Proposed House budget plan would cut non-security budgets by $6.2 trillion and freeze federal pay for five years

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Proposed House budget plan would cut non-security budgets by $6.2 trillion and freeze federal pay for five years

Non-security budgets would be cut by $6.2 trillion over the next 10 years, under a budget resolution plan unveiled today by Rep. Paul Ryan (R-WI), chair of the House Budget Committee (HBC).  Overall, Ryan says his proposal would cut $4.4 trillion from the budget deficits assumed in the president’s budget FY2012 budget plan.

The annual budget resolution, often referred to as a “congressional budget blueprint,” sets revenue and appropriations targets for the tax writing and appropriations committees, so they can begin work on the president's budget request.  This is an internal congressional procedure so the passed budget resolution is not sent to the president for approval.

The proposed resolution adopts binding caps on discretionary spending (funding provided in appropriations acts) that move total non-security budgets back to FY2008 levels and then freezes them for five years.  In an effort to reduce the cost of the federal workforce, the resolution recommends:  1) freezing federal civilian pay through FY2015, 2) reducing federal civilian employment levels by allowing the hiring of only one new employee for every three workers who leave federal service, and 3) requiring federal employees to pay 50 percent of their defined retirement benefit.

The resolution adopts some of the proposals made by the National Commission on Fiscal Responsibility and Reform and other outside groups for reducing federal budgets.  For example, it recommends eliminating wasteful and duplicative programs, reducing the federal auto fleet by 20 percent, and streamlining the process for disposing of unnecessary property.  In addition, the resolution proposes cutting off funding for the new health care law and recommends its repeal.

The plan assumes no change to the president’s FY2012 Department of Defense baseline request ($553.1 billion) or to the request ($118.8 billion) for Overseas Contingency Operations (OCO) in Iraq and Afghanistan.  The ten-year resolution also accepts Secretary Gates’ plan to save $178 billion and reinvest $100 billion of that amount to increase high priority combat capabilities.

The proposed resolution goes beyond cuts to non-security discretionary spending.  It recommends changes to tax laws, mandatory programs, and long-guarded farm subsidies.  The plan would cut tax rates for individuals and businesses, consolidates tax brackets, and set the top rate at 25 percent.  It would convert Medicaid into a block grant to states, giving them more control over how Medicaid dollars are spent.  Ryan’s proposal would also allow new Medicare beneficiaries, from 2022 on, to choose from a list of private health insurance plans under a voucher plan whose cost would be subsidized by Medicare.  However, the plan does not recommend changes to Social Security.  The resolution would also restructure farm support programs.  Noting the record-breaking success in the agricultural sector, Ryan’s plan would adjust industry support by reducing fixed farm price support subsidies and reforming government’s support for crop insurance.

While the Republican-controlled House is likely to adopt Ryan’s plan, it is just as likely that the Democrat-controlled Senate will reject such a plan and produce a resolution that is markedly different in scope.  As a result, it is very possible that come September we will be looking at another continuing resolution scenario for the FY2012 budget similar to the one we are experiencing with the FY2011 budget.

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