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The House Republican's Budget Blueprint

by Demian Brady / /

The budget debate season kicked off in January when the Congressional Budget Office (CBO) released its annual outlook of spending and tax receipts for the next ten years. And the news wasn’t good, or rather, regarding the deficit, the news was more dismal than usual. The short-term deficit reduction CBO had previously forecast vanished – instead of dropping to $414 billion in 2016, it will rise to $544 billion. Spending will continue to outpace federal income, but at a faster rate than in CBO’s last projection, coming in $1.56 trillion higher over the period from FY 2015 to 2025.

President Obama followed up with the release of his budget proposal in February. His plan would see even more spending than CBO’s baseline, and was promptly pronounced DOA in Congress.

Now the House Republicans have offered their blueprint. Yesterday, House Budget Chairman Tom Price (R-GA) announced the release of “A Balanced Budget for a Stronger America.” On the policy front, the House Republican Budget (HRB) would target duplicative programs, programs whose funding authorizations have expired, repeal the Affordable Care Act (ACA), and would seek to promote economic growth and federalism. Spending would be modestly reduced for two consecutive years and then would grow at a slower rate than currently projected. On the tax side, the resolution would reduce and simplify the tax code.

 

  • Under the CBO’s projection, outlays would reach $4.07 trillion in 2017 – $153 billion above FY 2016 – and would grow by an average of 5 percent per year to $6.4 trillion in 2026.
  • Under the House budget, FY 2017 outlays would instead decrease by $37 billion from 2016 to $3.88 trillion. Spending would be cut by another $33 billion in 2018 to $3.85 trillion, after which outlays would grow by 4 percent annually. Slowing the rate of growth even by a single percentage has significant results over the long-term. By 2026, spending would reach $5.14 trillion in 2026 – $1.27 trillion less than CBO’s baseline projection.
  • As a share of GDP, spending would average 19 percent over the next ten years: less than the 22 percent average experienced during the Obama Administration, on par with the pre-recession levels (18.9 percent from 2000-2008), and lower than the average from 1980 through 1999 (20.8 percent). 
  • Under the House Republican plan, tax revenues would average 18.2 percent of GDP over the next ten years. The level would be higher than seen historically. For example, from 2000-2008, before the recession hit, revenues averaged 17.4 percent of GDP, and the average from 1980 to 1999 was 17.8 percent.

In order to achieve a modest surplus in 2026, the Republican Budget estimate includes the dynamic impact of the stimulatory effects of policy changes. Compared to CBO’s baseline, the HRB shows lower mandatory outlays and higher revenues resulting from legislation enacted late in 2015 that made certain tax provisions permanent. In addition, CBO projects that the repeal of the Affordable Care Act would boost GDP and increase the labor supply. In total, policy changes and debt service savings would lower the debt by an additional $241 billion over ten years.

The HRB would also make use of reconciliation, a budgetary process that allows for expedited consideration of certain tax and spending reforms. Reconciliation was used to help pass the ACA, but was also used in the past to advance significant spending reforms and the tax cuts of 2001 and 2003. This process was also used last year to pass legislation repealing parts of the ACA, which was ultimately vetoed.

It is important to pass a resolution in order to proceed with reconciliation. It also makes it easier to pass the regular appropriations bills, a preferable option for taxpayers than the prospect of a massive omnibus spending package that must be passed in a rush before the end of the fiscal year deadline.

The next step in the budget process is expected next week with debate and votes on Price’s resolution. However, the HRB faces opposition from some conservative Members of the House who are disappointed that it adheres to a budget agreement from last fall to increase spending. They would prefer to see additional immediate spending cuts to make a bigger dent in the deficit. They will soon unveil their own budget alternatives, as will Democratic House caucuses. At this time, though, the outcome of votes on the budget resolutions remain uncertain.


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