The economic-growth forecast has deteriorated, making the hurdle for balancing the budget that much higher. Last year, CBO expected real GDP to grow by a 2.9 percent annual average over the budget window. This year, that average real GDP growth figure fell to just 2.5 percent because CBO has significantly lowered its expectation of long-term growth in potential real GDP, due mainly to negative developments in the labor market.
The clear downward trend in the economic forecast recently has raised the hurdle significantly for those attempting to correct the fiscal imbalance over the next decade. CBO’s downgrade in its economic forecast from last year to this year has lowered expected revenues by $1.4 trillion over the next decade and has increased projected deficits by a cumulative $1.0 trillion over this period. This is important because it demonstrates the importance of economic growth to balancing the budget.
The Congressional Budget Office has a long history of analyzing the positive effects of deficit reduction on the economy and its effect the budget. For example, the budget resolution passed in 1997, which resulted in the first balanced budget in 39 years, included CBO’s estimate of the macroeconomic benefits of reducing deficits. CBO-estimated additional deficit reduction from these benefits was incorporated into the budget. Building on this long history, this year’s budget incorporates CBO’s estimate of the macroeconomic effects of reducing the deficit as called for in the budget. Similarly the President’s macroeconomic forecast assumes the enactment of his proposed policies.
Yes. The overall spending cap for fiscal year 2015 is $1.014 trillion, as agreed to in Murray–Ryan, and the levels for defense and non-defense discretionary spending are where they were set in the Murray–Ryan agreement. We are not changing the plan that was agreed to by bipartisan majorities in the House and Senate and signed by the President.
The Bipartisan Budget Act does provide funding levels for fiscal year 2015. But that agreement was the bare minimum. House Republicans have put together their fourth balanced budget in a row because we believe we owe it to the country to offer an alternative to the status quo. We need to get this economy growing, bolster our defense, strengthen Medicare, reform government, and we need to stop spending money we don’t have. We owe the American people a brighter future. And this budget would deliver just that.
No,the House Republican budget strengthens key investments—like defense and Medicare—by cutting waste and making much-needed reforms. It’s not fair to take more from families to spend more in Washington. Instead, House Republicans’ responsible, balanced budget retools the federal government so it can keep its promises in the 21st -century. It cuts spending by ending cronyism and overreach, which have weakened confidence in the federal government and the economy.
No, the House Republican budget strengthens the safety net. Under this plan, spending continues to grow, but states have more flexibility to tailor government programs to their people’s needs.
Forty-six million Americans live in poverty today; the status quo is clearly unacceptable. The President’s policies have slowed the recovery and brought us closer to a debt crisis, which would hurt the poor the first and worst. By contrast, our budget will repair the safety net and expand opportunity for all families.
No, that plan will be introduced separately. This budget does propose modest, commonsense reforms of federal safety-net programs. It builds upon the success of welfare reform, encouraging work as the best path out of poverty. And it proposes better ways to provide housing, nutrition, and job-training assistance to families in need. Further, it addresses the fiscal and economic challenges facing the nation, which is crucial to fighting poverty. It also includes a deficit-neutral reserve fund to facilitate the consideration of new policies to reduce poverty and increase opportunity and upward mobility.
No, our budget stops Obamacare’s raid on Medicare. It also repeals its board of 15 unelected bureaucrats empowered to cut Medicare—because their cuts could deny care for current seniors. House Republicans have a long-term solution to protect and strengthen Medicare. It makes no changes for those in or near retirement. For future generations, we will offer them a range of plans—including traditional Medicare—from which they can choose. No senior can be denied coverage. Every senior will have the support they need to get the care they deserve. And those who attack this reform without offering a credible alternative are complicit in Medicare’s demise.
No, House Republicans want to clear out special-interest loopholes, simplify the tax code, and lower everybody’s rates. Our plan will help create jobs and increase wages. But any revenue we get from closing loopholes we’ll use to grow the economy. We won’t use it to pay for more spending. Unfortunately, our opponents want to take more from families to spend more in Washington.
Under our budget, we still spend $600 billion on food stamps over the next decade. We will spend more than $3 trillion on Medicaid. That’s hardly draconian.
