WASHINGTON (Reuters) - Annual deficits under a new plan from Senate Democrats would be in the $400-600 billion range for much of the next decade, a level they say would allow stronger near-term job growth than Republicans’ balanced-budget vision.
The plan unveiled by Senate Budget Committee Chairwoman Patty Murray on Wednesday offers up some modest spending cuts and seeks nearly $1 trillion in new tax revenue, but leaves major government programs largely unchanged - a stark contrast to Republican Paul Ryan’s radical revamp of healthcare benefits in an effort to slash deficits to zero by 2023.
Murray’s plan, which is expected to be passed by the Senate Budget Committee this week, showed that deficits would average 2.4 percent of economic output through 2023, a rate many economists view as sustainable. The Senate hasn’t passed a budget in four years.
Deficits have exceeded $1 trillion during each of the past four years due largely to economic damage from the recent financial crisis. Under the assumptions used in Murray’s budget, the fiscal 2013 deficit is forecast at $891 billion, or 5.6 percent of gross domestic product.
The Democratic plan would add $5.2 trillion to public debt over the decade, pushing it above $18 trillion in 2023. As a share of a growing economy, however, the debt would decline gradually to 70.4 percent from 76.6 percent now.
The plan, given to Budget Committee members only after the panel opened debate on it, aims to shrink deficits by $1.85 billion over 10 years - including the replacement of about $960 billion in automatic spending cuts known as the sequester.
It adds $100 billion in new spending to rebuild roads, bridges, schools and workers’ job skills and prescribes $975 billion in spending cuts and $975 billion in new revenues from the elimination of tax deductions and loopholes that benefit the wealthy.
“The highest priority of our budget is to create the conditions for job creation, economic growth, and prosperity built from the middle out, not the top down,” Murray told the committee.
Ryan’s plan, expected to be passed by the House Budget Committee late on Wednesday, aims to slash deficits by $4.6 trillion and reach a small surplus by 2023 through deep cuts to domestic social programs such as Medicaid healthcare for the poor.
Ryan’s plan benefits from a $620 billion tax increase on the wealthy enacted in January, but will not levy any more new taxes. It calls for repeal of President Barack Obama’s 2010 healthcare reforms for savings of $1.8 trillion.
For the third year in a row, Ryan has proposed major changes to the Medicare healthcare system for the elderly and disabled, converting it after 2024 to a voucher-like system that gives seniors a subsidy to purchase private health insurance or coverage through the existing fee-for-service Medicare program.
Murray’s plan would make no changes to Medicare’s structure but claims it will achieve $265 billion in savings from the program through unspecified efficiency changes that build on Obama’s healthcare reforms. Senate Budget Committee aides said these would be determined by choices made in future legislation. Another $10 billion in savings would come from new efficiencies in the Medicaid program.
Budget Committee Republicans criticized Murray’s plan as a timid effort that preserves the status quo in the face of a massive baby boom generation that will “bankrupt” Medicare.
“Their proposal goes to extraordinary lengths to shield the federal bureaucracy from any reform, even as millions of Americans are trapped in failed government programs,” said Senator Jeff Sessions, the panel’s top Republican. “The Democrat budget enriches the bureaucracy at the expense of the people.”
The Democrats’ plan would also reduce spending caps starting in 2015 for savings of $240 billion from the military, $142 billion from discretionary domestic spending and $76 billion from certain benefit programs. The programs and projects that would bear these cuts are not specified, leaving that task to appropriations committees.
On the tax side, the budget offers little specificity on which credits, deductions and loopholes should be closed to raise the $975 billion in new revenues.
The Ryan plan is expected to go to a floor vote in the Republican-controlled House next week, while the Democratic-controlled Senate will vote on the Murray plan. House and Senate leaders would then try to work out differences between the two.
Reporting by David Lawder; Editing by Sandra Maler, Andrew Hay and Paul Simao