Republican Congressman Paul Ryan, and chair of the House Budget Committee, has proposed a new plan that balances the budget in 10 years with no tax increases. The plan is a lot like the one Ryan ran on as a prospective vice presidential candidate in the last election.
The plan would replace Medicaid with block grants to the states, substitute vouchers for Medicare recipients who prefer private insurance and repeal the Affordable Care Act, also known as Obamacare.
It would also cut the top corporate tax rate to 25% from 35% and reduce the number of income tax brackets to just two: 10% and 25%. Through these and more changes, the plan proposes to cut the deficit by $4.6 trillion over the next decade and limit spending to 19.1% of GDP annually.
In an op-ed in today’s Wall Street Journal Ryan writes that his plan will help grow the economy and return the U.S. to its place as “a haven of opportunity.”
But is the plan viable?
Ben White, chief economics correspondent for Politico, says Obamacare will not be repealed “ever” but the desire by Republicans to do that “will not go away.”
White says the Ryan plan also includes “a couple of trillion dollars in extra savings to domestic discretionary spending” that aren’t specified, leaving the plan open to criticism. Democrats will label the plan “smoke and mirrors” because of the unspecified cuts and say there’s no need to balance the budget in 10 years anyway because the unemployment rate is still too high, says White.
Democrats are expected to propose their own budget plan as early as this week. But what that will look like is still anyone’s guess.
“Democrats historically have had trouble agreeing on how to cut spending,” says White. “Some Democrats want to cut a lot from the military. Others don’t. Some who are willing to do some cuts to Medicare and Medicaid, change the Social Security Medicare eligibility age…but they’ve had a hard time getting to consensus on any of that."
Still, White says he expects the Democrats will pass a budget in the Senate this time—their first in almost four years.
But after that, White doesn’t expect much. “The Ryan budget is dead in the Senate when it gets there. The Democratic budget is dead in the House when it gets there.”
White says there won’t be a grand bargain that cuts the deficit by $4 trillion or so over the next 10 years, bringing the budget near balance. But he sees some possibility for compromise on tax reform, especially to cut the corporate tax rate which both Republicans and Democrats desire. But even there are major differences.
“Ryan wants to get to a lower overall corporate rate by closing loopholes. Democrats want to close loopholes and use the revenue to pay down debt and spend on other priorities," says White. "Again it sounds good but I don’t know whether we get there.”
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