In late March, a few days after the House approved its budget resolution, the Senate approved a budget resolution for the first time in four years. The vast differences between the dueling proposals reflect broad disagreements between Democrats and Republicans regarding how to address the federal government's persistent budget deficits.
The Senate-approved budget resolution, authored by Senate Budget Committee Chairwoman Patty Murray (D-Wash.), would modestly reduce the deficit from current projected levels during the next decade.
According to projections, if the resolution is implemented, the annual deficit would decrease from the current $1 trillion to $566 billion in 2023. Moreover, the total federal debt held by the public would be about 70 percent of U.S. gross domestic product (GDP) compared with the current 76 percent.
The Senate budget proposal reduces the deficit by combining spending cuts with tax increases. It calls for $975 billion in increased tax revenues through reducing or eliminating provisions in the tax code that enable taxpayers to reduce their tax liabilities. Although Democrats claim these tax increases would fall solely on high-earning individuals, Republicans claim it would be impossible to obtain the expected level of revenue without affecting middle-class taxpayers and small businesses.
The Senate budget resolution also would cut spending modestly in defense and domestic programs, including Medicare and Medicaidthe entitlement programs that are the primary drivers of the government's long-term budget imbalance. Most notably, the Senate Democratic budget does not make any substantive reforms to Medicare and Medicaid. If major reforms to such federal health care programs are not made, deficits will explode.
Senators voted 50-49 to approve the plan. Fifty Democrats supported the measure, and four Democrats joined the 45 Republicans who opposed the measure.
The House passed a budget resolution authored by Budget Committee Chairman Paul Ryan (R-Wis.). The House Republican budget is much more ambitious from a deficit reduction perspective. It would balance the budget during the next decade by reducing annual deficits a total of $4.6 trillion during the next 10 years by gradually slowing the growth of government and most notably providing major reforms to Medicare, Medicaid and other entitlement programs.
The House proposal keeps total federal outlays at their current levels during the next two years. After that, government spending would continue to increase but at a slower rate than if current policies continue. By 2023, federal expenditures would decline to 19.1 percent of GDP compared with the current 22.2 percent. Moreover, the publicly held debt relative to GDP would decline to 55 percent during the next decade.
The House Republican budget resolution passed the House on a vote of 221-207 on a nearly straight party-line vote.
The House and Senate budget resolutions mirror the broader fight between Republicans and Democrats regarding fiscal policy. Essentially, Republicans seek to slow the growth of government spending by reforming entitlement and other programs to reduce and eventually eliminate annual deficits without raising taxes. Most Democrats, on the other hand, prefer to achieve only modest deficit reduction by slightly curtailing spending and raising taxes.
It appears unlikely Democrats and Republicans will be able to come together in the near term to craft a compromise budget that can pass the House and Senate. This means the government would continue operating without a budget in place, relying instead on stop-gap measures.
The opportunity for lawmakers and the president to forge a compromise likely will come this summer when the current statutory debt ceiling will again need to be increased or the government could default on its debt. Such a compromise might take the form of tax increases, albeit less than the $975 billion in the Senate budget proposal, coupled with meaningful reforms to Medicare and Medicaid.
However, most Republicans remain opposed to any tax increases beyond the $600 billion in increased taxes included in the "fiscal cliff" bill passed Jan. 1, and most Democrats remain opposed to more than minor tweaks to Medicare and Medicaid. If the president and Congress fail to break through this gridlock, the U.S. may continue to lurch from one short-term budget crisis to the next for months or even years.
Duane L. Musser is NRCA's vice president of government relations.