Authored by Rep. Chris Van Hollen (Md.), the House Budget Committee’s top Democrat, the $3.7 trillion budget plan is designed to present an alternative vision to a spending plan proposed last week by the committee's Republican Chairman Paul Ryan (Wisc.).
Under Van Hollen’s budget, the deficit as a percentage of the nation’s gross domestic product would shrink from more than 8 percent in fiscal year 2012 to 2.7 percent in 2022. But the national debt would continue to grow — and documents accompanying the budget resolution do not indicate the proposal would lead to a balanced budget over any time frame.
Ryan’s plan would reduce the deficit to 1.2 percent of GDP by 2022 and would eventually balance — by 2040.
In a statement, Van Hollen said his budget “stands in stark contrast” to the GOP alternative, offering a path to cutting debt without undermining the social safety net for the poor and vulnerable.
“This budget will reduce the deficit in a balanced and credible way, making difficult choices while providing investments that help create jobs now and build an even stronger economy for the future,” Van Hollen said. “But unlike the Republican budget — which ends the Medicare guarantee while providing tax breaks to millionaires — we ask the very wealthy and special interests to share responsibility for reducing the deficit.”
In the short term, Van Hollen proposes to fund elements of President Obama’s American Jobs Act, designed to help stimulate the still lagging economy. Those proposals include $80 billion for education, $5 billion for police and firefighters and $50 billion for new highway projects.
Van Hollen proposes to make permanent Bush-era tax cuts for the middle class but to generate $1 trillion in new revenue by ending tax cuts for millionaires, closing tax loopholes and establishing what Obama has dubbed “the Buffett Rule,” designed to ensure millionaires do not pay lower tax rates than the middle class.
The budget does not provide details on exactly how the tax code would be reformed to generate that level of new revenue.
The plan includes $80 billion in proposed new reductions to mandatory government programs, like agriculture subsidies but does not outline reductions to major entitlement programs that most experts believe will have to be a part of any bipartisan deal to significantly reduce the debt.
It also counts reduced spending on overseas military operations toward deficit reduction, a tactic that Republicans believe is a gimmick because it takes credit for dollars that were never truly going to be spent.
Ryan’s plan called for major entitlement changes — including an increase in the Medicare retirement age and a proposal to control costs in the growing program by offering seniors government assistance to buy private insurance at a level that would be capped.
It also called for sending Medicaid and food stamp funding to the states in block grants and slashing spending on the programs. And it called for cutting top tax rates for individuals and corporations to 25 percent. Ryan said the tax cuts should be paid for by closing tax loopholes and ending shelters and subsidies but provided no details.
Van Hollen’s proposal is one of a number of alternatives to Ryan’s proposal that the House will consider Thursday. The GOP-led House is expected to set aside Van Hollen’s budget, along with one that includes more stimulus spending and higher taxes on the wealthy introduced by the Congressional Progressive Caucus.
They will likewise pass over a budget that would propose even deeper spending cuts than those outlined by Ryan proposed by the conservative Republican Study Committee.
Van Hollen’s budget sets agency spending for the fiscal year that begins Oct. 1 at $1.047 trillion, a level established in the summer’s difficult deal to raise the debt ceiling. Democrats have complained that Ryan broke faith with that agreement by proposing to spend $1.028 trillion — $19 billion less than the debt deal’s cap for the year.
It would also set aside the sequester — $1.2 trillion in automatic spending cuts over the next decade that are now set to go into effect Jan. 1 as a consequence for the autumn failure of Congress’ special deficit reduction supercommittee, on which Van Hollen served.
He argues his budget plan includes other deficit reductions that more than matches the figure and therefore the automatic cuts can be eliminated.