Comparing the Reid and Boehner Proposals Common Ground and Subtle Differences

If you take a look at House Speaker John Boehner's proposal and Senate Majority Leader Harry Reid's proposal -- both of which increase the debt limit and enact deficit reduction in a two-part process -- you'll see that they are more similar than they are different (see below for a comparison table of elements within the proposals). Boehner has been promoting his proposal as one that would reduce deficits by $3 trillion, with $1.2 trillion in discretionary cuts upfront and $1.8 trillion to come out of a special process this fall. Reid's proposal would enact roughly the same $1.2 trillion in discretionary cuts upfront (more on that here), $70 billion in other mandatory savings, limit war spending to a total of $450 billion over 2013-2021, and put in place a similar special process to recommend additional savings by year's end.

You can see the similarities. A two-step process isn't perfect (read our release from last night on ways to make the process and enforcement as credible as possible), but it could help us raise the debt ceiling and start to set us on the right course.

Assuming that a two-part process seems to be where the consensus is, let's focus on the second part -- the joint committee, which would achieve real deficit reduction. As CRFB president Maya MacGuineas said yesterday:

"Promises of future savings are only as good as the intentions behind them, but if policymakers are serious in their understanding of the need to tackle entitlement reform and tax reform, these frameworks could do the trick.”

Subtle Differences

The proposals differ in how the promise of future savings from the joint committee would be enforced. The Boehner proposal would make the President's ability to request (subject to Congressional disapproval) a further increase in the debt limit contingent on enactment of committee recommendations under an expedited process. The Reid proposal would also require a vote on the committee recommendations under an expedited process, but does not provide enforcement to ensure that the savings are achieved. A strong enforcement mechanism to ensure savings materialize should be considered a necessity. Enforcement levers from the Gang of Six could be used to strenghten either framework. In addition, the Peterson-Pew Commission's paper on how to construct targets and triggers provides several ideas for strengthening enforcement rules, as well as PPC's fiscal toolbox which outlines some of the enforcement mechanisms present in other plans.

There is also a difference in the goals for the Committee.

Rather than offering a savings target, the Reid proposal sets a goal of reducing the deficit to 3 percent of GDP -- but does not specify when that goal should be achieved. It could be a year-in goal -- perhaps 2015, as with the President's Fiscal Commission. It could be a 10-year average deficit. No one knows.

The Boehner proposal instead calls for $1.8 trillion in deficit reduction -- but does not define what baseline that would be scored off of. It's difficult to evaluate the savings if the baseline is not specified. By remaining silent on the baseline but requiring the plans be scored by CBO under existing procedures, the Boehner proposal appears to require the Committee recommendations be scored against CBO's current law baseline, which assumes expiration of all the 2001/2003/2010 tax cuts as well as no AMT patch or “doc fix.”

****

In order to get beyond the baseline confusion and potential for gimmicks to artificially inflate savings, CRFB has recommended using specific debt-to-GDP levels and corresponding savings targets to ensure that legislation actually achieves the goal of stabilizing and reducing our debt.

As they currently stand, there is a lot of uncertainty with both the Reid and Boehner proposals. Perhaps that is by design, with the intent being to reconcile the two plans and find a consensus. Let's hope -- the debt limit must be raised as soon as possible, and it is time policymakers find common ground in order to make a deal. While these proposals have their differences, as can be seen below, there is much overlap.

 

