The United States has not had a budget since President Obama has taken office. This is a historical precedent; no budget has been passed by the Senate and this past year one was not even proposed. That is not to say that no budgets have been proposed. Obama has proposed a budget each year, although three out of four came in past deadline. Additionally, the House of Representatives have proposed and passed budgets in each of the past two years.
With the presidential campaign heating up, it is a good time to examine some of the key differences between the candidates’ budget plans. By examining Obama’s FY2013 budget, Ryan’s FY2013 budget, and some of the proposals being put forth by Romney, we can arrive at a better understanding of the different trajectories of the country.
There are a lot of issues facing the U.S., many of which involve government debt. Under the President’s plan, deficit spending will continue over the next 10 years, but at a reduced rate compared to now. According to the Congressional Budget Office (CBO) between 2013 and 2022 the President’s budget would increase the National Debt by $6.4 trillion. Deficits are 3.2% of projected GDP for that 10 year period. The budget adds $3.5 trillion more debt than under the CBO’s baseline scenario which reflects current law if gone unchanged. Under Obama’s budget, U.S. debt would equal $15.2 trillion (77% of GDP) in 2017 and $18.8 trillion (76% of GDP) in 2022. Under the CBO baseline, debt would be 61% of GDP by the end of 2022.
Under Ryan’s FY2013 budget, deficit spending would continue but gradually decline over the next 10 years. The budget will become balanced by 2050 under the plan. In 2023, National Debt would be 68% of GDP according to the CBO. Under the plan, the annual deficit goes from 8.75% of GDP in 2011 to 1.25% of GDP in 2023. Federal debt held by the public would be 53% of GDP at the end of fiscal year 2030 and 10% at the end of fiscal year 2050.
Reforming the tax code is a platform that both candidates are running on. However, their ideas on how to do so are vastly different. Obama wishes to replace the Alternative Minimum Tax (AMT) with the Buffet rule, which will require individual filers earning over $1 million per year to pay no less than 30% of their income in taxes. On the other hand, Romney and Ryan’s budget proposes repealing the AMT altogether. Instead they propose to consolidate all income tax brackets into two; 10% and 25%. He eliminates loopholes and broadens the tax base to make the net effect revenue neutral.
Addressing entitlement spending such as Medicare and Medicaid is an important issue in our country. These and other entitlement programs are the main drivers of U.S. deficits and debt, so any discussion on balancing the budget and avoiding a debt crisis must include these programs. Obama’s plan in regard to these issues is to implement the Patient Protection and Affordable Care Act (PPACA/Obamacare) and reduce payments made to physicians under Medicare and Medicaid. Additionally, he will increase income-related premiums under Medicare Parts B and D by 15%.
Ryan’s budget instead proposes to repeal the PPACA. He instead would change Medicare into a premium-support program and allow seniors to choose from a list of insurance options. He would create competitive bidding for providing insurance plans to seniors and the premium support would reflect the price of the second cheapest insurance plan. Each insurance plan would be required to provide at minimum the amount of service currently provided by Medicare, and the traditional Medicare fee-for-service model would be one of the options.
Defense spending is a contentious issue, with two very different proposals. This is one of the only areas where the Ryan Budget does not reduce spending. He allocates $6.3 trillion to Defense spending over the next decade. Conversely, the Obama budget finds most of its discretionary spending cuts by reducing defense funding and OCO funding to $450 billion over the decade.
There are many more differences between the two visions for America. The plan that will be best for the country in the long run is uncertain. It is extremely important to weigh the two proposals and come up with some form of budget for the future. Generally, a family without a budget does not have their fiscal house in order, and sooner or later they will run into trouble. By the time that happens, there will be few options available, each one more unpleasant than the last.
CBO Analysis of President’s 2013 Budget: http://www.cbo.gov/sites/default/files/cbofiles/attachments/03-16-APB1.pdf
Obama’s 2013 Budget: http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
CBO analysis of Ryan/House 2013 Budget: http://cbo.gov/sites/default/files/cbofiles/attachments/03-20-Ryan_Specified_Paths_2.pdf
Ryan’s 2013 Budget: http://budget.house.gov/uploadedfiles/pathtoprosperity2013.pdf