On March 12, House Budget Committee Chairman Paul Ryan (R-WI) released his FY 2014 budget plan, The Path to Prosperity: A Responsible, Balanced Budget. On March 13, Senate Budget Committee Chairman Patty Murray (D-WA) released her FY 2014 budget plan, Foundation for Growth: Restoring the Promise of American Opportunity.
On March 13, the House Budget Committee held a markup on the FY 2014 House Budget Resolution implementing the Ryan budget plan. The Committee reported the Resolution on a vote of 22 to 17, with no Democratic support. The Senate Budget Committee held a two-day markup on the FY 2014 Senate Budget Resolution and reported it out of Committee on March 14, with a party-line vote of 12 to 10. The resolutions will next move to the floor of their respective chambers for consideration. The budget resolutions establish overall ceilings for discretionary spending and limits for total government revenue and mandatory spending. The resolutions do not set limits for spending on particular programs; program-specific spending plans typically are developed by the appropriations committees.
The Ryan and Murray plans illuminate stark differences in budget priorities between the Republican majority in the House and the Democratic majority in the Senate. Ryan’s plan claims to cut spending by $4.6 trillion, compared to the current spending outlook, and to balance the budget within ten years. Ryan’s plan proposes to achieve the savings through spending reductions and entitlement reform. Murray’s plan claims to reduce the deficit by $1.85 trillion by cutting spending by $975 billion and raising $975 billion in revenue.
Ryan’s plan states it would build on the Budget Control Act (BCA) of 2011 to cap spending by extending the caps for two years, through 2023. It does not replace sequestration for non-defense domestic discretionary programs and would reduce funding for the programs below the reductions achieved by the BCA caps and sequestration. The plan refers to an annual report on duplicative government programs issued by the Government Accountability Office (GAO) and states that the House Budget Resolution would require all authorizing committees to provide to the Budget Committee “spending-reduction recommendations for programs in their jurisdictions that are duplicative, wasteful, outmoded, or excessively expensive for the benefits received.” The plan also asks all authorizing committees to review funding spent for programs that are not currently authorized.
Murray’s plan would reduce spending by $975 billion through a savings of $493 billion in domestic spending, including $275 billion in health care savings; $240 billion in defense spending cuts; and $242 billion in reduced interest payments. Part of the savings would go towards replacing the sequestration cuts scheduled for FY 2014 through FY 2021. Murray’s plan proposes a $100 billion jobs and infrastructure package that includes funding for infrastructure investments and worker training programs.
Murray’s plan also continues the domestic spending caps agreed to in the Budget Control Act. It suggests achieving savings through eliminating waste, selling excess federally owned property, and reducing improper payments. The plan also states that each authorizing committee should review the programs within its jurisdiction to identify duplicative or overlapping efforts and examine how these programs could be delivered in a more efficient way or reduce administrative costs. Like Ryan’s plan, Murray’s plan also references GAO’s report on duplicative programs.
The Ryan plan’s section on housing proposes to wind down Fannie Mae and Freddie Mac and reform the Federal Credit Reform Act. The plan says the budget will seek to “drastically decrease the market dominance of Fannie Mae and Freddie Mac by gradually ending their government guarantees and taxpayer subsidies. It also supports various ways to attract private capital into the entities’ balance sheets.” The plan also notes that the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI Fund) has not met its congressionally mandated capital reserve ratio of 2 percent since 2009. The plan says therefore the government should “adopt measures to discourage risky behavior” and states that the budget would require the use of fair-value scoring for federal housing credit programs in order to properly evaluate taxpayer risk.
Murray’s plan says the Senate budget “helps put homeownership within the reach of responsible, hardworking middle-class Americans by ensuring the market is affordable, accessible, and stable.” The plan recognizes FHA’s role in ensuring a functioning mortgage market during the housing crisis. It states that as the future of housing finance is considered, “smart and measured reform of the housing market should include stabilizing and ensuring the long-term solvency of FHA’s MMI Fund.” The plan compares the Senate approach to proposals in the House to privatize Fannie Mae and Freddie Mac and revise FHA credit subsidy rate calculations. It states that these reforms would come at the expense of creditworthy first-time home buyers. It further states that the Senate budget “balances the need for stability and access to credit with the need to examine the future of the nation’s housing finance system.” The Murray budget plan includes language to allow authorizing committees to put together housing finance reform legislation that promotes “appropriate access to mortgage credit for individuals and families.”
Murray’s plan also includes a section specific to housing for low-income families. It states that “housing is an essential part of our economy and critical to the success of families and communities.” It also includes language to allow the appropriate committees to take action to capitalize the Housing Trust Fund. The plan highlights the collaboration among government agencies, the private sector, and the philanthropic community as key to helping families achieve housing stability. It states that to continue this leveraging opportunity the federal government must be a reliable partner.
Both plans discuss tax reform. Ryan’s plan was informed by a letter sent from House Ways and Means Committee Chairman Dave Camp (R-MI) to Ryan and seeks to achieve the following through tax reform:
- Simplify the tax code to make it fairer to American families and businesses.
- Reduce the amount of time and resources necessary to comply with tax laws.
- Substantially lower tax rates for individuals, with a goal of achieving a top individual rate of 25 percent.
- Consolidate the current seven individual-income-tax brackets into two brackets with a first bracket of 10 percent.
- Repeal the Alternative Minimum Tax.
- Reduce the corporate tax rate to 25 percent.
- Transition the tax code to a more competitive system of international taxation.