A Budget in the Works: The House Budget Committee’s Proposal

March 20, 2012

Fiscal Year 2013: A Budget in the Works

The House Budget Committee’s Proposal

It’s that time of year again. Just over a month after President Obama submitted his Fiscal Year (FY) 2013 budget to Congress, House Budget Committee Chairman Paul Ryan (R-Wis.) has released the House Republicans’ budget. What’s in the 99-page document anyway? What would Ryan’s proposed changes mean?

Key Budget Takeaways from Ryan’s Budget

  • Discretionary Spending Showdown
  • What’s in the Budget? 

Discretionary Spending Showdown

Ryan’s Budget proposes $1.028 trillion in spending for FY13 while the Senate digs in at $1.047 trillion1

One of the most important numbers laid out in the budget is the topline number for discretionary spending.  While a budget might make many policy proposals, such as tax and Medicare reforms, these reforms are just a blueprint.

  • As we’ve discussed previously, since the budget is in the form of a concurrent resolution and not a bill, a future bill is required to be signed into law to make these types of policy changes. However, one number the budget does set, if the process is completed by both the House and Senate, is the topline number for discretionary spending.
  • Generally, discretionary spending is spending that occurs through the yearly appropriations process2. Department of Defense and Department of Education spending fall under this category.  Most spending on Social Security and Medicare, for example, are not in this category.

But here’s the catch:  the Budget Control Act, which raised the debt ceiling last August, already set the topline discretionary spending number for Fiscal Year 2013 in the Senate at $1.047 trillion.3

  • This is why Senate Majority Leader Harry Reid said on February 3: “We do not
 need to bring a budget to the floor this year”4. In other words, since the number is already set for the Senate appropriators to spend, Senator Reid is very unlikely to move a budget through the Senate.

In a March 19 letter to Speaker Boehner and Majority Leader Cantor, the Chairman of Senate Budget Committee, Kent Conrad and the Chairman of the Senate Appropriations Committee, Daniel Inouye, said, “Should the House back out of last summer’s agreement and attempt to lower the FY 2013 discretionary spending level [of $1.047 trillion]…[it] would delay consideration of the appropriations bills.”5

What’s in the Budget?

We know discretionary spending will be hotly debated between the House and the Senate, but what else is in the House budget?

Taxes
The Ryan budget:

  • Proposes restricting tax loopholes, deductions, and credits6.
  • Proposes dropping the individual income tax rates to 10 and 25 percent7.  Currently, the highest individual income tax rate is 35 percent.8

Deficit
As outlined in our By the Numbers document, Ryan’s budget would run a deficit of $797 billion in FY13.  It is slightly lower than what would accumulate under President Obama’s proposed budget ($901 billion).

Spending9
The budget:

  • Proposes increasing national defense spending by $8 billion (over what was set last August in the Budget Control Act).10
  • Proposes to privatize Fannie Mae and Freddie Mac; Ryan’s budget notes that the government has spent over $185 billion in government bailouts.
  • Proposes to do more to stop improper government payments, such as fraudulent Social Security payments.
  • Proposes to sell federal assets, such as unneeded federal property.
  • Proposes to restructure farm programs by reducing “the fixed payments that go to farmers irrespective of price levels.”

Social Security Reform
In general, Social Security creates a basic level of monthly income once an individual reaches normal retirement age.  It also provides benefits to certain disabled workers who are unable to work due to a disability.11

  • While the House Republican budget document lays out the fiscal challenges facing Social Security, it doesn’t propose specific solutions.
  • Instead, it proposes that “the President and both chambers of Congress to ensure the solvency of this critical program”12.

Medicare Reform
Medicare is a federal health insurance program for people who are 65 over, people with certain kidney diseases at any age, and for people who have certain disabilities and cannot work13.

  • According to Congressional Quarterly, Ryan’s current plan to overall Medicare is “less extreme” than his proposal last year14.
  • Ryan’s plan is “nearly identical” to the plan Ryan put forth with Ron Wyden (D-Ore.) last year15.

For workers currently under the age of 55:

  • In 2023, these Medicare beneficiaries would get to choose between traditional Medicare or would get to select a choice of private plans with premium support.
  • According to Kaiser Health News, “The GOP document projects an estimated $205 billion in Medicare savings over President Barack Obama’s proposed budget over ten years”16. 

Medicaid Reform
Medicaid is a health insurance program for low-income people and is administered by states.  The states and the federal government fund the program.17

  • The budget proposes turning “Medicaid over to the states in the form of a federal block grant.”
  • According to the GOP document, it would constrain “Medicaid’s growing cost trajectory by $810 billion over ten years.”18

Sequester and Defense Spending
Last August, the Budget Control Act established a Joint Selection Committee on Deficit Reduction, also known as the “Super Committee,” to find further cuts in federal spending. But Washington failed America because the Super Committee failed to act, which triggered a process called sequestration.

