House Republicans, under the leadership of Budget Committee Chairman Paul Ryan, proposed deep slashes in personal income taxes and domestic spending as part of their fiscal 2013 budget proposal that was unveiled to the House on Tuesday morning.
The plan, known as the Path to Prosperity -- the same title Ryan gave the 2012 budget proposal that launched him to the national arena -- is a an aggressive move by House Republicans, who are likely to campaign on lower taxes ahead of the presidential and congressional elections in November. But, even if it passes in the House, it will almost certainly stall in the Democratic-controlled Senate, which has not submitted a budget plan itself since 2009.
The House plan would slash personal income taxes to two brackets: a top rate of 25 percent and lower rate of 10 percent, according to The Hill, which reports the income thresholds for those two brackets are unclear. Meanwhile, it would also cut the corporate tax rate to 25 percent, despite the fact that President Barack Obama recently called for a lower corporate tax rate of 28 percent, down from the current 35 percent rate.
In a video preview released ahead of the budget, Ryan argues the House Budget offers real solutions to bolster the U.S. economy and employment. In the almost four-minute long preview Ryan warns that the new budget proposal posits a choice between greater opportunity, greater prosperity and debt, doubt and decline.
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However, in order to combat the coming debt crisis that was the subject of Ryan last video preview, the proposal includes deep spending cuts to counter the plan's virtually unchanged tax revenues. The plan would set a $1.028 trillion discretionary spending cap, a dip below the $1.047 trillion cap agreed on during last summer's debt-ceiling debate.
On Monday, Senate Budget Committee Chairman Kent Conrad, D-N.D., and Appropriations Committee Chairman Daniel Inouye, D-Hawaii, sent a letter to House GOP later protesting the Party's disregard for the compromise reached during the debt ceiling deal. The Senate Democrats warned the budget represents a breach of faith that will make it more difficult to negotiate future agreements.
Ryan projects that under the GOP plan, the federal deficit would drop swiftly by mid-decade and balance the budget by 2040. Ryan estimates the budget would reduce next year's deficit to $797 billion, considerably lower than the $977 billion deficit the Congressional Budget Office predicts would result from Obama's budget.
The plan also includes an overhaul of both Medicaid and Medicare -- the federal health plans for elderly and low-income Americans -- that Ryan devised along with Sen. Ron Wyden, D-Ore., that would require future seniors to use government-funded subsidies to buy into the current Medicare program or a private health insurance plan. Medicaid would be sharply cut and then converted to fixed block grants to be distributed to the states.
Hill Opposition To Medicare Overhaul
Although it is technically a bipartisan effort, congressional Democrats have lashed out against the Medicare plan, according to Roll Call, which reports several House Democrats -- including Caucus Vice Chairman Xavier Becerra, Calif., and Rep. Jan Schakowsky, Ill. -- have asserted the proposal would end Medicare as we know it.
In order to wrestle the deficit without raising taxes, the Ryan plan also includes cuts to food stamps, Pell Grants, and several other social safety net programs Obama has vowed to preserve.
The AP reports those cuts could be particularly drastic since across-the-board spending cuts are already set to take effect in January as punishment for the failure of last year's super committee to develop a package of $1.2 trillion in deficit cuts over the next decade -- a provision of the debt ceiling deal. Those cuts will include $55 billion from defense accounts and $43 billion from non-defense accounts; the House GOP plan would reverse those cuts by requiring various congressional committees to come up with savings in areas such as federal employee pensions and further cuts to federal healthcare programs.
In an interview with CBS on Tuesday morning, Ryan balked at the idea that the Republicans are endangering the health benefits of senior citizens, one of the most prevalent charges against the House budget plan.
We preserve the program for people in and near retirement, he said. We want to take all the empty promises our government is making and make sure they're not broken promises.