Today, government—at the local, state, and federal level—spends over $1 trillion a year on anti-poverty programs, and yet over 46 million people live in poverty today.
Washington must stop measuring success by how much it spends. We should measure it by how many people get out of poverty. That is our budget’s focus. We want to reform our anti-poverty programs so that they actually help the poor.
The President’s policies have slowed the recovery and brought us closer to a debt crisis that would hurt the poor the first and worst. By contrast, House Republicans plan to repair the safety net. Spending on these programs would continue to grow, but states would have greater flexibility to tailor them to their people’s needs.
Freeing states from one-size-fits-all federal mandates will allow them to better allocate Medicaid dollars for their most vulnerable citizens. Rather than micromanage Medicaid from Washington, states will have the flexibility to ensure that the disabled and those in nursing homes receive the quality care they deserve. Elected leaders close to the people can better take care of these priorities than a federal government thousands of miles away.
This budget increases spending on Medicaid over the next ten years, from $357 billion in fiscal year 2015 to $403 billion in fiscal year 2024. The budget simply slows the explosive growth in the program. Moreover, the House Republican budget gives states the flexibility and resources to tailor a Medicaid program that meets their people’s needs.
Today, Medicaid has the same flaws that cash welfare had before we reformed it in 1996. The federal government provides an open-ended match to what the states spend on Medicaid, which gives them a perverse incentive to spend as much money as possible. The federal government pays an average of 57 cents of every dollar spent on Medicaid. Expanding Medicaid coverage during boom years can be tempting for state governments since they pay less than half the cost.
Conversely, to restrain Medicaid’s growth, states that cancel a dollar’s worth of coverage save only 43 cents. Moreover, states lack the flexibility to achieve savings, though many governors have asked for a new approach. One-size-fits-all federal mandates limit innovation, and many times the only way states are able to save money is to cut payments to medical providers. Many doctors are refusing to treat Medicaid patients, because states have reduced their reimbursements below what it costs to treat them.
The health-care law would force millions of Americans into a Medicaid system that is fundamentally broken. That would explode costs for the federal government and state governments alike. The best way forward is to follow the reforms in the House Republican budget, not expand a broken program. Repealing the health-care law and replacing it with true, patient-centered reforms will better serve Medicaid patients. Obamacare was full of false promises, including expansions in Medicaid that if fully implemented will place unsustainable burdens on the state and the federal budget and lead to a further deterioration in the quality of care.
The Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) is a good example of a program in need of reform. Spending on SNAP has quadrupled in the past decade. It’s grown in good times and bad, because of the open-ended nature of the program. States get more money if they enroll more people. This setup encourages waste, fraud, and abuse.
This budget fixes the flawed incentive structure. By capping open-ended federal subsidies and allowing states to develop innovative approaches to delivering aid, the budget’s gradual reforms encourage states to reduce rolls and help recipients find work. The budget also calls for time limits and work requirements like the reforms that helped reduce poverty nationwide in the mid-1990s.
Yes. This budget reforms our job-training programs to improve outcomes across the board. It calls for the consolidation of duplicative federal job-training programs into a streamlined workforce-development system. That system will have fewer funding streams and provide accountable, targeted career-scholarship programs. Instead of wasting money on duplicative administrative bureaucracy, this budget calls for job-training programs to be better coordinated with each other to get the most out of every dollar for those who need it.
This budget also puts the Pell Grant program on a sustainable path. Congressional Democrats and the President have pushed Pell Grant spending to unsustainable rates. The Congressional Budget Office reports the program will face fiscal shortfalls starting in 2016 and continuing through each year of the budget window. We need to reform the program so it can keep its promises. This budget brings Pell spending under control and makes sure aid helps the truly needy, not university administrators. At the same time, the proposed reforms ensure that we maintain the current maximum Pell award ($5,730) throughout each of the next ten years of the budget.
No. This budget protects and strengthens Medicare. The program’s trustees say that without reforms, Medicare will go bankrupt just as current seniors are in the heart of their retirements. Our plan includes bipartisan solutions to strengthen Medicare by offering guaranteed-coverage options to future seniors, regardless of pre-existing conditions or health history.