What is sequestration? By definition, sequestration makes spending reductions to get budget levels “in line with statutory spending goals”19.

  • Between 2013 and 2021, defense spending would be reduced by $492 billion; nondefense activities would be reduced by $492 billion as well.20

According to the Congressional Budget Office, in calculating these non-defense reductions, “…a significant portion of mandatory spending…” is exempt from sequestration. Such mandatory spending includes Social Security and Medicaid, among others.21Ryan’s budget proposes to avoid the sequestration process for defense spending.  According to The Hill, “The plan from House Budget Committee Chairman Paul Ryan asks six congressional committees — but not Armed Services — to find $261 billion in savings to help roll back the automatic cuts through sequestration that were triggered by the failure of the Super Committee.”22

 To view this document as a .pdf, click here.
  1. Subscription Only. Congressional Quarterly. House GOP Budget Would Cut Spending, Protect Defense From Sequester. http://cq.com/doc/news-4048756
  2. Congressional Research Service. Introduction to the Federal Budget Process. December 2, 2010. P. 19. http://assets.opencrs.com/rpts/98-721_20101202.pdf 
  3. Congressional Research Service. The Budget Control Act of 2011. August 19, 2011. P. 12. http://www.fas.org/sgp/crs/misc/R41965.pdf
  4. The Hill. Reid: This Year’s Budget is Done. February 3, 2012. http://thehill.com/blogs/on-the-money/budget/208593-reid-this- years-budget-is-done 
  5. Letter to Speaker Boehner and Majority Leader Cantor. March 19, 2012. http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=95846b25-c536-4918-99f5-2264c35d6df7
  6. House Republican Budget for FY 13. P. 60 http://budget.house.gov/UploadedFiles/Pathtoprosperity2013.pdf
  7. House Republican Budget for FY 13. P. 15 http://budget.house.gov/UploadedFiles/Pathtoprosperity2013.pdf
  8. House Republican Budget to Propose Lower Income Tax Rates. Business Week. March 19, 2012. http://www.businessweek.com/news/2012-03-19/house-republican-budget-to-propose-lower-income-tax-rates
  9. Unless noted, information comes from House Republican Budget for FY 13. Pp. 26, 30, 33, and 34. http://budget.house.gov/UploadedFiles/Pathtoprosperity2013.pdf
  10. The Hill. GOP Budget Boosts Defense Spending. March 20, 2012. http://thehill.com/blogs/defcon-hill/budget- approriations/216925-gop-budget-boosts-defense-spending
  11. Government Accountability Office. Social Security Reform. http://www.gao.gov/new.items/d05193sp.pdf
  12. House Republican Budget for FY 13. P. 14 http://budget.house.gov/UploadedFiles/Pathtoprosperity2013.pdf
  13. Medicare.gov. What is Medicare and Medicaid? http://www.medicare.gov/Publications/Pubs/pdf/11306.pdf
  14. Subscription Only. Congressional Quarterly. Ryan’s Latest Medicare Plan Another Likely Non-Starter for Democrats. March 20, 2012. http://www.cq.com/doc/news-4048757
  15. Kaiser Health News. New Ryan Budget Would Transform Medicare and Medicaid. March 20, 2012. http://www.kaiserhealthnews.org/Stories/2012/March/20/ryan-budget-medicare-medicaid-republicans.aspx
  16. Kaiser Health News. New Ryan Budget Would Transform Medicare and Medicaid. March 20, 2012. http://www.kaiserhealthnews.org/Stories/2012/March/20/ryan-budget-medicare-medicaid-republicans.aspx
  17. Medicare.gov. What is Medicare and Medicaid? http://www.medicare.gov/Publications/Pubs/pdf/11306.pdf
  18. Kaiser Health News. New Ryan Budget Would Transform Medicare and Medicaid. March 20, 2012. http://www.kaiserhealthnews.org/Stories/2012/March/20/ryan-budget-medicare-medicaid-republicans.aspx
  19. Congressional Research Service. Budget Sequesters: A Brief Review. March 8, 2004. P. 2.
  20. CBO: Testimony of Douglas W. Elmendorf on Discretionary Spending. October 26, 2011. P.15. http://www.cbo.gov/ftpdocs/124xx/doc12490/10-26-DiscretionarySpending_Testimony.pdf
  21. CBO: Testimony of Douglas W. Elmendorf on Discretionary Spending. October 26, 2011. Pp. 4, 15. http://www.cbo.gov/ftpdocs/124xx/doc12490/10-26-DiscretionarySpending_Testimony.pdf
  22. The Hill. GOP Budget Boosts Defense Spending. March 20, 2012. http://thehill.com/blogs/defcon-hill/budget- approriations/216925-gop-budget-boosts-defense-spending

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