Comparing the budgets of Obama and Republicans

Recently, Congressional Republicans and President Obama released their budget proposals for this year and coming years, as Ezra Klein notes, “budgets are a moment when the two parties can’t hide,” where “we can see the decisions the parties make when they’re forced to choose between competing priorities and constituencies.” They are important documents, in other words. So without further ado, here is my summary of Obama’s and Congressional Republicans’ budgets:  (Obama’s is available here and Republicans’ is available here)

Obama’s Budget

Obama’s  budget is cautious but probably does enough to stabilize America’s debt through a mixture of tax hikes on the wealthy and some already agreed-to spending cuts. Mainly, Obama’s budget consists of three parts: 1) some increased spending on infrastructure and education 2) spending cuts to domestic spending and defense totaling $2.7 trillion 3) $1.6 trillion in new tax revenue from corporations and the wealthiest 2% of Americans.

First, the increased spending will go to areas where, by all accounts, the funds are sorely needed. The American Society of Engineers has given the US a grade of a “D” overall for the condition of its infrastructure, which once led the world. Obama has proposed spending billions more to upgrade the nation’s roads, bridges, railways, passenger rail systems and internet connections over the next six years. This money will put Americans to work building systems that will repay our investment many times over.

Second, Obama will cut spending, mostly by the amounts already agreed to in the as part of the debt ceiling negotiations with Republicans last year. This will cut defense spending, domestic discretionary spending (an umbrella term covering most federal programs), federal pensions and agricultural subsidies by $2.1 trillion. Medicare and Medicaid will also be trimmed for $360 billion, mostly through cuts agreed to in the debt ceiling negotiations and also by changing some tax treatments that will shift Medicaid costs to the states.

Third, Obama will end the Bush tax rate cut for the top 2% of earners, raising their top marginal rate to 39.5% from 35%. He will also implement the “Buffett rule” which states “that no household making more than $1 million a year pays less than 30 percent of their income in taxes.” These small changes are to make sure that the richest Americans pay their fair share for deficit troubles that their tax breaks caused. Obama also proposes a $61 billion “Financial Crisis Responsibility Fee” which would compensate taxpayers for their extraordinary support  of the financial industry in the 2008-2009 crisis. He will also plans to close some tax loopholes for the rich and corporations to make up a total of $1.5 trillion in new revenue (he names some specific ones).

Comparison of taxes and spending cuts in past deficit deals by Ezra Klein

Taken as a whole, Obama’s plan is very moderate. It is more conservative than most past bipartisan deficit deals. It also tries to spread the pain of deficit reduction somewhat evenly across all facets of society. Civil servants, the rich, the poor and the elderly all have their favored programs or tax breaks trimmed to make room for the deficit reduction that experts agree the US needs to undertake. His budget is far from perfect, but it would preserve the American social contract and social safety net, unlike Republicans plan.

Republicans’ Budget

Congressional Republicans’ budget (authored by Rep. Paul Ryan), is a very radical document. Ryan seeks to eliminate basically everything the US government does besides Medicare, defense and Social Security. He would also give out a massive $4.6 trillion tax cut, aimed at the richest Americans. Then, because their first two actions mostly balance out deficit-wise, Republicans would try to eliminate almost every tax break on the books to balance the budget. So let’s pull this apart:

First, Republicans will eliminate almost everything the federal government does except defense, Medicare and Social Security. The military is the only area of the budget that gets larger under Ryan’s plan, everything else goes under the ax. The cuts are painful and they start immediately. By 2050 there will be almost nothing left. Pell Grants-gone. National Parks-gone. Energy and health research-gone. Highway and transportation funding-gone. Homeland Security-gone. Food stamps-gone. Early childhood education- well, you get the picture. Over  the first decade this is how the cuts will fall:

The poor will bear of 2/3 of Republicans’ budget cuts in the first ten years, and more in the years to come. In fact, between 14 and 27 million people will lose Medicaid health coverage in the first ten years of this plan, as estimated by the Urban Institute.

Second, in a sharp contrast to his cuts to the poor, Ryan and the other Republicans plan to give out trillions of dollars to the rich in tax cuts. Ryan’s plan would drop Mitt Romney’s tax rate to near 0% (no wonder Mitt thinks this plan is “marvelous”) and would plaster the rich with money, even as it cuts trillions in spending from the poor. Take a look:

Ryan's tax cuts go overwhelmingly to the rich

So if you make a lot of money, you come out as a big winner in Paul Ryan’s plan. If you don’t make very much, then you are  in for a world of hurt if  this budget gets passed.

Third come the “mystery meat”  in Paul Ryan’s budget, as Paul Krugman says. See, Ryan has a problem because at this point in the budget process he has made the debt a lot worse by passing huge tax breaks and only made up for it with some big spending cuts. Now he has to try to cut the national debt.  So, Republicans propose that we get rid of almost every tax break in the book to pay down the debt. Only, they don’t tell us what breaks they want to cut. They leave those trillions in cuts up to our imagination. Seriously. To get the kind of deficit reduction he promises, Ryan would have to eliminate lots of tax breaks that benefit the poor and the middle class like the child tax credit, earned income tax credit, the tax free status of 401(k) and other retirement plans, the mortgage tax deduction, etc. That means that the last chart I posted will be completely different once Republicans are done.

Most low and middle income earners will probably end up paying more under Republicans’ plans than they do now because their tax breaks will be eliminated. But won’t tax breaks for the rich be eliminated as well? Nope. The biggest tax break for the rich (the lower tax bracket for capital gains) will actually be expanded. Rich people will no longer have to pay anything on their income from stocks, bonds and property, dropping Bill Gates’ Warren Buffett’s and Mitt Romney’s tax rates to about 0.

The only debt reduction in the Republican budget is the elimination of tax breaks and loopholes, which Republicans leave completely unspecified. The rest of the budget is not an attempt to come to grips with our debt, but an attempt to radically remake American government and society. Republicans would literally destroy the American social safety net in order to write huge checks to the millionaires in our country. The losers in Republicans’ budget are clear: anyone who is poor or middle income stands to lose all of their support from the government and see their taxes raised. The winners are the rich. They will see their taxes vastly reduced and all they will have to worry about are those Tiny Tims who come to their door asking for money around Christmas every year.

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