 Reid Proposal 
Boehner Proposal
Debt Ceiling Increases        
  • Raises debt ceiling by $2.7 trillion immediately, which would last until 2013
  • Allows President to request $900 billion increase in debt ceiling, $400 billion immediately and rest subject to vote of disapproval
  • If more than $1.6 trillion additional savings from special committee enacted, President authorized to request $1.6 trillion debt ceiling increase, subject to vote of disapproval
Discretionary Spending       
  • $1.2 trillion in savings over 10 years from discretionary caps
  • Caps grow roughly with inflation
  • Firewall between security and non-security spending for FY 2012 and FY 2013
  • Limits war spending to $450 billion over the 2013-2021 period
  • Enforcement: 60-vote point-of-order on bill that would cause spending to exceed caps or to increase caps AND automatic, across-the-board cuts if caps are exceeded
  • $1.2 trillion in savings over 10 years from discretionary caps
  • Caps grow roughly with inflation
  • Details range for defense spending in FY 2012 and FY 2013
  • Enforcement: Automatic, across-the-board cuts if caps not met
Specified Other Mandatory Savings        
  • $70 billion in other mandatory savings (savings other than from Social Security and federal health programs)
    • $40 billion from program integrity to achieve savings from waste, fraud, abuse
    • $15 billion from spectrum sales
    • $10 - $15 billion from agricultural reforms
    • Higher education reforms whose savings go to Pell Grants
  • $16 billion from program integrity to achieve savings from waste, fraud, abuse
  • $13 billion from higher education reforms to go to Pell Grants
Special Committee to Identify Additional Savings       
  • Joint, bipartisan committee of 12 lawmakers to "present options for future deficit reduction"
  • Goal: Reduce deficit to below 3% GDP
  • Mandate: Make recommendations to meaningfully improve short and long term fiscal imbalance, may include tax reform, shall consider bipartisan plans
  • Recommendations guaranteed to receive up or down Senate vote under expedited process by the end of the year
  • Joint, bipartisan committee of 12 lawmakers to report deficit reduction legislation by November 23
  • Goal: $1.8 trillion in deficit reduction
  • Mandate: Make recommendations to meaningfully improve short and long-term fiscal imbalance
  • Enforcement: Second $1.6 trillion debt ceiling increase not authorized without enactment of at least $1.6 trillion additional savings
  • Recommendations considered under expedited process
Balanced Budget Amendment (BBA)       
  • None
 
  • Requires vote on BBA in House, and subsequent vote in Senate if BBA passes House

 

Note: This blog has been updated since its original posting.

We do not need a balanced budget amendment.

One big difference is the balanced budget amendment. 

 

When the Constitution was written the Founding Fathers purposely did not include a requirement for a balanced budget. The newly formed United States was already in debt from the Revolutionary War. They expected that elected governments following them would do their jobs and not run deficits as ours has for 37 of the last 41 years. The Founding Fathers did include Article 1 Section 7 regarding revenue bills. The 16th Amendment ratified in 1913 granted congress the power “to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” 
We expect that our government will do its job!  In times of recession, expand government spending. In times of economic growth, pay the debt down.   
We do not need a constitutional amendment to balance the budget. Does anyone really believe we should let this congress anywhere near the U.S. Constitution and hold a constitutional convention? This congress is too belligerent, obdurate, and stubborn. This congress does not know how to govern.   For all intents and purposes, this government is incompetent.
In the 1980s President Reagan cut taxes and changed the tax code. During his eight years plus President Bush’s (41) four years the deficit increased from one trillion dollars to 3.7 trillion dollars. Even though President Clinton had surpluses for three years, the deficit increased another 1.5 trillion dollars during his tenure in office. President Bush (43) took office with 5.2 trillion dollars in debt. President Bush (43) cut taxes and when he left office the debt had climbed to 10.4 trillion dollars. Tax cuts were financed by debt. 
In 2008 the U.S. financial markets imploded causing a soft depression. The government spent in excess of 2.2 trillion dollars. The Federal Reserve lent in excess of 3.3 trillion dollars. The government nationalized Fannie Mae and Freddie Mac and purchased controlling interest in AIG insurance. The government bailed out the banking system and the automobile industry. Unemployment rose past ten percent and is still in excess of nine percent. Gross Domestic Product declined to a low of negative 6.8% in the fourth quarter of 2009. Inflation remains low.  Housing is in the worst condition since the depression. The Federal Reserve has performed two rounds of quantitative easing to spur the economy without success. The economy remains fragile.
A defaulting on our debt will undermine any economic recovery. There will be an immediate increase in interest expense. In 2010 the interest expense on our debt was 413.9 billion dollars. That expense will rise significantly when U.S. Treasury obligations lose their triple-A rated status. We will lose that status because congress is incapable of working together. Eighty percent of our deficit is due to interest expense and it was projected to rise to 931 billion dollars by 2021. That projection will have to be revised upward.
The U.S. will also lose its reserve currency status. What value does one put on a currency when the government defaults on its debt? A lower dollar makes all imports cost more. Our trade deficit will increase.  What happens to the price of oil?  There are a plethora of other ills congress will bring down on the economy. But the price will only be paid by the American people. 
It does not take any great genius to realize that we cannot cut spending and fail to raise taxes to meet our obligations. The Constitution provides for both.   Congress needs to do itsjob.  Enough with this game of chicken and the idea that any party can hold the nation hostage to their demands.

