What's going on with the budget is a mess. And it is a mess made worse by partisan politics. Part of understanding the mess flows from the fact that there are now two budgets in play. The first is the seemingly endless political confrontation over spending for the current fiscal year ending September 30. Now thrown into the mix is the budget for the next fiscal year, 2012.
In February President Obama presented his 2012 spending plan which calls for $3.7 trillion in expenditures and which projected savings of $1.1 trillion over the next decade. Now the House Republicans have come up with their own version which set spending for the next fiscal year at $3.5 trillion with major changes in spending, taxes, and health care that would supposedly save about $6 trillion over the next decade. Before taking a look at the GOP alternative budget for 2012 and beyond, a quick look at the continuing fight over this year's budget is in order.
In the previous posting, it was indicated that an agreement may be in the making that would cut spending by $33 billion to close out the current 2011 fiscal year. It was also suggested that GOP House Speaker Boehner may go for such a plan in part to draw a line in the sand for the tea party (TP) adherents who continue to demand a $61 billion reduction. It now seems that in Boehner's eyeball-to-eyeball confrontation with the TP, the Speaker blinked. That is, he now seems to be bending and going for more than the $33 billion, although not the full $61 billion demanded by the TP.
But what is worse, at least for public spectators, is that instead of finally wrapping up the 2011 budget conflict, the House Republicans are talking about another very short term measure to avoid a shutdown of government this Friday when current spending approval runs out. The latest rumble seems to be that the GOP is offering to add another week, to April 15, to the shutdown deadline and for that week cut spending by $12 billion. It is hard to escape the belief that all of this is just another case of smoke and mirrors to somehow make it appear to TP supporters that they are getting close to their $61 billion target. It is hardly any wonder that Congress stands so low in public approval. If that's not enough to confuse and confound, we now have a proposed GOP budget for next year and beyond, setting the stage for a new round of political rhetoric.
What the House GOP is proposing, and what may become the official Republican plan, is a three part strategy to tackle the generally acknowledged problem of deficit spending and growing federal debt. And here is where the GOP may have the public relations edge because it has set forth a plan for tackling the entitlements issue while Obama's budget does not. There's the old rubric about getting political agreement on significant issues -- "the devil is in the details". The problem with the GOP alternative budget is that the devil is in the basics, not the details. The three part strategy concerns overhaul of medicare and medicaid, tax policy, and general spending levels.
Overhaul of medicare and medicaid. This posting doesn't permit detailed discussion but the basic approach is vintage Republican. There is general agreement that overhaul of the basic health care programs is needed to get spending under control. But what the GOP proposes is that, except for those grandfathered by age into the current medicare system, health care for the elderly in the future would be funded by government subsidies to pay for policies provided by the insurance industry. In short, it would mean a huge number of federal dollars going to the private insurance bureaucracies which are already a significant part of the problem of health care delivery.
As to medicaid which operates through a federal-state grant system to provide health care to the lower income, the Republicans would convert that into a block grant which supposedly would give the states greater flexibility in delivering health care services to its poorer residents. Right now medicaid is what they call an open end appropriation which guarantees the feds will pay their share of the costs regardless of any increases because of expanding enrollment such as experienced with the recent recession. Given that states spend an average of 21 percent of their general fund budget on medicaid, they are certainly interested in ways to get the program costs under control. The GOP plan anticipates medicaid savings of $771 billion over the next decade. Under the GOP plan, the federal cost under a block grant would be set by fixed annual appropriations so if costs rose at the state level it would be left to the states to pick up the entire cost of any increases. This is just one aspect of the problems with the block grant approach. Giving the states greater flexibility over how they would use the money is another and perhaps scarier part of the issue.
