After seeing Congressman Paul Ryan's (R-WI) budget yesterday, now we know the approach favored by the Senate Democrats. Senate Budget Chair Patty Murray (D-WA) has just released her FY 2014 budget, "Restoring the Promise of American Opportunity," outlining a package with a mix of spending cuts and revenue increases through tax expenditure reductions.
Chairman Murray's plan appears to contain $1.85 trillion in net deficit reduction over ten years compared to its current policy baseline which assumes the sequester is repealed. That would cause debt to fall from a projected 76.6 percent of GDP in 2014 to just over 70.4 percent of GDP in 2023 – partially with an assist from a complete elimination of war spending after 2015, which, to their credit, they do not count as deficit reduction.
The package contains a mix of spending and revenue provisions, specifically $975 billion in additional revenues compared to current policy, and $875 billion in spending reductions net of stimulus. Her plan would put debt on a modest downward path as a share of the economy, although it does not include debt reduction nearly as large as the House budget.
Senator Murray calls for generating the $975 billion by reducing tax expenditures and closing loopholes on higher earners and corporations – though as with the Ryan budget the details are not specified and are left up to the appropriate tax-writing committee.
On the spending side, she calls for $275 billion in health savings, mostly from providers within Medicare, and $140 billion in non-defense discretionary savings. She also reduces base defense spending by $240 billion and draws down funding for the wars overseas faster than the CBO drawdown scenario. The budget would also cancel sequestration, have $100 billion in temporary stimulus measures, primarily in new infrastructure spending, and contain minor savings in other mandatory programs.
The table below shows savings in the budget compared to the current law, CRFB Realistic, and implicit budget resolution baseline, which is the same as CRFB Realistic except that it does not account for the excess war drawdown.
|Savings/Costs (-) in the Murray Budget (billions)|
|Senate Budget Current Policy||Current Law||CRFB Realistic|
|War and Sandy Drawdowns||$0||$1,264||$350^|
Source: Senate Budget Committee, CBO, CRFB calculations
^Number is rounded since exact number is unavailable.
Murray has called for savings across the budget, which is a good sign, and the budget would put debt on a modest downward path as a share of the economy. But this budget falls slightly short of achieving the $2.4 trillion in deficit reduction we have argued is needed. Less deficit reduction may be able to put debt on a downward path, but this may not be the case if projections are overly optimistic.
Now that Ryan and Murray have both put out their preferred plans, CRFB President Maya MacGuineas argues that now lawmakers must look for areas on which they agree on a compromise:
It is very encouraging that both houses have now formally recognized the importance of putting the debt on a downward path. With both Senator Murray’s plan and Congressman Ryan’s proposal on the table for discussion, elected leaders can begin working toward forging one, bipartisan deficit reduction plan. It will take tough decisions, but by putting everything on the table we can finally ensure a sustainable debt path.