The President’s health-care law makes drastic changes to Medicare, but those changes make matters worse. The law created a board of 15 unelected, unaccountable bureaucrats to cut Medicare in ways that would deny care to current seniors.
See here for a complete contrast between the President’s approach and our approach to Medicare.
No. The President’s health-care law raided Medicare to fund an open-ended health-care entitlement. Advocates of the President’s health-care law claimed that the law both improved Medicare’s solvency and paid for the new entitlement at the same time. This claim is contradictory. Medicare’s chief actuary testified before the House Budget Committee that the Medicare savings had been double-counted.
The House Republican budget stops the raid on Medicare and ensures that any current-law Medicare savings are devoted to saving Medicare. It is crucial that policymakers ensure Medicare’s solvency into the next decade if we want to protect the current arrangements of those in or near retirement.
The House Republican budget produces near-term savings over the next ten years by proposing curbs on abusive and frivolous lawsuits. Medical lawsuits and excessive verdicts increase health-care costs and result in reduced access to care. When mistakes happen, patients have a right to fair representation and fair compensation. But the current tort-litigation system too often serves the interests of lawyers while driving up costs.
This budget also advances a bipartisan proposal to further means-test premiums in Medicare Parts B and D for high-income seniors, similar to the President’s proposal in his fiscal year 2014 budget. These common-sense reforms to subsidize the wealthy less will not cause disruptions to seniors’ current arrangements.
No. The changes in the House Republican budget will not affect those in or near retirement in any way. When younger workers become eligible for the Medicare program, they will be able to choose the kind of coverage that best suits their needs from a list of plans—including traditional Medicare. These plans will be guaranteed to offer coverage to all beneficiaries regardless of pre-existing conditions. Medicare would then provide a payment to subsidize the cost of the plan. This is not a voucher. It is a payment that goes to whatever plan recipients choose. The program would operate in a similar manner as the health insurance that members of Congress receive and Medicare’s prescription-drug-benefit program, which are also not “vouchers.” Former Clinton budget director Alice Rivlin has made it clear that premium support would not be vouchers with the following statement in testimony before the House Ways and Means Committee: “premium support as we define it is definitely not a voucher.”
This budget repeals the Democrats’ health-care law, including provisions that increase prescription-drug prices for everyone. In fact, the CBO confirmed that the law’s new requirements will drive up health-care costs, at odds with claims made by its proponents. In a letter to Chairman Ryan in November 2010, CBO said that “[the] increase in prices would make federal costs for Medicare’s drug benefit and the costs faced by some beneficiaries higher than they would be in the absence of those provisions” and that “the premiums of drug plans will increase along with the increase in net drug prices, so the premiums paid by beneficiaries will increase slightly.” Like the rest of this costly new entitlement, provisions that increase prescription-drug prices should be repealed.
The real threat to seniors’ health care is the fact that Medicare is going bankrupt. The current trajectory of government spending on health care is unsustainable. As noted above, without changes, according to the Medicare trustees, the Medicare program collapses in 2026. Comparing any plan to save Medicare with the status quo means comparing real solutions to a false reality. This budget protects Medicare for current seniors by averting any disruptions and saves the program for future generations by providing a personalized Medicare program—like the one members of Congress now enjoy—with more support for low-income beneficiaries and those with higher health costs and reduced subsidies for high-income beneficiaries.
The House Republican budget recommends a ten-year “Doc Fix” in the form of a deficit-neutral reserve fund. Washington must stop spending money it doesn’t have, and this proposal will ensure Medicare physicians do not experience sharp reductions in their reimbursement rates—protecting seniors’ access to critical care—without adding to the nation’s debt.
Our budget ensures no changes for those in or near retirement. The reforms begin in the year 2024. In other words, there are no changes for those seniors who are on the program today or those who will enroll before the new program begins. Moreover, last fall, the Congressional Budget Office issued a report on what premium-support reforms would mean for taxpayers and for Medicare beneficiaries. CBO found that both groups would save money under a system similar to what is proposed under this budget. Almost as important, CBO found that the longer we waited to pursue these reforms, the less savings seniors would see and the more it would cost to save Medicare. It is critical that we come together now with a real solution to protect and strengthen Medicare. Remember: Obamacare broke the Medicare promise for seniors. It cuts benefits for current seniors and ensures a bankrupt program for the next generation.
