Rep. Ryan Ups the Ante in Latest Round of Budget Poker

The republicans in the House of Representatives and the White House have been playing a game of budgetary poker for the past two years and taxpayers have been paying the price.  House Budget Committee Chairman Paul Ryan’s (R-Wisc.) fiscal year (FY) 2013 budget was the next card played in this high stakes game.  In FY 2012, Rep. Ryan showed his cards and went all in with spending cuts.  This year Rep. Ryan continues his aggressive stance as he doubles down on tax cuts.  All the meanwhile, the Senate has folded by not proposing a budget for more than 1,000 days.  And, according to The Hill, Senate Majority Leader Harry Reid doesn’t even seem bothered by their lack of work.  “Senate Democratic leaders on Friday said they do not intend to bring a fiscal 2013 budget up for a floor vote. ‘We do not need to bring a budget to the floor this year — it’s done, we don’t need to do it,’ Senate Majority Leader Harry Reid (D-Nev.) told reporters on Friday.”  Rep. Ryan addresses both spending and taxes as he ups the ante on America’s fiscal future.

Spending

The biggest question is how Rep. Ryan’s budget addresses spending.  According to Dan Mitchell, “Ryan’s plan allows spending to grow by an average of 3.1 percent annually over the next 10 years, with is faster than the 2.8 percent average annual growth in last year’s budget.”  This is not as much progress as some fiscal conservatives would like to see but it is a step in the right direction.  The real progress and good news is that it would spend less than the President.  According to Peter Ferrara in Forbes, “President Obama’s budget actually proposes to spend $47 trillion over the next 10 years. Ryan’s budget proposes to cut that by $6.8 trillion. By 2022, Ryan’s budget would consume nearly a trillion dollars less per year than President Obama’s.”  Cutting $6.8 trillion is significant because this would mean that spending as a percentage of GDP would shrink.  According to US News, “Under current law, the Congressional Budget Office projects that federal outlays would fall from 24.1 percent of GDP last year to 22.4 percent in 2022. By contrast, the Ryan budget would cut spending to 19.8 percent of GDP in 2022.”

If there was one weakness with spending cuts it would be military spending.  According to The Hill, “The House Republican budget released Tuesday would shield the Pentagon from nearly $500 billion in automatic cuts and roll back some of the $487 billion reduction approved in last year’s Budget Control Act.”  In times of fiscal discipline it is imperative that all agencies see shrinking budgets.

Taxes

Rep. Ryan’s FY 2013 budget is good news for tax cuts.  Ryan’s proposal cuts the corporate tax rate from 35 percent to 25 percent and reduces the number of income tax brackets from six to two.

In less than a month the United States will have the highest corporate tax rate in the world.  Cutting the corporate tax rate is an important step in helping the economy get back on track.  The corporate tax rate of 35 percent (the second highest in the world) is an example of an outdated tax system and a burden that stifles innovation and business expansion.  This rate is higher than every one of America’s major European trading partners and is higher than China or Canada. In fact, since 1992, the average OECD combined statutory rate has been lower than America’s and it has continued to fall. Today, it is nearly 10 percent lower (25.1 percent) than America’s 35 percent. Add in the state and local taxes that U.S.-based companies pay and the gap widens even further.

Rep. Ryan’s FY 2013 budget is not perfect.  There are still projected deficits for many years to come and there aren’t enough spending cuts.  However, the budget is an important and fiscally responsible step forward.  While President Obama’s budget projects a budget deficit of more than $600 billion in 2017, Rep. Ryan’s budget projects a deficit of $182 billion in the same year.  The ideal situation is to balance the budget and get the country back into surplus, but this reduction in the deficit will put the country on the right path.  Even though Rep. Ryan’s plan isn’t “perfect,” it is a significant step forward to shrinking the government.