Raise Taxes, Cut Defense: House Dems’ New Plan
Policy + Politics

Raise Taxes, Cut Defense: House Dems’ New Plan

AP Photo/J. Scott Applewhite

Congressman Chris Van Hollen may have jumped ahead of President Obama’s speech on deficit reduction to offer his own budget plan on behalf of House Democrats — but it’s unclear how many were listening. On Capitol Hill on Wednesday, all eyes were on the President. 

“It kind of got overshadowed,” said Ethan Pollack, a budget analyst at the liberal Economic Policy Institute. “I would hope that it would be considered more. It’s got good things in it.”  

“It’s an odd day for House Democrats to come out with their agenda at the same time that their President is giving a major budget presentation,” said American Enterprise Institute fiscal policy expert Alex Brill. He’s not yet reviewed the plan, he said. 

Van Hollen’s plan, which blends the President’s 2012 budget proposal with concepts from the President’s fiscal commission, is in stark contrast to House Budget Chairman Paul Ryan’s budget. “The [GOP budget] increases tax breaks for millionaires and special interests and pays for these new tax cuts on the backs of working Americans,” said Van Hollen. His budget – unlikely to pass the Republican-led House – would generate the bulk of its savings by slashing defense spending, allowing the Bush-era tax cuts on top earners to expire, and freezing non-security discretionary spending for five years.  The Democratic plan leaves Medicare, Medicaid, and Social Security completely out of the deficit-reduction equation.  

Democrats say their budget reduces the deficit by $1.2 trillion more in a ten-year window than Obama’s proposal, which would slash the deficit by $4 trillion over 12 years. The Democrats’ plan would set federal 2012 spending at $3.67 trillion, compared to the Republicans’ budget of $3.529 trillion and the President’s at $3.729 trillion. The Democratic plan pushes the budget into primary balance, or the stage where the government is collecting what it is spending without interest payments, by 2018—three years later than Ryan’s plan would. 

Comparisons to Obama’s Plan
The Democrats’ plan does break with some of Obama’s budget proposals—largely on defense spending.  Their plan wages $89 billion in additional security and defense spending cuts to what the President proposed, bringing the ten-year savings to $308 billion. It also saves $309 billion by ending the Overseas Contingency fund in 2015, pending U.S. troop withdrawal from Iraq by the end of 2011. It rejects the Presidents’ proposed cuts to the Low Income Energy Assistance Program, which provides heating and cooling subsidies to the poor, as well as the Community Development and Community Service Bloc Grant programs. 

But the budget’s nearly-identical similarities to the President’s fiscal 2012 budget are numerous.  Like the President, House Democrats advocate returning the estate and gift tax back to 2009 levels—where $3.5 million is the exemption threshold to pay a 45 percent estate tax rate.  It also echoes the President’s calls to invest in education, infrastructure, science, and research and development by calling to create a national infrastructure bank, increase spending on food stamps, maintain Pell grant funding, and make the research and development tax credit permanent.  It also leaves the health care law intact, etches away at federal spending on farm subsidies, and rids the tax code of breaks to oil and gas companies.   

It also selectively throws support behind concepts laid out by the President’s fiscal commission on taxes.  It urges the House Ways and Means Committee to strongly consider the commission’s proposals to eliminate tax expenditures, yet it doesn’t voice support for both the commission and the Ryan budget’s calls to lower tax rates for corporations and high earners. 

Related Links:
Van Hollen Leads Democratic Budget Effort (Baltimore Sun)
Democrats React to Obama’s Speech (Des Moines Register)
Obama, Van Hollen Back Bowles-Simpson as Counterpoint to GOP Budget (Talking Points Memo)