One big difference i

One big difference is the balanced budget amendment. 
 
When the Constitution was written the Founding Fathers purposely did not include a requirement for a balanced budget. The newly formed United States was already in debt from the Revolutionary War. They expected that elected governments following them would do their jobs and not run deficits as ours has for 37 of the last 41 years. The Founding Fathers did include Article 1 Section 7 regarding revenue bills. The 16th Amendment ratified in 1913 granted congress the power “to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” 
We expect that our government will do its job!  In times of recession, expand government spending. In times of economic growth, pay the debt down.   
We do not need a constitutional amendment to balance the budget. Does anyone really believe we should let this congress anywhere near the U.S. Constitution and hold a constitutional convention? This congress is too belligerent, obdurate, and stubborn. This congress does not know how to govern.   For all intents and purposes, this government is incompetent.
In the 1980s President Reagan cut taxes and changed the tax code. During his eight years plus President Bush’s (41) four years the deficit increased from one trillion dollars to 3.7 trillion dollars. Even though President Clinton had surpluses for three years, the deficit increased another 1.5 trillion dollars during his tenure in office. President Bush (43) took office with 5.2 trillion dollars in debt. President Bush (43) cut taxes and when he left office the debt had climbed to 10.4 trillion dollars. Tax cuts were financed by debt. 
In 2008 the U.S. financial markets imploded causing a soft depression. The government spent in excess of 2.2 trillion dollars. The Federal Reserve lent in excess of 3.3 trillion dollars. The government nationalized Fannie Mae and Freddie Mac and purchased controlling interest in AIG insurance. The government bailed out the banking system and the automobile industry. Unemployment rose past ten percent and is still in excess of nine percent. Gross Domestic Product declined to a low of negative 6.8% in the fourth quarter of 2009. Inflation remains low.  Housing is in the worst condition since the depression. The Federal Reserve has performed two rounds of quantitative easing to spur the economy without success. The economy remains fragile.
A defaulting on our debt will undermine any economic recovery. There will be an immediate increase in interest expense. In 2010 the interest expense on our debt was 413.9 billion dollars. That expense will rise significantly when U.S. Treasury obligations lose their triple-A rated status. We will lose that status because congress is incapable of working together. Eighty percent of our deficit is due to interest expense and it was projected to rise to 931 billion dollars by 2021. That projection will have to be revised upward.
The U.S. will also lose its reserve currency status. What value does one put on a currency when the government defaults on its debt? A lower dollar makes all imports cost more. Our trade deficit will increase.  What happens to the price of oil?  There are a plethora of other ills congress will bring down on the economy. But the price will only be paid by the American people. 
It does not take any great genius to realize that we cannot cut spending and fail to raise taxes to meet our obligations. The Constitution provides for both.   Congress needs to do itsjob.  Enough with this game of chicken and the idea that any party can hold the nation hostage to their demands.
greating

Post a New Comment

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <code> <ul> <ol> <li> <p> <br><img><div><span><object><embed><blockquote> <!--break-->
  • Lines and paragraphs break automatically.
  • Insert a chart by placing [chart:nid] into your content, where nid is the node ID.

More information about formatting options

By submitting this form, you accept the Mollom privacy policy.