Comparing debt reduction proposals for 2012

Recently the House of Representatives passed the GOP version of their 2012 Congressional Budget.  The plan as it is now written and subject to changes is a comprehensive plan which addresses critical issues involving the commitments made to Americans.  The current estimated expenditures for the future connected to those commitments are unsustainable in the current economic environment with which we are faced.  Granted there are or will be issues between the GOP plan and those of Democrats and the President.  Much has been said regarding both the support and opposition of the plan.

Establishing a Congressional Budget is a difficult task, as has been evident with the recent budget for the current fiscal year.  The issues facing Congress are enormous as to addressing the current fiscal health of this country and it cannot be addressed without looking at current and future entitlements.  The decisions made will not be easy and will in all probability not be widely accepted by the general public.  Acceptance of the decisions made for the 2012 Congressional Budget by Congress will undoubtedly have an impact on the next election.

There will be three different budget plans which will need to be consolidated into the final one for fiscal year 2012 and beyond.  While the plan that will undoubtedly be passed at some point for the next fiscal year, there will be further discussions in establishing a Congressional Budget for subsequent fiscal years.   There will always be some discussion on the content of a Congressional Budget, but the discussions need to be such that they are not political.

Both political parties must look to what is needed rather than what they want for their own political future. This is not to say that there are not those in Congress who do not have the best interest of the public and country.  I feel that there are many who take their responsibilities seriously.  The purpose of this article is to present the basic comparisons between the various proposals without going into details of each area.

There are basically three different budget proposals that need to be compared for agreement and for differences which need to be discussed between the parties.  The GOP budget proposal titled Pathway to Prosperity initiated by Representative Paul Ryan is a total of 73 pages.  The Democratic budget proposal is 24 pages and President Obama’s budget proposal is a total of 216 pages. The varied length of these budget proposals indicate there is much to discuss.  Comparing the approaches to the budget within each proposal for the next fiscal year and beyond is what this article is about.

There are common issues addressed in the GOP, Democrats and the President’s budget reducing plans, but the key differences is in the approach taken to the common issues.  While there is some agreement on subjects to be addressed, the approach taken by each in some cases is open for discussion and negotiation.   The issue of government spending shows a difference of both in the amount of the spending reduction and the time frame.  The GOP plan as currently passed by the House includes a reduction of government spending of $6.2 trillion dollars over a ten year period.  The Democratic plan from current information available targets a reduction of deficit spending at a slower pace to $1.2 trillion more than the President’s budget over ten years.

The spending approach taken in President Obama’s budget is to freeze non-security discretionary spending for five years which is in agreement with the Democratic proposal.

Key Facts

Spending – GOP approach

The approach to the current budget crises in the GOP proposal targets $6.2 trillion in spending cuts over the next ten years.  The goal is to eliminate hundreds of duplicative programs, reflects on the ban on earmarks and curbs corporate welfare.  The GOP plan is targeting to bring down non-security discretionary spending to below 2008 levels.

Spending – President’s approach – five-year non-security discretionary spending freeze

Debt and Deficit – GOP approach to reduce the deficit by $4.4 trillion over the next decade

Debt and deficit –  The President’s approach.  The proposal includes a $1.1 trillion reduction excluding war savings and not extending the 2001 and 2003 tax cuts for high income earners.  Two thirds from spending cuts.

Debt and deficit – Democrat’s proposal Reducing the deficit by $1.2 trillion more than the President’s proposal along with a freeze on non-security spending for five years.  This freeze agrees with the President’s proposal.  The Democrats also want to streamline security spending.

Taxes – GOP approach – Keep taxes low so the economy can grow and aim to eliminate $800 billion in tax increases from the Health Care Law.  Initiates process to reform individual and corporate tax rates to promote growth and job creation.

Taxes – President’s approach – Increase taxes to the tune of $1.5 trillion.  Calls for a simpler, less burdensome tax code for households and small businesses. This proposal also opposes a permanent extension of the 2001 and 2003 tax cuts for families making over $250,000.  Additionally the President calls for not extending the 2001 and 2003 tax cuts for high income earners.

Taxes – Democrats proposal.  This proposal makes permanent the 2001 and 2003 tax cuts except for earners over $250,000.  This agrees with the President’s proposal.

Growth and Jobs – GOP approach – Create 1 million new private-sector jobs next year to  bring the unemployment rate down to 4 percent by 2015 which results in 2.5 million additional private-sector jobs in the last year of the decade.  Increase GDP by $1.5 trillion over the decade

Growth and Jobs  – President’s approach – Invest in reforming education and job training so Americans can compete in a global economy.  Establishes 20 new Economic Growth Zones, hard hit areas that will receive expanded tax incentives to spur investment and employment

Objectives – GOP plan

Economic Growth and Job Creation

Spending Cuts and Controls

Real Security

Patient Centered Health Care

Restoring America’s Exceptional Promise

The GOP plan has five key components within its structure.  One is to prioritize national security.  A second is to streamline other government agencies.  Another proposes to end corporate welfare.  The fourth is to boost American energy resources and the fifth aims to change Washington’s culture of spending.  Another aspect of the GOP plan is to repair a broken Medicaid system, save Medicare, advance Social Security solutions and prepare the workforce for the 21^st century.

The budget proposals discussed and details presented in this article were limited as only some of the comparisons were able to be presented.  Each proposal addresses the need for fiscal reform including tax reform to some extent.  Comparing the three different proposals identified some commonality between them, along with some differences that need to be addressed.  It is clear that each proposal attempts to address many important issues while the approaches taken to resolve them are different.  As identified earlier in this article the length and content of each proposal varies.  Another aspect is that in some ways the details identified are different.  The GOP basically addresses subjects and the President’s identifies specifically how each cabinet department/agency figures in his proposal.

There is no question that difficult decisions will need to be made concerning each approach to managing our economic crises.  The key will be whether all the parties are willing to work together for the common good of the country rather than for the good of each political party. It is also anticipated that the final budget will have parts of each proposal, because each side will not get everything they want.  Our fiscal house must be put on a path to fiscal responsibility involving changing the spending habits of Congress.  In accomplishing the final budget Congress must take into account the impact any budget decision will have on individuals and businesses.  Everyone will win if our fiscal house is put on a sound path to fiscal responsibility. Once a final product has been created to a budget deficit reduction plan, the uncertainty will be gone.  Removing uncertainty, not only in the private sector but as a government, allows energy to be devoted to addressing issues that have taken a back seat to the budget process not underway.

Additional information for the various proposals can be found on the following websites:  The President’s proposal can be found on whitehouse.gov under the budget tab.  The GOP budget proposal which passed the House of Representatives can be found at http://budget.house.gov/fy2012budget.  The Democrats 2012 budget proposal can be found at    http://democrats.budget.house.gov/doc-library/FY2012/04152011-winthefuture-makeitinamerica.pdf

http://www.youtube.com/watch?v=jx_McfAtuBo

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