Rep. Paul Ryan (R-WI) on Tuesday presented his proposal for a 10-year federal budget plan to stake out the Republican position on federal spending and taxes – no tax increases, repeal of the Affordable Care Act, lower social program spending, protection of military spending, and a balanced budget by 2025.
“This is a plan to balance the budget and create jobs, and it builds off a simple fact: We can’t keep spending money we don’t have,” Ryan said upon presenting the plan. “This budget provides relief for families. Too many Americans struggle to make ends meet, while Washington continues to live beyond its means. It’s irresponsible to take more from hardworking families to spend more in Washington. Today’s proposal—The Path to Prosperity—shows that it’s not too late to tackle our country’s most pressing challenges.”
Lower Corporate Tax, Fewer Brackets
On the tax side, Ryan’s budget would cut the federal corporate income tax rate to 25 percent from 35 percent, and slash the number of tax brackets for individuals from seven to two: a 25 percent bracket and a 10 percent bracket. The top tax bracket for individuals is currently 39.6 percent.
On the spending side, federal expenditures would decline by $5.1 trillion by 2025, though some of the savings are really accounting gimmicks. For instance, while ending the Affordable Care Act and its associated spending, the Ryan plan keeps Act revenues.
Opponents of the Ryan plan pounced on it.
“As in years past, Chairman Ryan’s budget ignores the overwhelming evidence that slashing public spending during a slow recovery will not return the economy to health. However, this year, in order to mathematically achieve a balanced budget within a decade, Chairman Ryan adds a ‘macroeconomic fiscal impact’ line item, positing that cutting the deficit would, over the medium term, boost the economy. While shrinking the deficit may indeed boost economic growth when the economy is running near or at its potential, that simply will not be the case under Chairman Ryan’s near-term austerity,” wrote Joshua Smith, senior policy analyst at the Economic Policy Institute blog.
‘Reverses Death Spiral’
Defenders also spoke up.
“The President would keep entitlement programs barreling towards bankruptcy, while the House budget plan will allow seniors more choices for Medicare coverage, and reverse the program’s death spiral,” wrote Mattie Duppler, director of budget and regulatory policy at Americans for Tax Reform, at atr.org. “By restructuring federal Medicaid and welfare spending as block grants, the House blueprint empowers state and local governments to tailor Medicaid and other assistance programs to their own populations’ needs. The President would increase spending on these programs without any reforms that ensure their efficiency or solvency.”