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Ryan’s Alternative Budget Balances Without Tax Hikes, Instills Fiscal Discipline

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March 29, 2007 | Kate Matus ((202) 226-7326) | comments

WASHINGTON – Wisconsin’s First District Congressman Paul Ryan, the Ranking Member of the House Budget Committee, proposed a fiscally responsible alternative budget resolution that garnered substantial support when it came to a vote today in the U.S. House of Representatives. 

Ryan’s federal budget plan reaches balance in 2012 without raising taxes, while ending Washington’s raid on Social Security and promoting policy tools to strengthen budget enforcement. Although 160 Members of Congress voted in favor of this substitute amendment to the Democrats’ budget resolution, it wasn’t sufficient to pass the measure. Instead, the House voted largely along party lines to adopt the Budget Resolution offered by the Democrat majority, which amounts to the largest tax hike in American history and puts off entitlement reforms that are needed to improve our nation’s fiscal health over the long term. Now the House will work with the Senate to resolve differences between the House and Senate versions of the Budget Resolution. 

“Since entering Congress, I’ve been fighting to stop the raid on Social Security surpluses, and the budget I wrote does that, while at the same time controlling spending and preventing job-killing tax hikes,” Ryan said. “Washington doesn’t have a revenue problem. It has an overspending problem, and any lasting solution must rein in the growth of government spending and make government more accountable for the tax dollars it spends.” 

“Our Republican budget alternative would balance the budget in five years, while protecting taxpayers and small businesses from having to bear the largest tax increase in our nation’s history. Our budget plan also works to address the crisis facing our entitlement programs, which are growing at an unsustainable rate. We need to improve these programs – making them more responsive and sustainable – if the U.S. is going to get back on the right track and stay competitive in the global economy.”

“Unfortunately, the budget that passed the House today goes in the wrong direction – relying on huge tax hikes and gimmicks to balance the books temporarily, while putting off real solutions that will help us pay down debt and make our economy stronger over the long term.” 

In order to bring the budget into balance by 2012, the Democrat Budget Resolution relies on revenue assumptions that factor in the expiration of the widespread tax relief that Congress enacted in 2001 and 2003, raising taxes on the American people by nearly $400 billion over five years – the largest tax increase in our nation’s history. For more than 2 million Wisconsin taxpayers this would mean an average tax hike of $2,964. The resolution also fails to provide even a one-year patch for the alternative minimum tax (AMT). Instead the budget employs a “reserve fund” that allows AMT relief only if offset by equivalent tax increases or spending cuts –which are not spelled out. 

The Democrat Budget Resolution not only raises taxes, but it also proposes an increase of more than $22.5 billion in nondefense, nonemergency annual appropriations for fiscal year 2008. Furthermore, the resolution sets the stage for future overspending by assuming that annual nondefense, nonemergency appropriations will increase by an average of 2.4 percent per year for the years 2009-2012, which is greater than the projected rate of inflation. 

The majority’s Budget Resolution also ignores repeated warnings from individuals, including the Comptroller General of the Government Accountability Office (GAO) and the Chairman of the Federal Reserve, about the rapidly escalating costs of entitlements. It puts off any significant reform for at least five years – allowing the problem to worsen. 

The Democrat budget also uses gimmicks, such as ten “reserve funds” that promise extra funding for pet initiatives if offsets are included. These reserve funds have no real effect because budget rules already permit initiatives not assumed in the budget to be financed by offsets. 

In contrast, Congressman Ryan’s alternative budget proposal would:

  • Balance the budget by 2012, without increasing taxes. It maintains provisions of the tax relief laws adopted in 2001 and 2003, so that there will be no increase in marginal income tax rates, no increase in the 10 percent bracket for low-income taxpayers, no reduction of the child tax credit, no rollback of marriage penalty or death tax relief, and no increases in capital or dividend tax rates. This proposal also provides for one-year extensions of alternative minimum tax (AMT) relief, the state and local sales tax deduction, and the research and experimentation (R&E) tax credit.

  • End the raid on Social Security – balancing the budget without using excess Social Security payroll tax receipts.

  • Pay down $99.5 billion of debt. 

  • Essentially freeze annually appropriated non-defense spending for the next fiscal year at the 2007 level (excluding emergencies). Within this amount, the alternative budget recommends priority increases for homeland security, veterans’ health care and related activities, medical research, Community Development Block Grants, and science and technology. 

  • Promote continued reforms to improve the government’s major entitlements, making them more sustainable. The plan calls for moderating the average annual growth of overall entitlement spending from 5.2 percent per year to 4.3 percent when reforms are implemented. 

  • Make Congress more accountable by strengthening earmark transparency and adopting the legislative line-item veto as passed by the House last year.

  • Establish a set-aside fund that specifically budgets $6.45 billion for domestic emergencies, as in the House-passed budget resolution for fiscal year 2007. For emergency-designated amounts above the level of the set-aside, requires a Budget Committee vote to approve an adjustment for the additional amounts. (The Democrat budget has no emergency set-aside and no definition of “emergency.”)

  • Refine and strengthen pay-as-you-go (PAYGO) rules, requiring direct spending increases to be offset by spending reductions, not tax increases. 

  • Establishes discretionary spending limits in the House through 2010. These caps would act as an additional control over discretionary spending provided by annual appropriations bills.