This piece originally appeared in the Huffington Post
The 2012 budget season saw two competing proposals that were commonly described as spanning from the political right to left in their approach: the fiscal 2013 budget resolution proposed by House Budget Committee Chairman Paul Ryan (R-Wis.), which passed the U.S. House of Representatives on a party-line vote, and the Budget for All proposed by the Congressional Progressive Caucus (CPC). The most salient difference between these competing visions is their efficacy in addressing vital economic challenges, such as restoring full employment, rebuilding the middle class, curbing national health care expenditure, and stabilizing the long-term fiscal outlook. Simply put, the Ryan budget would largely exacerbate such challenges, whereas the Budget for All takes a grounded approach in diagnosing problems and proposing serious, evidence-based solutions.
A budget is much more than numbers and a bottom line; a budget should reflect national priorities, which first and foremost compel addressing joblessness. Unfortunately, the Ryan budget instead prioritizes sharply reducing spending and cutting taxes on the wealthy — at the expense of good economic stewardship. Roughly 10 million jobs are needed to restore pre-recession unemployment and labor force participation rates. The Ryan budget would nevertheless immediately enact aggressive spending cuts — particularly to the social safety net — which would reduce employment by 1.3 million jobs in fiscal 2013 and 2.8 million jobs in fiscal 2014, relative to current budget policies. The Budget for All instead proposes increasing spending for job creation and public investments over the next two and a half years (by $786 billion relative to current law). All told, the Budget for All would boost employment by 2.1 million jobs in fiscal 2013 and 1.2 million jobs in fiscal 2014, relative to current budget policies. Employment would be roughly 3.4 million jobs higher by the end of fiscal 2013 and four million jobs higher by the end of fiscal 2014 if Congress adopted the Budget for All instead of the Ryan budget. And by sacrificing near-term deficit reduction that would have gained them Beltway applause, the CPC prioritized economics and public welfare over the approval of Washington’s Very Serious People, who have abandoned job creation for deficit reduction.
Restoring full employment is paramount to rebuilding the middle class, but much more will be required. Median income for working-age households has fallen 10 percent over the last decade (after adjusting for inflation). This reflects not just the effects of the recession (though these were large), but also anemic income growth over the 2001-2007 economic expansion — the weakest income growth on record. To address the challenges facing middle-income families that were apparent even before the Great Recession, the Budget for All would finance $2.1 trillion worth of investments in the nondefense discretionary budget — areas including education, workforce training, infrastructure, and scientific research — to promote economic opportunity, mobility, and competitiveness. The Ryan budget would reduce nondefense discretionary spending — which houses 90 percent of nondefense public investments — to 2.1 percent of GDP by 2022, down from 2.7 percent projected under current policy, whereas the Budget for All would increase it to 3.5 percent, back toward the historical levels of investment needed to maintain the public capital stock.
Beyond defunding public investments, the Ryan budget would deeply cut economic security programs. Medicare’s guarantee of health coverage in old age would be replaced with a voucher, the value of which would not keep pace with spiraling health care costs. By 2050, federal spending on Medicaid, the Children’s Health Insurance Program, and targeted subsidies to expand insurance coverage would be cut by more than 75 percent. The Ryan budget would merely shift costs from the federal budget to households, businesses, and state governments — which would do nothing to lower overall health care costs and likely increase national health expenditure. Conversely, the Budget for All would honor existing commitments to ensure retirement and health security by strengthening Medicare, Medicaid, and the Affordable Care Act. Specifically, the Budget for All would harness the purchasing power of Medicare to negotiate lower pharmaceutical prices and establish a public insurance option, both of which would lower national health care expenditure — the real long-term fiscal problem facing the country.
Contrary to public perception, the $5.3 trillion in nondefense spending cuts proposed by the Ryan budget are not earmarked simply for deficit reduction; instead, they would effectively help finance tax cuts for upper-income households. The Ryan budget would continue all of the costly, regressive Bush-era tax cuts and then cut taxes by another $4.5 trillion over the next decade. Ryan’s plan claims that these additional cuts would be financed with unspecified (and implausibly hefty) broadening of the tax base, but much would necessarily be deficit financed. Millionaires would receive an average tax cut of $265,000 in addition to a $141,000 tax cut from extending current temporary tax policies. Overall, 71 percent of Ryan’s tax cuts would go to the 5 percent of households earning more than $200,000, while only 6 percent would go to households earning $75,000 or less (accounting for 71 percent of households). Lower-income households would see the only tax increase, relative to current policies, because refundable tax credits would be scaled back. (This is in addition to Ryan’s deep nondefense budget cuts, 62 percent of which would come from programs for low-income households, according to the Center on Budget and Policy Priorities.)
In contrast, the Budget for All would adequately fund priorities with progressive tax reforms, largely by asking more from the highest-income households, who have enjoyed the lion’s share of income growth over the past decade. In light of growing inequality and concentration of wealth, the Budget for All would add new tax brackets for millionaires and billionaires, eliminate the preferential tax treatment of unearned income, and add a small surcharge on high-net-worth individuals (those with wealth exceeding $10 million). The Budget for All would also let the upper-income Bush tax cuts expire on schedule and phase out the middle two rate cuts as the economy strengthens, maintaining only those credits and provisions that predominantly aid working families. The budget would price carbon, thereby addressing global climate change, and tax financial speculation and leverage of “too big to fail” banks, thereby curbing systemic financial risk. Collectively, these policies would raise more revenue and restore a higher degree of progressivity to the tax code, pushing back against inequality and ensuring that deficit reduction is not shouldered by the poor.
The Budget for All and the Ryan budget purportedly reach the same debt level by the end of the decade, but Ryan only gets there with a $4.5 trillion budget gimmick. The Ryan budget would entrench Gilded Age-levels of inequality and double down on tax cuts for the affluent, exacerbating budget deficits and unemployment in the process. The Budget for All demonstrates that dismantling our commitments to the vulnerable is a policy choice rather than a necessity, but choosing an alternative course requires revitalizing progressive taxation and taking comprehensive approaches to real-world problems. Contrary to the claims of many pundits, the Ryan budget simply is not credible; the more intellectually rigorous and fiscally responsible Budget for All, on the other hand, offers serious solutions to the near- and long-term economic challenges we face.