Did Republicans Create a Budget Monster?
After much bluster about the debt limit, Republicans are offering an extension until May at a small price: Both houses must pass a budget resolution, which the Democratic-controlled Senate has not done for several years. Republicans are excited to force Senate Democrats on the record with a budget plan that will surely show years of red ink to come. But before they celebrate, they should think for a second about how politically ugly this year’s House budget is sure to be.
That’s because House Speaker John Boehner has pledged that the budget that passes the House will balance the federal budget over 10 years. Last year’s House budget called for a budget deficit of 1.2 percent of gross domestic product in 2022. So, this year’s House budget will have to have substantial additional revenues and/or spending cuts compared to last year’s.
Last year’s House budget, which Mitt Romney spent much of the fall campaign running away from, was already a political problem. It cut tax rates at the top to 25 percent, yet promised surprisingly robust revenues due to base broadening. As we saw with Romney’s own tax plan, such approaches have a major problem: You can only hit your revenue targets if you raise taxes on people with moderate incomes.
The House budget also reduced the deficit by sharply restricting spending on discretionary programs, Medicaid and Obamacare in the short term, and on Medicare and (maybe) Social Security in the longer term. (The budget also contained some short-term cuts to Medicare, in the form of a partial offset of the "doc fix," but the major reductions were set to come after 2022.)
Now imagine a budget that is like what I just described, but with an additional point or so of GDP in additional gap-closing measures.
I doubt Republicans will agree to do much of the additional gap-closing on the tax side. It’s true: We've just had a tax increase that gives Republicans a higher revenue baseline to start from. But a large majority of House Republicans voted against the fiscal-cliff deal that led to that tax increase; are they really going to ratify it in their budget?
Using the higher baseline is also complicated by the fact that past House budgets have proposed a major overhaul of the income tax code, with just two bracket rates for ordinary income: 10 percent and 25 percent. Taking advantage of the higher revenue baseline would require setting new, higher bracket rates, not simply declining to change an existing law.
Finally, it’s important to remember that this year’s budget will have to achieve near-unanimous approval of the House Republican conference. Ten Republican members voted against last year’s budget proposal, mostly objecting to it from the right. Since this year’s budget will almost surely get no votes from Democrats, like last year, the maximum possible number of Republican dissenters will be 17. Even if most of the Republican conference is willing to go along with a higher revenue target, that wouldn't be good enough; Boehner would need to get nearly everyone in his caucus to agree, and he hasn't had much success with that lately.
That leaves the other option: Republicans can propose a budget that balances by 2023 by cutting spending more deeply than they proposed last year, while still proposing a top tax rate around 25 percent. In other words, they can pass a budget even more caricaturable and extreme than before.
That is, assuming they can get the votes for that. At least one Republican member who voted against last year’s Paul Ryan budget, Chris Gibson, dissented from the left. He preferred a bipartisan budget plan based on the Simpson-Bowles report, which collected more taxes and spent less on the military.
There aren't that many Republican members left from swing districts, but there are a few, and some may not be eager to take a tough vote for a budget more conservative than last year’s. Since Boehner needs agreement from more than 92 percent of his caucus, every vote counts.
Republicans think forcing Democrats to pass a budget that is laden with spending and deficits will be to their political advantage. But the reason large deficits persist is that the things you can do to shrink deficits tend to be even less popular than deficits themselves -- especially if you insist on a deficit-reducing plan that also cuts taxes on the wealthy.
So, if you want to see the most politically explosive budget that passes a house of Congress this April, don’t look to the Senate. Look to the House.