The Ideological Chasm Between the House and Senate Budgets

By :: March 14th, 2013

Think of the federal budget as an expression of government priorities described by numbers and words. This week, we’ve seen two widely divergent views of the federal role in people’s lives, one from the Republican-controlled House Budget Committee and the other from the Democratic-controlled Senate Budget Committee. 

When you look at the numbers alone, you can see a wide, but potentially bridgeable, gap. When you read the words, you begin to grasp why our politics are so toxic.  

First the numbers:

HBC & SBC fiscal plans (v2) 3-14-13

The Senate panel would have the federal government spend an average of 21.7 percent of Gross Domestic Product over the next decade. The House panel would spend about an average of 19.5 percent. That’s a difference of about $6 trillion over 10 years.

The Senate committee would have the federal government raise an average of about 19.3 of GDP in revenues over the period. The House panel targets 18.8 percent. That’s a difference of about $1.1 trillion over the decade. In 2023, the Senate plan would collect about 19.8 percent of GDP in revenues, the House plan 19.1 percent

And the bottom line: The Senate panel would have government run an annual deficit of about 2.4 percent. The House panel would bring the federal books nearly to balance over the entire period, with an average deficit of about 0.6 percent. By 2023, the Senate plan would maintain the deficit at about 2.4 percent while the House plan would create a small surplus. 

Looked at as numbers alone, the spending gap is quite large but the revenue targets are not that far apart. The gap seems especially bridgeable since both sides have embraced the idea of cutting tax preferences from the revenue code. Closing a gap of a few tenths of GDP doesn’t seem out of reach.  

At least not until you read the words in these two budgets. That’s when you get a sense of how far apart the two parties really are.   

It is not an overstatement to say the House budget panel sees government as the enemy of the people, poised to destroy all that individuals build for themselves. Thus, its goal is to remake the very role of government by slashing planned spending and restraining revenues. 

This is from the introduction of the fiscal document prepared by panel chair Paul Ryan (R-WI):

“Pressed for cash, the government will…crank up the printing presses. The final stage of this intergenerational theft will be the debasement of our currency. Government will cheat us of our just rewards. Our finances will collapse. The economy will stall. The safety net will unravel.”

It is similarly not an overstatement to say the Senate Budget Committee, chaired by Patty Murray (D-WA), would largely maintain the status quo, with government continuing to play the activist, redistributionist role that so offends conservatives. 

“Government can’t solve every problem, but…it can and should work to create jobs, support the middle-class, and offer a hand up to families that need some support while they work to get back on their feet.”

Not surprisingly, these competing visions lead the two committees to very different priorities: For the GOP-controlled House panel, it is simply this: “We owe the American people a balanced budget.”

For the Senate committee it is this: "The highest priority…is to create the conditions for job creation, economic growth, and prosperity.”

Indeed, the first half of the panel’s fiscal plan is all about enhancing government programs. You’ve got to get to page 56 before the 113-page document addresses the deficit."

In truth, neither of these plans will ever become law, and neither would be sustainable if it did given the fiscal pressures of an aging Baby Boom generation. But that doesn’t seem to have stopped either side from digging their ideological foxholes even deeper.

9Comments

  1. Michael Bindner  ::  2:35 pm on March 14th, 2013:

    Given the fact that the Budget Control Act already served the purpose of making appropriations allocations and the tax committees and the leadership will likely work out deals on tax reform and entitlement reform – or push those deals down the road – both budget documents are simply politics.

    For this function to be relevant, it needs more teeth. This is one reason I support the creation of a Joint Budget Committee to make any deals on the big numbers before the President even submits his or her budget on a detailed level. A joint budget resolution would do what the Budget Control Act now does, set detailed appropriations targets – with the added feature that part of the President’s budget would be to submit a current accounts budget inside the agreed upon spending targets and have those estimates become law if the appropriations committees do not act by the start of the fiscal year.

    Of course, for anything like that to happen, we would need comity on revenue – and that is impossible while the GOP has donors who don’t realize that their children are the ones who will eventually pay for a legacy of tax cuts that they have left us from the Bush years. Because Obama has largely bought into it as well, it will take something radical, like the collapse of the dollar as an international currency or the need to enact a consumption tax to support the failure of health care reform to add up (a subsidized public option or single payer are inevitable), neither projection will hold true for the long term.

  2. AMTbuff  ::  6:00 pm on March 14th, 2013:

    Why truncate the vertical scale on that graph? Start it at zero to show accurately the scale of the differences. Unless the objective is to make the differences appear to be larger than they are. Which I guess is consistent with the use of the word “chasm”.

    The only real chasm is the one between the public’s appetite for government spending and its willingness to pay for that spending.

