• Heritage Action
  • Heritage Libertad
  • More

March 19, 2013

The Battle of the Budgets

By

Say you’re running a business, and you find yourself awash in red ink. You realize it’s time to retool your approach, and fast. So you ask two different employees each to come up with a budget. You’ll go with whoever writes the best plan.

What are the chances that one of them will submit a budget that never puts you in the black? One that suggests you raise prices and spend still more money? Practically nil.

Yet that’s exactly what the Senate expects the federal government to do. Its recent budget proposal doesn’t even attempt to restore balance. Spending would go up right away. So would taxes, and it doesn’t even touch entitlement programs such as Medicaid — which, along with interest on the debt, will take up all tax revenues by 2025, when today’s kindergarteners go off to college.

It’s easy to shrug off such warnings, especially when we hear about the problems of deficit spending all the time. Doing so raises the very real risk of a debt crisis, though, that can hurt all Americans, especially the poor and middle class. Growing inflation is one danger, as is higher interest rates. Mortgages, credit cards, consumer loans and business loans would become more expensive for millions of Americans.

Higher interest rates would make it more costly for families to borrow money. That means they’d have to delay purchasing their first home. Their ability to build financial security would be compromised. The economy would weaken, leading to fewer job opportunities and lower wages for workers.

Fortunately, the “other employee” in the scenario laid out above has come up with a smarter approach. The House plan, spearheaded by Rep. Paul Ryan, Wisconsin Republican, would balance the budget in 10 years, and cut the annual growth in spending from 5 percent to 3.4 percent. Even better, it would repeal Obamacare, and it dares to reform Medicaid and Medicare.

“His signature solution of a premium-support model for Medicare is the hallmark of his budget,” writes the Heritage Foundation’s Alison Fraser. “Moving to a patient-centered model would free retirees from relying on the unstable and unsustainable government-run Medicare program and restrain costs through competition rather than price-fixing.”

The Ryan budget also prevents a series of damaging cuts to our military set to occur under the sequestration budget ax. At a time when North Korea and Iran are racing to acquire nuclear missiles, cutting defense is the last thing we should be doing. In fact, we should be spending more, but at least the Ryan budget forestalls the worst cuts.

It’s not flawless, though. Its chief failing? Taxes. True, the Ryan budget lays out important principles for tax reform and rightly rejects closing tax preferences (“loopholes”) just to raise revenue. Despite repealing Obamacare, however, it keeps all of the program’s tax hikes. These are “the oxygen that fuels the fire of ever-bigger spending,” Ms. Fraser says, “the entire fire needs to be put out.” That means repealing all of the president’s signature health care law, including its tax increases.

Still, this is a strong plan, which deserves serious consideration.

There are six things that each budget from the House, Senate and president should accomplish, which are laid out in Heritage’s plan “Saving the American Dream”:

Balance the budget in less than 10 years, without raising taxes, and keep the budget in balance thereafter.

-Swiftly overhaul entitlement programs, including Social Security, to guarantee economic security to seniors while making the programs affordable.

First appeared in The Washington Times.

Heritage's daily Morning Bell e-mail keeps you updated on the ongoing policy battles in Washington and around the country.


The subscription is free and delivers you the latest conservative policy perspectives on the news each weekday--straight from Heritage experts.


The Morning Bell is your daily wake-up call offering a fresh, conservative analysis of the news.


More than 450,000 Americans rely on Heritage's Morning Bell to stay up to date on the policy battles that affect them.


Rush Limbaugh says "The Heritage Foundation's Morning Bell is just terrific!"


Rep. Peter Roskam (R-IL) says it's "a great way to start the day for any conservative who wants to get America back on track."


Sign up to start your free subscription today!