No. We fully repeal Obamacare’s spending and end its raid on Medicare. The budget also contains provisions to ensure those enrolled in Medicare Advantage are protected from access problems that result from Obamacare’s harmful cuts.
Under our premium-support reform, traditional Medicare will always be a guaranteed option for seniors. Those in retirement, those approaching retirement, and all future generations will have this guaranteed coverage option. Additional plans—beyond traditional fee-for-service Medicare—will be provided in the year 2024 under a premium-support system. This reform will foster greater competition to better serve seniors. In a report released last year, CBO found that premium-support reforms would lower costs for both seniors and taxpayers. The reforms proposed in this budget are built on the recommendations made in the CBO report. The Democrats’ alternative is a bankrupt Medicare program, rationed by Obamacare.
Our principles are the same as theirs: Lower rates to promote growth. Broaden the base to increase fairness. But unlike the commission, we don’t let government consume a greater share of the economy. Instead, we keep government’s take much closer to its historical average. Washington can’t solve its spending problems by taking more money from families. They have to write a budget. Washington should do the same. By returning government to its proper role, this budget brings spending in line with taxes—not the other way around.
No. In fact, it does the opposite. This budget calls for fundamental tax reform that closes the loopholes that distort economic activity. It does call for an increase in safe, environmentally responsible domestic energy exploration. But it includes no subsidies to promote this goal. Expanding American energy production would increase revenues collected from energy companies, while at the same time putting downward pressure on gas prices and creating jobs in America.
No. In fact, this budget calls for comprehensive tax reform that would remove the barriers that discourage companies from investing profits they’ve made overseas in new jobs here at home. By lowering the world’s highest corporate tax rate and moving to a globally competitive tax system that doesn’t tax income earned abroad twice, this budget would promote more job creation in this country.
No. While this budget abides by the defense spending levels agreed to in the Bipartisan Budget Act, in future years it brings defense spending back to “pre-sequester” levels so that we will not need to, for example, reduce the army to the smallest it’s been since before World War II or to reduce the number of carrier strike groups.
We’re providing the minimum level that the Joint Chiefs have testified is necessary to execute President Obama’s defense strategy. Under this plan, non-defense spending will still be a historically large share of the federal budget, consuming 73 cents of every federal dollar spent.
The Bipartisan Budget Act provision has already been amended so that current law applies only to those service members who joined after the provision took effect. This budget does not reopen the issue and preserves current law.
No. The House budget matches the President’s discretionary request for Function 700 Veterans Benefits and Services for fiscal year 2015. It also fully funds the President’s advance appropriation request for veteran medical care for fiscal year 2016. In fact, the House budget provides over $9 billion more than the President’s budget over ten years.
Murray–Ryan provided $63 billion in sequester relief over fiscal years 2014 and 2015 that was split evenly between defense and non-defense. In fiscal year 2016 and beyond, the discretionary-spending reductions are achieved through caps on discretionary spending that reflect the policy priorities of the American people. These caps are lower than those in current law. If Congress and the President act through the appropriations process in accordance with those spending levels, there would be no across-the-board reductions in discretionary spending (i.e. sequesters) in future years.
The problem with the sequester is not how much it cut, but how it cut. Sequesters are needed only when Washington can’t figure out how to live within a budget. Our budget set priorities and makes responsible reforms to get spending under control.
This budget puts debt on a downward trajectory. As a share of the economy, total public debt is over 100 percent of the economy. Under this budget, it will decline to about 79 percent. That’s much better than the $8 trillion that would be added if we stayed on the current path. The debt will continue to grow at a much slower pace under the Republican budget until the budget is balanced. At that point, debt held by the public will begin to decline and will be on a path to being paid off.
There is nothing in this budget that cuts Social Security. This budget calls for the President and Congress to work together to address looming shortfalls in the Social Security system. By working on a bipartisan basis, we can meet the promises we have made to our seniors.