House and Senate Pass Budget Resolutions
These first steps toward a 2014 budget signal disagreements ahead
March 25, 2013
In the last week, each house of Congress approved a Budget Resolution proposal for fiscal year 2014, October 2013-September 2014. These draft Resolutions, an early step in the annual budget process, specify the aggregate levels of revenues (taxes) and spending for the year – without the details that will appear in later budget documents – and may contain proposals related to other programs and policies that impact the budget. These two proposals, one from the Republican-controlled House of Representatives and the other from the Democratic Senate, display the fundamentally different views of the budget held by the two major political parties. Both documents are described below. The Budget Resolution is not final until both houses reach agreement on the document and, as you will see, they are currently very far apart.
The House of Representatives. The Resolution passed by the Republican-controlled House was developed under the guidance of House Budget Committee Chair (and former vice-presidential candidate) Paul Ryan. It includes many provisions that have been proposed in previous years but failed to be enacted into law as well as some new items.
- Individual Income Taxes. The 10% marginal tax rate for low-income filers would continue and the 15% rate would be reduced to 10%. All the other marginal tax rates (25%, 28%, 33%, 35%, and 39.6%) would be reduced to 25%. Clearly this change would most benefit higher-income filers who pay the higher rates. The corporate tax rate would be reduced from 35% to 25%. These reductions in tax rates would reduce revenues by an estimated $6 trillion over 10 years. Some of the lost revenue would be offset by closing unspecified tax loopholes.
- Spending Cuts. Part of the lost revenue would be offset by cuts in spending totaling $4.6 - $5.2 trillion over 10 years. (By comparison, the massive sequester reduced spending by “just” $1 trillion over 10 years.)
- Medicare. The federal health insurance program for seniors would be converted into a voucher plan; seniors would be given a specified amount of money to purchase (if they were able) a private insurance plan. The age of eligibility for Medicare would be raised from 65 to 67.
- Health care. Many aspects of the Affordable Care Act (“Obamacare”) would be rolled back including the Medicaid expansions for low-income people, the tax increase that funded some of the program, and funding for the subsidized insurance exchanges that would help moderate-income uninsured people buy insurance.
The Senate. The Senate approved a Budget Resolution brought to them by the Democratic-headed Budget Committee. This proposal is much more limited in scope than the House version, that is, is does not call for major changes to core government programs and functions like Medicare, the Affordable Care Act, and the tax code.
- Sequester. The indiscriminate, across-board-spending cuts (the “sequester”) – that began on March 1 and, unless changed, would continue for a total of 10 years – would be halted.
- Stimulus. Calls for $100 billion in infrastructure spending to create jobs and stimulate the economy.
- Taxes. Raise nearly $1 trillion in revenue over the next 10 years primarily from corporations and wealthy households while calling for lower and middle-income households to be protected against tax increases.
- Spending. Cuts $1 trillion. The combination of tax increases and spending cuts provides what the Senate calls a “balanced” approach to deficit reduction.
Both budgets passed largely (but not exclusively) on party-line votes. In the months ahead, we can expect to see much disagreement over these two very different visions for the federal budget.
Here’s how they compare in terms of the major components. All figures are summed over 10 years.
|House (Republican)||reduces by $6 trillion plus raise unspecified amounts by closing loopholes||cuts $ 4.6 trillion||$ 0|
|Senate (Democratic)||raises by $1 trillion||cuts $1 trillion||$ 100 billion|
More information on these Budget Resolutions
2 Parties Budgets Show Big Rift as G.O.P. Renews 2012 Proposals by Jeremy W. Peters and Jonathan Weisman, New York Times, March 12, 2013.
House Passes Money Bill and Budget Blueprint by Jonathan Weisman, New York Times, March 21, 2013.
Senate Passes $3.7 Trillion Budget, Setting Up Contentious Negotiations by Jonathan Weisman, New York Times, March 23, 2013.