Budgets in Comparison: Will President Obama’s Budget Save the American Dream?

Romina Boccia / Alison Acosta Fraser /

Douglas Graham/CQ Roll Call Photos/Newscom

Douglas Graham/CQ Roll Call Photos/Newscom

When the President’s budget comes out Wednesday, it will complete the last piece of the budget puzzle, as the House and Senate have each duly passed a budget according to law. Never mind that the President’s budget is supposed to lead Washington budget discussions, rather than follow.

The key question is: Which of the five major budget proposals provides the leadership necessary to rein in growing spending, especially on entitlement programs, and create a growth agenda? A strong benchmark is needed to compare the relative merits of these budgets regarding the six goals any budget should meet.

The Heritage Foundation has prepared a table (which you can download here) that compares budgets passed in the House and Senate, the Republican Study Committee (RSC) plan, and the House Democrat plan with Heritage’s flagship plan, Saving the American Dream.

Here are the highlights for each of the six budget goals:

  1. Achieve balance within 10 years and stay in balance. The Heritage plan, Saving the American Dream, balances the budget in 10 years and maintains balance thereafter. The House and RSC budgets meet this first important goal under 10 years (the RSC in 4). Staying in balance would lower the debt permanently, but budget scores were not available more than 10 years out.
  2. Fully fund national defense. Defense is a core constitutional responsibility of the federal government and must be based on meeting national security needs. The Heritage plan makes defense a priority and fully funds capabilities and modernizes the forces. The House and RSC budgets would maintain defense spending under the Budget Control Act caps, but do away with the harmful sequester of defense.
  3. Reform the major entitlement programs. Programs like Social Security, Medicare, and Medicaid should be reformed with policy changes that improve the programs, eliminate their shortcomings, and make them affordable. The Heritage plan features a sweeping overhaul of Social Security, Medicare, and Medicaid to provide true economic security to America’s seniors and deliver better services to those who truly need them. The House budget continues to champion premium support in Medicare and block grants to the states in Medicaid. But it neglects reforms to Social Security—the biggest spending program today. The RSC budget would implement Medicare reforms 5 years sooner than the House. It would also make important first changes to Social Security, implementing chained Consumer Price Index (chained CPI) for Cost Of Living Adjustments (COLA) and raising the full retirement age slowly to 70. The RSC’s Medicaid proposal to not adjust benefits for inflation and beneficiary growth is extreme, however.
  4. Repeal Obamacare. This law installs vast powers onto Washington bureaucrats who will control the dollars and decisions that should be in the hands of individual patients and their families. Obamacare would spend an additional $1.8 trillion over the next 10 years for subsidies to individuals for purchasing coverage through the government exchanges and for states agreeing to expand their Medicaid programs. The Heritage plan repeals Obamacare in its entirety. The House and RSC budgets would repeal Obamacare but regrettably keep the higher tax revenues.
  5. Reduce non-defense discretionary spending. The Senate and Democratic House budgets would spend more immediately, repeating failed stimulus attempts that don’t create the promised jobs, but succeed at leaving us with greater deficits. The Heritage plan implements a variety of reforms to roll back this spending and caps it at no more than 2 percent of gross domestic product (GDP). The House budget would reinstitute work requirements from the successful 1996 welfare reform, and would consolidate duplicative jobs training programs, among other savings. The RSC budget proposes aggressive cuts but lacks sufficient detail as to how these would be accomplished.
  6. Adopt growth-oriented tax reform capped at the historical taxation level of 18.5 percent of GDP. Heritage’s New Flat Tax is a bold, growth-oriented tax reform plan that caps revenues at 18.5 percent of GDP. The House budget would lower individual and corporate income tax rates and consolidate to only two rates. Revenue levels would be high at 19.1 percent by absorbing revenues raised by the fiscal cliff deal and Obamacare. The RSC reverses the fiscal cliff revenue increases, but keeps revenues from Obamacare, to raise 18.8 percent by 2023. The RSC would likely struggle to raise this much with its tax policies. The Senate and House Democrat plans favor tax increases over true, revenue-neutral tax reform.

Federal spending and debt are growing at a dangerous rate, and economic growth and job creation will be significantly harmed if lawmakers fail to correct course.

President Obama’s budget will break records, regardless of its content since it will be more than 2 months late and arrive after the House and Senate budgets. Reports indicate that it would make minor changes to Social Security and Medicare, while spending more on infrastructure and raising taxes yet again. Some changes will be welcome, but many others will not be. In the end, what will matter is whether sound policy changes to rein in spending, balance the budget, and stabilize the debt—similar to the proposals in the Heritage plan—are put into law.

Follow Heritage’s reaction to President Obama’s budget live tomorrow here at The Foundry and check back with our Google Spreadsheet to see how it compares.

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