Analysis of the 2015 House and Senate Republican Budgets
April 09, 2015
As you may have read in Wonk Tank’s previous post, the Fiscal Policy Primer, part of fiscal policy involves how the government spends the money it has raised. As can be expected, the two main political parties in the US have different ideas as to how to most effectively spend the federal government’s money. Generally, Republicans and Democrats disagree on how much the government should spend and how it should raise money. In this post, we analyze the 2015 GOP-written House and Senate budgets.
For the first time in six years, the House and the Senate have passed a complete budget resolution. Even though Congressional budgets are not actually laws, they give an overall direction of how much federal programs should spend. The control over actual spending is done by the Senate and House Appropriations Committees in the form of bills that lay out the funding for each federal agency.
The predominant view of Republicans is that spending and taxes should be cut in order to decrease the federal deficit and increase economic activity. Republicans argue that based on the current levels of spending, the federal government’s debt will keep on rising to unsustainable levels. Moreover, following the Keynesian view, now that the economy is slowly returning to pre-recession levels, the government has no need to keep running a deficit.
Senate Republican Budget
The Senate Republican Budget, passed on March 27 by a 52-46 vote, aims to balance the budget in 10 years. To do this, they will reduce spending by $5.1 trillion over these 10 years without raising taxes.
So, you might be asking yourself, where will those $5.1 trillion in spending cuts over a decade come from? Funding for domestic discretionary programs, such education, science and technology will be cut by $236 billion over these years. The budget also aims to create $430 billion in Medicare savings, however, no clear guidelines were set for how this will be done. The main spending cut that the Senate budget is counting with is $4.3 trillion cuts in mandatory spending which includes Medicaid, SNAP (food stamps) and the Affordable Care Act (Obamacare).
Repealing the Affordable Care Act, which is estimated by the CBO to have a gross cost of $2 trillion (but is projected to reduce the deficit on net) over the next 10 years, is tricky. Normally, repealing a bill like Obamacare would require a 60 vote majority; but by including it in the budget, Republicans have paved the way for something know as reconciliation, which would allow the GOP to be repeal the law with 51 votes, a number easily attainable by the Republican Senate majority. This means that Congress would have to repeal it by changing the original law that funds it, not by the Appropriations Committees.
However, not everything in the budget consists of spending cuts. One noteworthy aspect of this budget is its provision of $58 billion for a war spending account known as the Overseas Contingency Operations (OCO) fund. This $58 billion increase in the OCO is something that President Obama had asked for, demonstrating that there are potential areas of cooperation between President Obama and Senate Republicans, at least on foreign policy. Moreover, the Senate set a minimum requirement of 60 votes in order to increase this amount in the future. In regards to the direct funding that the Pentagon receives, the cap set by the Budget Control Act ($523 billion) will remain in place in 2016.
House Republican Budget
The House Republican Budget resolution, which passed with a vote of 228 - 199 aims to reduce spending by $5.5 trillion and balance the budget in 9 years.
Although the House Budget is similar to the Senate Budget, they still have some significant differences between them that would need to be worked out by the GOP:
Funding for discretionary non-defense spending would be cut by $759 billion.
This budget would also freeze the Pell Grant Award to its current amount of $5,775 for the next 10 years in addition to providing fewer financial aid to families.
SNAP (the food stamp program) would also be cut and made into a block program administered by states.
The only increases in this budget, unsurprisingly, are aimed at defense spending. The Budget Control Act would be in place for one year only, and then the Pentagon would receive $387 billion in increases over 10 years. The OCO fund that the senate increased funding for by $58 billion would receive instead $90 billion under the House Budget.
While the Senate Budget proposes no cut in corporate and income taxes, the House Budget proposes a decrease in both. Additionally, the two budgets allow the Earned Income Tax Credit and the Child Tax Credit to expire in 2017 – effectively a tax increase for the people that qualify for these credits.
As you can see, these two budgets are similar, but there is a long road ahead for the GOP in regards to making one unified budget. There are big differences in the changes to taxes, defense discretionary spending and domestic discretionary spending that will have to be worked out. However, there are significant commonalities as well, such as the mutual focus on striking at the Affordable Care Act, arguably the Obama administration’s signature achievement.
In all likelihood, none of the ambitious reforms and massive cuts proposed by the Republicans will ultimately come to pass. But the budgets do provide a fairly clear look at Republican priorities, and are likely to be among the last serious policy reform proposals from the party before the 2016 election heats up and politicizes the budget process.
Overall, the GOP’s budgets do demonstrate the unanimity of Congressional Republicans’ desire to cut spending and marginal tax rates (though that does not mean cutting taxes overall, especially for lower income individuals) – though the particulars of how the GOP plans to enact these cuts remain up in the air.
Further Reading (aside from the links that are throughout the article):
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