GOP Dares Obama to Balance the Budget
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By Josh Boak,
The Fiscal Times
March 13, 2013

The new Republican budget was issued Tuesday with a challenge for President Obama and Democrats—give us your blueprint for balancing the government’s finances.

House Budget Committee Chairman Paul Ryan achieves a surplus by 2023. Critics will charge that the Wisconsin Republican cooked the books with savings that are hypocritical, fictitious, and just unwise. But in announcing a budget that trims spending by $4.6 trillion over the next decade, Ryan drove home the point that Obama has no intention of submitting a budget that ever balances.

“This is an invitation. Show us how to balance the budget,” Ryan politely dared the president at a press conference. “If you don't like the way we're proposing to balance our budget, how do you propose to balance the budget?”

This is an attempt to shift the tenor of the budget debate – but Democratic leaders have no intention of responding to the invite with an RSVP.

Obama has gained traction with the public by emphasizing the principle of fairness and calling for tax increases approaching $1 trillion over 10 years on wealthier Americans to help stabilize the national debt. The GOP wants to shift the public debate onto the debt itself.

SPECULATIVE ARGUMENT
Much of the conversation in the months ahead will involve Republicans talking about the importance of immediately reducing the debt. It’s a highly speculative argument, given the potential damage to an economy that is still limping from the 2008 financial meltdown.


Democrats will frame these cuts as smoke-and-mirrors, more akin to the illusion of a casino magician. But they’ll be stuck grappling with how to explain the complexities of why a balanced budget is not needed to a skeptical public. Their defense is that a ten-year timeframe in Ryan’s budget is arbitrary and that the alleged savings are phony. 

The Democrats intend to stabilize the $16.5 trillion national debt, the accumulation of past budget deficits as a share of the overall economy. Publicly held government debt currently hovers close to 73 percent of Gross Domestic Product.

“As the economy improves, you make sure that your deficits are not growing faster than your economy and that you stabilize your debt,” Maryland Rep. Chris Van Hollen, the ranking Democrat on the Budget Committee, told reporters Tuesday morning.  “We believe at the end of the 10-year window that we will stabilize the debt--to-GDP ratio at 70 percent.”

This is a tricky standard for Van Hollen, since the Dem proposal will benefit from falling deficits as the economy shakes off the Great Recession for the next few years. But the economy will grow at 2.2 percent a year during the final five years of the 10-year timeframe, according to projections by the Congressional Budget Office. Deficit spending is estimated to increase by 7.5 percent a year over that period.

Ryan essentially balances the budget by adopting policies the GOP once reviled.

This includes $600 billion in new tax revenues from the fiscal cliff deal that raised tax rates on household incomes above $450,000, a measure at the start of the year that two-thirds of the Republican caucus rejected. The Obama administration forced through the deal with the help of Senate Minority Leader Mitch McConnell, R-Ky.

“We’re not going to refight the past because we know that’s behind us,” Ryan said of the choice to keep the existing revenue levels, while pushing in the budget for tax reforms that would create two individual rate brackets of 10 percent and 25 percent.

But Ryan – who campaigned against the rate hikes as the vice presidential nominee last year – also says he does not interpret Obama’s re-election as meaning that Republicans should “surrender our principles.” A big part of that involves rehashing the feuds with the administration over Obamacare, which Ryan described as a “fiscal train wreck.”

His plan also calls for $1 trillion in new tax revenue from Obamacare and more than $700 billion in Medicare savings from that program, yet the bill would repeal the rest of the 2010 measure that enabled those reductions in deficit.

Van Hollen argued that it’s disastrous to break the measure into pieces and scrap the health insurance coverage mandated by Obamacare for 30 million Americans. The expanded insurance coverage helps to offset the economy-wide impact of the Medicare reductions. “It is a total hoax to say that you are repealing Obamacare and, at the same time, to say that you are balancing the budget in ten years,” Van Hollen said.

Additionally, the Ryan budget would shift all of the recent sequestration cuts from the military and onto other discretionary programs such as welfare, air traffic safety, food inspections, infrastructure and education. That doesn’t sit well with Democrats. When asked about the chances of a deal and the possibility of finding common ground, Van Hollen acknowledged that both sides will have to back down to agree to a budget.

“Miracles can happen,” Van Hollen said. “You’re not going to get there by finding common ground. You’re going to get there by compromise.”