Taxing. The GOP proposal carries no specifics of what would be done to overhaul the tax code to close so-called loopholes for both personal and corporate income. But there is a clear indication about the direction of any changes in the code. The GOP plan calls for permanent extension of President Bush's tax cuts which are a major source of the current deficit problem and which would mean locking in the heavy bias toward upper income earners. That bias is also found in the proposed change to lower the top corporate and personal income rate to 25 percent. And, of course, there is no allowance for tax increases which ultimately will be the only way we will pay down the debt.
Spending. Again no specifics except the general goal of cutting spending back to levels of about five years ago. It is reasonable to assume, based on the GOP track record, that spending on defense and other national security programs would be protected and allow for increases while the major burden of reduced spending would fall on a variety of other social and community oriented programs, veterans benefits, and federal (military and civilian) retirement.
That's a lot to digest in one posting so will sign off with the likelihood that more will be said as events unfold and political rhetoric moves front and center.
All the medicaid costs seem to really be hurting the states right now. I'm wondering what happens to medicaid when Obama Care kicks in fullyin 2014. Since the new health care is supposed to cover everybody is medicaid going to go away or are we going to be paying for both?
ReplyDeleteMaybe we'll have 2011 budget by the time we need the 2012 budget. It is starting to seem like it is all just an endless continuation of continuations.
Shiela
ReplyDeleteStates are feeling the medicaid pinch even more now or in the immediate future. Under the stimulus package the states were receiving extra money for medicaid but that added money has either run out or is about to do so. The new GOP plan for health care reform is underpinned first by the repeal of the Obama reform. As I understand it, medicaid under Obama plan would be ended per se and those eligible for medicaid would fall within that provision mandating that all persons carry health insurance. The low income people would have their insurance subsidized but there are alternative possibilities for who would actually underwrite that insurance, private companies or pooling programs constructed by individual states. The one thing that was banned was that the federal government itself would be the insurer. At least that's how I understand the future of medicaid.
The 2011 budget politics has certainly been a continuing melodrama and it is continuing, at least until midnight Friday.
Believe there is a typo in paragraph two. If Obama proposed a budget of $3.7 Billion (with a B), the Tea Party would nominate him for emperor!
ReplyDeleteThis budget stuff is pretty incomprehensible to me. In your reply to Sheila you mention the Obama plan ending Medicaid as we know it, which would seem to be a money saver and that Medicaid would be unnecessary once everyone is insured. What about Medicare? With all us Boomers hitting the fan starting this year, i that is likely the bigger problem. I would be in favor of an income cap on eligibility but somehow that doesn't seem like something toward which the GOP would be philosophically inclined.
Cosmo
ReplyDeleteNoticed the error and corrected it; it was actually a Trump budget. He needed another headline.
On medicare. Those aged 55 and over at the time of any passage would be grandfathered into the current system. Those under 55 would be offered a menu of private insurance plans from which one could choose and the government would subside part of it, depending on your income. The higher the income, the lower the subsidy. But from anything I've seen, there would be no cap but presumably Trump would get little in the way of subsidy, except perhaps for his Rogaine (sp.?). But even if the GOP plan is rejected, something will have to be done about medicare. It eats up more and more of total spending every year and keeps falling behind because current medicare payroll taxes and the $96 dollar per person per month premium (paid by those on medicare) aren't enough to pay the costs. And as more and more of the boomers hit 65, the situation obviously gets worse.
Well, the government didn't shut down but I guess we're still waiting for a budget. I read that the 2012 bugget could actually be on the floor on Thursday and here we are without a 2011 budget. I repropose my sentiment that there be no recess until we have a budget.
ReplyDeleteCarole
ReplyDeleteThere will be a 2012 budget resolution on the floor this week but it has no meaning. The budget act of l974 sets up a budgetary procedure which starts with such a resolution which is just a broad map of what the party in power in the House would like to see but it doesn't even commit the appropriations committees to follow the map when they work out the 12 individual appropriation bills to cover the government. The Senate will have its own resolution.
I would agree that no budget, no recess but right now it looks like there will finally be action to complete the 2011 fiscal year.