Taxes, Entitlements: Sticking Points In Deficit Debate
The budget plans put forward by President Obama and House Budget Committee Chairman Paul Ryan (R-WI) both set a goal of about $4 trillion in deficit reduction, but Ryan would get his in 10 years — two years sooner than the president.
The biggest differences between the two plans are their treatment of taxes, and Medicare and Medicaid. Ryan would dramatically transform the two government health care programs: Medicaid would become a block grant controlled by the states; Medicare would become a voucher program starting in 2022. On taxes, Ryan would continue the Bush tax cuts for wealthy Americans set to expire at the end of next year. Obama would let them expire.
"It says that 10 years from now, if you're a 65-year-old who's eligible for Medicare, you should have to pay nearly $6,400 more than you would today."
Yet, said the president, Ryan thinks that at the same time, "we can somehow afford more than $1 trillion in new tax breaks for the wealthy."
Republicans quickly rejected the idea of any increase in taxes to solve the deficit problem.
Maya MacGuineas, who heads the Committee for a Responsible Federal Budget at the New America Foundation, says the president's proposal shows he is finally seriously engaging in the deficit discussion. But, she says, the president's plan is short on specifics and should do more to reduce deficits.
"If you look at what Congressman Ryan did, he put out a huge, bold plan, very detailed and very courageous, because it's hard. You can see he's going to get beaten up for it," she said. "The president wasn't as courageous in what he laid out there, but what he did was put out something that's doable."
To give his plan some teeth, the president proposed a fail-safe trigger: It would force across-the-board cuts if the nation's debt-to-GDP ratio isn't declining toward the end of the decade.
Robert Greenstein of the Center for Budget and Policy Priorities, a progressive think tank, takes issue with describing Ryan's proposal as courageous.
"I don't think it's very courageous to say we're going to really eviscerate programs from the weakest people in the society who don't have political clout and have no lobbyists on K Street."
Greenstein points to deep cuts in the food stamp program in Ryan's plan. He also says the Republican's proposal for block-granting Medicaid, which provides health care for the poor, is likely to lead to deep cuts in the program by many states.
Brian Riedl of the conservative Heritage Foundation sees it differently "because it gives governors flexibility to innovate and save costs by block-granting the program."
"And so I think you might see a Washington meddling less in the innovative ideas that governors have," Riedl said.
Over the long term, Ryan's plan offers a vision of a much smaller government with dramatically different health care programs, MacGuineas says. Meanwhile, the president sees the government providing most of the services it currently does, only more efficiently. That may not be visionary, she says, but "I think what he's talking about is a really helpful starting point for moving this discussion forward."
And with the nation reaching its debt limit soon, a quick deal on curbing the deficit is critical.
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