President Barack Obama announced his own budget proposal on April 13th as a counterpoint to Representative Paul Ryan’s April 5th proposal.
Obama’s plan would cut the deficit by 400 billion dollars less than Ryan’s, and outlines spending for the next twelve years as opposed to the next ten. Ryan recommends almost two trillion dollars more in spending cuts than Obama.
Graph of public debt over the next 15 years for each proposal.
Although the plans have some similarities, Ryan’s plan more aggressively targets entitlement programs like Medicare and and Medicaid, while Obama’s focuses on increasing taxes and cutting defense spending. Ryan recommends almost two trillion dollars more in spending cuts than Obama.
The Republican plan would cut Medicare spending by changing the program into a voucher system. This would decrease the amount that the government covers of the total premium, but increase the options available to seniors and encourage people to purchase more reasonable affordable plans. All citizens under 55 would be affected by this change. Obama has opted to maintain the current system, simply working harder to lower the cost of prescription drugs.
Under Ryan’s plan, Medicaid would become a block grant given to states by the federal government. The states would then be responsible for distributing the grant on their own. This should decrease spending by $771 billion by not allowing states to rely on the federal government to pick up the tab. Obama’s proposal relies on many ideas that he has already put forth that will make Medicare more efficient, cutting spending by approximately $100 billion.
Neither Ryan nor Obama propose any significant changes to Social Security
Both Ryan and Obama call for reducing the number of loopholes in the tax code and eliminating tax breaks. The major difference is that Ryan also suggests cutting the overall tax rate for corporations and individuals, as well as the repeal of Obamacare and the attached tax increases. Obama wants the Bush tax cuts to expire and to limit itemized deductions.
The Republican proposal does not target military spending with as much vigor as the Democratic plan. Obama suggests $400 billion in military spending cuts, while the Republicans have opted to maintain the current proposed spending levels for 2012. However, in terms of discretionary spending, the Republicans have identified $1.6 trillion in cuts over the next ten years, compared to $600 billion identified by President Obama, although he does recommend decreasing mandatory spending, such as agricultural subsidies and federal pension plans.
Ultimately, both plans offer a very comprehensive overhaul and a sharp move towards fiscal austerity, even if Ryan’s plan is far more comprehensive. Ideas from both plans could be combined to truly decrease the deficit, such as Ryan’s health care proposals and Obama’s military spending cuts. But whether either of these plans gets off the ground is in Congress’s hands now.
By Jacob Arber
