Wisc.) proposed budget plan was narrowly passed Thursday, 221-207. The plan includes no cuts to Social Security or military spending, and a smaller role in the protection of the environment, the supplying of government-backed loans, and the regulation of financial services and energy companies.
The plan would turn Medicare into a voucher-like program, which Americans under the age of 55 would receive a sum of money — not accounting for inflation — to buy health insurance. Similar to last year’s blueprint, plans to defund Obamacare and gut — not cut — social programs, such as Medicaid, are also included.
Ryan claims the $600 billion in revenue from the fiscal cliff deal, plus sequestration, plus savings from first few years of the 2010 Affordable Care Act will balance the budget by 2023. In reality, it could take until 2040 to truly balance the budget.
2) Senate Democrats
The Senate Democrats’ first budget proposal in four years is sponsored by Budget Committee Chairman Patty Murray (D-Wash.). The Senate passed the proposal on Saturday by the narrowest of margins, 50-49. The proposal includes no changes to safety-net programs; higher taxes on the wealthy and corporations, to supply deficit reduction and economic boosts from government-backed job training, educational grants and infrastructure work; and a reworking of the Medicare system. The Medicare system will remain the same for the elderly and anyone close to retirement, but doctors and hospitals will receive less money from the government.
Murray claims $1 trillion in new taxes plus $1 trillion in spending cuts over the next 10 years will come close to balancing the budget in 10 years. The key word here is “close.” In actuality, it doesn’t come close and there’s essentially no plan to deal current government debt.
3) Compromise
Short-term funding for governmental discretionary spending was saved by the passage of a continuing resolution into law on Thursday into legislation on Thursday, ending the possibility of a government shutdown by allowing Congress to carry over the previous fiscal year’s budget.
This is a temporary fix, however. Reconciliation is necessary in the coming months, as legislators prepare for the next fiscal showdown: the ultimate deadline, sometime in late summer, when the Treasury will need Congress to approve an increase in its borrowing authority.
By law, the House and Senate are obligated to adopt a budget resolution for fiscal year 2014 by April 15 or legislators won’t get paid.
Long-term entitlements and deterioration in revenues have caused our nation’s federal debt issue. It would require cleaning up the tax code and reducing the number of tax expenditures and loopholes in order to obtain adequate deficit reduction.
The proposed GOP budget is virtually comprised of all spending cuts while the Senate Democrats’ proposal takes into account half spending cuts and half tax increases. Democrats aren’t necessarily abandoning values and surrendering by including spending cuts and this should by no means be used against the Republicans’ failure include tax increases in their proposal. Democrats are conscious about the dangers of raising taxes at a time when the economy is still weak and this should be seen as noble and mindful, not as concession.
The grand bargain lies at the middle. Republicans and Democrats agree the budget should include half spending cuts; that’s the easy part. The remaining half should include a combination of tax increases and tax reform, which contribute to deficit reduction by closingloopholes and eliminating deductions.
Cleaning up the tax code is a daunting task and seen by many as a more of a long-term goal. But by broadening the tax base, raising marginal tax rates and returning some rates to Clinton-era levels, most legislators will be content politically and a budget consensus would become a reality.
Above all, the prospects of bipartisanship in Washington are greater than ever. Interest rates are on their way up, and the stock market is enjoying a rare linear progression: It’s all because the country is optimistic about it’s future. Legislators must maintain their commitment to a grand bargain, abstain from absolutism and keep working for the greater good of the American people, not party accolades.