In my column for today, I wrote about a proposal that the Congressional Progressive Caucus intends to release next week as a liberal alternative to Rep. Paul Ryan’s GOP budget. Because I didn’t have room in my column to go into all the details, I just wanted to post the rough budget outline below, which I obtained from a senior Democratic aide.
The progressives’ alternative, dubbed “The People’s Budget,” promises to reduce the debt and return the nation to surpluses with a combination of massive tax increases and defense cuts. I believe that the proposals outlined below would do tremendous harm to national security and the economy. Its goal for revenue as a percentage of the economy – 22.3 percent – would represent the highest rate of taxation in American history (see PDF). While that sort of revenue model may work on paper, in reality, given the economic disincentives it creates as well as the likelihood of increased tax avoidance, it would ultimately be fiscally unworkable.
I could go through the outline and critique the proposals point by point, but for now I’ll just say that I applaud any effort by members of Congress to offer policy ideas that reflect their principles. Were everybody to do that, we could have a substantive debate about which direction our country wants to go in, instead of meaningless daily rhetorical skirmishes, or the current debate in which Ryan’s budget proposal is compared to an alternate reality in which our fiscal crisis doesn’t exist.
FROM: CPC Budget Task Force
RE: CPC 2012 Budget
Our Top Line Message
The Congressional Progressive Caucus (CPC) has an opportunity to reframe the debate on the budget, the economy, deficits and debt by offering a credible alternative to the Republican Agenda. The CPC has created a budget that reflects progressive policy priorities and our top-line goals. Our plan responds to the top priorities expressed by voters in poll-after-poll while addressing the country’s most pressing problems. This budget:
Eliminates the deficits and creates a surplus
Puts America back to work with a “Make it in America” jobs program
Protects the social safety net.
Ends the wars in Afghanistan and Iraq.
Is FAIR (Fixing America’s Inequality Responsibly)
To summarize what our budget accomplishes:
Primary budget balance by 2014.
Budget surplus by 2021.
Reduce public debt as a share of GDP to 64.4% by 2021, down 16.9 percentage points from a baseline fully adjusted for both the doc fix and the AMT patch.
Reduce deficits by $5.7 trillion over 2012-21 ($1.0 trillion from primary spending, $880 billion from net interest, $2.7 in general revenue, and $1.0 trillion in Social Security payroll taxes).
Both outlays and revenue equal 22.3% of GDP by 2021.
The Baseline
We mocked up our policy options and measured them against a baseline that includes both a ten-year doc fix and AMT patch.[1]The adjusted deficit, i.e. the starting point for this exercise, is compared with the CBO current law deficit below. We have calculated an adjusted debt level to reflect adjusted deficit levels. We have also calculated the net deficit impact of various policy paths to include interest adjustments based on net interest levels as identified in CBO’s January budget update.
Breakdown of Policies
Individual income tax policies
1. Extend marriage relief, credits, and incentives for children, families, and education, but let the upper-income tax cuts expire and let tax brackets revert to Clinton-era rates
2. Index the AMT for inflation for a decade (AMT patch paid for)
3. Rescind the upper-income tax cuts in the tax deal
4. Schakowsky millionaire tax rates proposal (adding 45%, 46%, and 47% top rates)
5. Progressive estate tax (Sanders estate tax, repeal of Kyl-Lincoln)
6. Tax capital gains and qualified dividends as ordinary income
Corporate tax reform
1. Tax U.S. corporate foreign income as it is earned
2. Eliminate corporate welfare for oil, gas, and coal companies
3. Enact a financial crisis responsibility fee
4. Financial speculation tax (derivatives, foreign exchange)
Health care
1. Enact a public option
2. Negotiate Rx payments with pharmaceutical companies
3. CMS program integrity and other Medicare and Medicaid savings in the president’s budget.
4. Prevent a cut in Medicare physician payments for a decade (maintain doc fix)
Social Security
1. Raise the taxable maximum on the employee side to 90% of earnings and eliminate the taxable maximum on the employer side
2. Increase benefits based on higher contributions on the employee side
Defense savings
1. End overseas contingency operations emergency supplementals starting in 2013, providing $170 billion in FY2012 funding for withdrawal
2. Reduce baseline Defense spending by reducing strategic capabilities, conventional forces, procurement, and R&D programs
Nondefense investment
1. Invest $1.45 trillion in job creation, education, clean energy and broadband infrastructure, housing, and R&D
2. Infrastructure bank
3. Surface transportation reauthorization bill
[1] Note: Not patching the AMT would save $661 billion over ten years. Not maintaining the doc fix would cost $249 billion over ten years. The savings you would see from pursuing these policies would amount to just over $900 billion over ten years, but would engage in a form of budget gimmickry that we may see from someone like Paul Ryan, and should be avoided if possible.
CPC Budget Achieves Budget Surplus by 2021
CPC Budget Brings Debt Below 65% of GDP by 2021
Deficit and Debt Tables
