A new Republican budget introduced by freshman Sen. Mike Lee this week takes a hard line against entitlement spending, high taxes and the growth of government.
According to an outline obtained by The Daily Caller, the budget promises to reduce publicly held debt to roughly 52 percent of GDP over the next decade and balance the budget by 2017. It would also reduce spending to 17.8 percent of GDP by 2022, and transform entitlement programs like Medicare and Social Security into basic insurance programs that would no longer provide benefits to wealthy Americans.
Lee’s “Saving the American Dream” budget is based off of a plan originally put forward by the Heritage Foundation. At its heart is a tax simplification plan that would do away with tax loopholes for special interests, estate and excise taxes, and the 15.3 percent payroll tax.
In place of the complex current tax system, Lee’s budget would introduce a “unified” consumption tax that would apply the same rate to both individuals and corporations.
The “target rate” for the unified tax laid out in the outline is 25 percent and still subject to some tinkering, but the new code would allow Americans to avoid paying taxes on money they intend to save and invest. The health insurance and Earned Income Tax credits would remain intact, as would the mortgage interest, higher education and charitable giving deductions.
As for entitlements, under the plan Social Security would “become a retirement plan more akin to a traditional insurance plan” rather than “the current ‘income replacement’ plan.”
The benefits would be adjusted for income, and the retirement age would be raised over the next decade to 68 for persons born in or after 1959. The early retirement age would, over the next 18 years, go up to 65 for those who were born in or after 1964. Retirement ages would then be indexed to longevity, and would go up about one month every two years.
The budget promises that “only the wealthy will see a decrease” in their monthly benefit, and married couples earning over $110,000 a year would see their benefits phased out through means testing.
Medicare would also be subjected to a series of reforms under Lee’s budget, becoming what the outline calls a “defined contribution premium support plan.” Beneficiaries would be able to stay in the “Free for Service” plan or move to one that offers premium support for a price.
Obamacare would be repealed under the plan and replaced with a market-based system that helps low-income Americans buy insurance with tax credits. Medicaid spending would be capped at 2007 levels and block granted to the states, which in turn would have greater leeway in designing their own Medicaid programs.
According to the outline, Lee’s budget would “cut the size of government in half over 25 years” while maintaining a strong national defense. It is likely to be voted on next week.