  3. Curt Beckmann  ::  8:45 pm on March 14th, 2013:

    Is anyone else worried by the fact that even with the Senate’s (Democrats’) revenues and the House’s (Republicans’) spending, we still run a deficit? At what time to we ever expect to start paying down this federal credit card? I question how we can avoid a downgrade like the UK, boosting our borrowing costs and making it harder to make ends meet, prompting a slow downward spiral. I thought Intrade.com might provide some Insight on the downgrade question, but alas I’m out of touch since Intrade stopped trading earlier this week. Curious what the most recent expectations were…

  4. SteveinCH  ::  9:18 pm on March 14th, 2013:

    Michael,

    You really should think before you write. The House budget forecasts average revenues at 18.9% of GDP for the next decade. That is a higher number than any decade other than the 1990s (where the average was 19.1%). The issue is not our inability to raise revenue, it’s our desire to spend much more than we raise.

    Our children don’t “pay” for tax cuts. They pay for the spending we do over the taxes we raise. No amount of attempting to change the meaning of words changes this.

  5. Michael Bindner  ::  8:02 am on March 15th, 2013:

    That is exactly the same thing. But what they are paying for is net interest and principal costs that were rolled over into the financial markets. Really. Now, they sometimes hold that debt – but more and more that debt is being held by others. Also, it is not all children who owe – only those whose families could pay more taxes now. In essence, it is the top 20% of households who are racking up the debt for their children – since only tax increases on that strata can be raised without damaging the economy.

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  7. Vivian Darkbloom  ::  8:59 am on March 15th, 2013:

    “It is not an overstatement to say the House budget panel sees government as the enemy of the people, poised to destroy all that individuals build for themselves.”

    “It is similarly not an overstatement to say the Senate Budget Committee, chaired by Patty Murray (D-WA), would largely maintain the status quo, with government continuing to play the activist, redistributionist role that so offends conservatives.”

    Is this an example of non-partisanship? One side is said to see government as “the enemy of the people” and the other merely wants to maintain the status quo (and, if there’s a problem with the latter, it’s only because it “so offends conservatives”).

    If only Howard would turn his critical, non-partisan eye to the following statements:

    “Government can’t solve every problem, but…it can and should work to create jobs, support the middle-class, and offer a hand up to families that need some support while they work to get back on their feet.”

    And,

    “The highest priority…is to create the conditions for job creation, economic growth, and prosperity.”

    That sounds nice, but how, exactly, does the Senate budget proposed by Murray, which seeks to raise taxes by $975 billion without any structural tax reform, makes largely undisclosed and illusory cuts to spending in the same amount, while perpetuating huge government deficits, create those conditions? How does that budget position us for the next recession and/or financial crisis? Should we be accepting that rhetoric without asking which budget is likely to make all those wonderful things come true?

    As far as the Ryan budget is concerned, the rhetoric is also self-serving. Nevertheless, his budget calls for real tax reform (as previously signaled by Camp). One side is proposing tax and entitlement reform, both of which are sorely needed, and the other side is proposing revenue increases in the name of tax reform and zero entitlement reform. Details on both sides are lacking, but it strikes me that Ryan and Camp have disclosed more details than Murray has. So, where is the outrage? Was it completely expended on Romney?

    Comparing the spending and revenues and projected deficits of the two plans as a percentage of GDP is fine, albeit very incomplete. Both plans are using static scoring in their projections. An important adjunct to that static analysis is which plan will likely provide the greater GDP growth. Non-partisan economists should be asking which plan will likely grow the GDP not only next year, but in the next 10 or, dare I say, 15 or 20 years. In other words, which plan would actually “create the conditions for job creation, economic growth, and prosperity”. Properly aligned incentives, responsible and credible federal finances contribute to the positive and sustained GDP growth that makes all of that possible—not self-serving rhetoric culled from the narrative of a budget document the details of which would pull in the other direction.

    If one considers the likely economic consequences of the competing plans, they do indeed seem to go in very opposite directions. That is not just ideology; it’s economics and the latter is what I’m hoping to see more of here.

  8. SteveinCH  ::  9:37 am on March 15th, 2013:

    VD,

    Nice post. I’m going to do a full read of the both budgets this weekend since much of the commentary I have seen is highly contradictory. It is interesting that many analysts are taking Murray’s numbers at face value while probing Ryan’s more starkly.

    My sense so far is that both budgets are awful but for very different reasons. Ryan’s is awful because it avoids needed attention to SS and defense, forcing it into a series of (in my view) overly aggressive reductions in other areas. Murray’s is awful because it adjusts the baseline from the CBO, has a bunch of unspecified tax increases on unspecified people and seems to only “cut” OCO spending, spending that never would have happened in the first place.

    I’ll blog it this weekend once I’ve had a chance to do my reading.

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