To see the real proposal, first separate rhetoric from arithmetic. The accompanying verbiage asserts that the budget produces $4.4 trillion in debt reduction. But that includes the deficit reduction from the Budget Control Act (the “debt ceiling deal”) and the American Taxpayer Relief Act (the “fiscal cliff deal”). The former happened in 2011, the latter in January and not a penny of either can be attributed to the Senate’s budget plans. Only those policies that alter the CBO projected outlook of $7 trillion in new deficits between fiscal 2014 and 2023 can count toward the actual total. Those only amount to about $1.7 trillion, not even half of is needed to get the U.S. debt below dangerous levels.
Those numbers overstate the real progress, as the Democrats disguise their spending plans behind claims of $975 billion in spending cuts. Like the House, the Senate correctly says that the starting point (the “baseline” in budget jargon) should not include spending for wars in Iraq and Afghanistan that are being phased down, or emergencies (Sandy) that have already been funded. Fair enough.
But at that point, the shell game begins. The Senate pretends that the Budget Control Act is not law (despite the rhetoric claiming its savings), that the much ballyhooed sequester does not exist, and that spending will be magically (and costly) $1 trillion higher over the next 10 years. Similarly, the budget assumes that Medicare doctors are automatically (and, again, costly) paid another $140 billion without any need to come up with the money or figure out how to pay for it.
To make the “which shell are the spending cuts under?” game even more dizzying, there is not a single, solitary, specific, actual policy recommendation to back the supposed discretionary spending cuts or a reform to entitlements like Medicare, Medicaid, and Social Security of any substance. Digging through the smoke screen yields the insight that spending is actually up by $646 billion.
The taxes are undisguised and very serious. The Senate Democrats’ plan is to raise taxes by a total of a net $923 billion over the next 10 years. The claim is that these will be paid by the piggy bank of rich Americans and corporations, as if these were not in turn funded by the prices paid by shoppers and the wages earned by workers. The Senate Democrats can dictate who sends in the check, but they cannot change the economic reality that the middle class will ultimately pay.
What’s the score? Taxes up by $923 billion, spending up by $646 billion, and total deficits up by $6.7 trillion. Tax, spend, and borrow….but never balance.
This stands in stark contrast to the budget offered by House Republicans on Tuesday. It holds the line on taxes, balances the budget in 10 years, and keeps it balanced thereafter. To get the necessary discipline on the outlay side of the ledger, it reforms the mandatory health, pension, and lower-income programs to yield a social safety net that will survive to the next generation. To raise the existing federal revenue without an anchor on job growth and upward mobility, it reforms the individual and corporate tax codes – ending the giveaways and restoring American competitiveness.
The federal budget is a serious problem. The federal debt is a burden that slows growth and threatens financial stability. Budget week offers a serious choice to deal with these problems: tax, spend and borrow versus reform, grow, and repay.
Senate Democrats haven’t done a budget in four years, depriving voters of a clear picture of the real options. The choices are now clear.
Holtz-Eakin is president of American Action Forum AAF and former director of the Congressional Budget Office.