In case you haven’t heard, we’re in the midst of a massive spending crisis. Yup. It’s a real bummer. Unless we have some real action out of Washington — and quick — the tsunami of red ink coming our way will mean massive debt or crippling levels of taxes. So what is Washington doing about it?
First up, the president. He had a statutory responsibility to present a budget to Congress by February 4. He didn’t. Instead, he waited a month and then launched his self-proclaimed charm offensive. His delay in presenting the presidential budget is the longest such delay in history, excluding presidential transition years. This is the first time in 92 years that a president will follow — not lead — Congress in the whole budget thing. So it’s already a record-shattering year.
On Tuesday, House Budget Committee Chairman Paul Ryan (R-Wis.) got things rolling when he presented his FY 2014 budget plan. The most notable change from his FY 2013 proposal is that this blueprint would balance the budget in 10 years. That’s a marked improvement. His previous proposal took a couple of decades longer to balance.
Under Ryan’s new plan, publicly held debt would fall from 77 percent of GDP to 55 percent of GDP over the first ten years, and the debt-to-GDP ratio would continue to fall after that. Also good: The proposal offers a tax reform plan aimed at growing the economy and creating jobs, not choking more taxes out of us.
The biggest driver of the debt is Medicare. Unless we fix Medicare, it may not be around for our children and grandchildren. Ryan repeals the $1.8 trillion in new health care entitlements in Obamacare. His budget would save Medicare by gradually turning it into a premium-support program. Moving to this patient-centered model would free retirees from relying on the unstable and unsustainable government-run Medicare program and restrain costs through competition rather than price-fixing.
But Ryan’s Medicare reform plan is more timid than it should be. The new system would not affect anyone aged 55 and older, even though many of these folks have over a decade left in their working lives. Realistically, you can’t tackle the entitlement crisis if you exempt all Baby Boomers — even millionaire Boomers — from reforms. The math just doesn’t work. Medicare and Social Security (which Ryan’s budget doesn’t even tackle) aren’t sustainable in their current forms. Reforms for these programs should focus on helping those seniors most in need.
On Wednesday, Senate Budget Committee Chairwoman Patty Murray (D-Wash.) introduced her budget. A product of the “balanced” approach crowd, it has nothing to do with actually balancing the budget. Instead, “balance” means higher taxes and higher spending. It’s an approach that ensures chronic deficits and debt and a relentlessly growing federal government.
Perhaps the Senate could be forgiven somewhat for this misguided approach. It was, after all, the Senate leadership’s first attempt to write a budget in four years, so their skills are bound to be a bit rusty.
Murray’s budget features a massive tax hike — $1 trillion on top of the “fiscal cliff” tax hikes and the new Obamacare taxes. Not exactly a growth agenda, there. Deficits in her budget average 2.4 percent of GDP. Publicly held debt declines from 77 percent of GDP to — wait for it — 70 percent of GDP within a decade.
Sure, that seems to be an improvement. But in the entitlement section, Murray’s budget insists on “keeping promises.” The money necessary to keep these promises is just not there, and pretending otherwise is dishonest. As more Boomers retire into Social Security and Medicare, deficits will explode, driving the debt even higher.
Murray doesn’t strike out entirely. She deserves some credit for delivering the first Senate budget in years. And by presenting a plan that would raise taxes, expand the welfare state, gut defense and ignore entitlements, Murray has provided a stark contrast to Ryan’s House plan.
It looks like it’s going to be a long season from here on out.
Alison Acosta Fraser is director of the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.