The Budget Battle, Part 1

I haven't yet mentioned much about the budget battle going on in Congress right now because we hadn't seen the Republicans' plan.  If you haven't seen what's in Obama's budget, go here for the details or here for a more concise summary.  Bottom line: spend spend spend tax tax tax borrow borrow borrow debt debt debt. 

It's not so much a budget as it is a bait-and-switch to expand government, with (false) fear of economic collapse as the primary motivation to shove it into law.  One severely under-reported fact in the final budget is that those 'tax cuts' -- which are actually redistribution of wealth -- that Obama promised a thousand times during the campaign seem to have found their way out of the bill.  In fact, despite much huffing and puffing by Democrats about 'cutting the fat' out of the budget, those 'tax cuts' are just about the only thing that got cut.  That should be no surprise - Democrats haven't actually cut taxes for the past half century, though most of them like to promise it loudly and often.

One of the worst provisions is Obama's outright attack on charitable giving, lowering the deduction from 35% to 28% on the 'rich'.  The Washington Post amazingly has a pretty decent explanation of how it would work:

Suppose someone would give $10,000 to a university if that amount were deductible at 35 percent. That deduction would reduce the individual's tax bill by $3,500. Limiting the deduction to 28 percent would lower the individual's tax saving on a $10,000 gift to $2,800.

This is where things get interesting: If the 10 percent increase in the cost of giving caused the person to reduce his gift by 10 percent, to $9,000, his tax savings would be 28 percent of $9,000, or $2,520. The government's revenue loss would be reduced by $980 (from $3,500 to $2,520). The person's gift to the university would be reduced by $1,000, almost the same amount. Since this high-income person would pay $980 more in taxes but give away $1,000 less, he would end up with an extra $20 for personal consumption.

In essence, everyone loses, and there is much less incentive to make a charitable gift.  And, just apply your common sense - if rich people are the ones who give the most to charities, and they suddenly have a lot less incentive to give to charities, what do you think will happen to the amount of money being given to charities?  Right, it'll go down.  I believe this is a deliberate attempt by Obama to make more important the role of government in providing care and services to the poor, and thus indirectly buying their votes.  If he can muscle charities and religious organizations out of the picture, the government is the only place left to turn, and those people will continue to keep him and other Democrats in power.

So what does the GOP have to say about this budget?

Conservative die-hard Mike Pence called Obama's budget the 'most fiscally irresponsible budget in American history'.  Paul Ryan -- despite his warts -- correctly calls out Obama's plan for what it is:

"We are in the middle of a fiscal and economic crisis. Is the president solving this crisis? I'd say no, he's exploiting this crisis to bring about...sweeping transformation to the federal government, the likes of which we haven't seen since the New Deal."

Ryan also warned that the Democrats would counter the GOP budget with class-warfare rhetoric. "What you're going to see over the next number of days is a rhetorical onslaught, cloaked in class warfare, which I believe is very dangerous. It demonizes successful small businesses and demoralizes the small businesses who are trying to be successful...But it's not inevitable that we're going to have to go on this spending spree, this borrowing spree."

Ryan points out the strong possibility of Democrat opposition:

...more than 100 Democrats voted against the Progressive Caucus budget last year on the grounds that it was too liberal, and that the president's budget is significantly to the left of that budget. The so-called "Blue Dog" Democrats, who claim a mantle of fiscal conservatism, could block the president's plan. "Of the people who call themselves Blue Dogs, there are enough of them to prevent this from happening," he said. Unfortunately, the Blue Dogs will not even be presenting their own alternative budget this year as they have in year's past. It is a sign that few of them will dare cross Speaker Nancy Pelosi by voting against.

Some Democrats, like Kent Conrad, are talking fiscally tough, singling out Obama's cap-and-trade and health care proposals, which are sure to be controversial.  But all is not quite as it seems there:

Simply put, President Obama has promised so much that it's impossible to deliver it all. What's worse, it's impossible to even come close to delivering it all.

Obama has promised to reduce the federal deficit, but the CBO says that his 10-year budget plan increases the debt by more than $9 trillion. He's also promised health care reform, but his plan doesn't even pay for that. If he intends to provide tax cuts, that will increase the deficit further. And if Obama intends to rescue the nation's banking system, it will cost more money (his budget resolution does not provide for any more spending).

Further, since the deficit balloons so dramatically in the second half of Obama's 10-year budget plan, the House and Senate budget resolutions ignore the last 5 years. (Freshman senator Mark Begich of Alaska says that's a good thing, because "it's harder to predict what happens" that far down the road, anyway.)

But for political opportunism, it's tough to beat the transparent move by Budget Committee chairman Kent Conrad (D-ND) to try to wash his hands of Obamacare and cap-and-trade. Conrad has loudly and proudly proclaimed that his budget provides no special protection for those two presidential priorities; he would force them to face filibusters, rather than be included in the reconciliation process. Yet the resolution advanced in the House does include them in reconciliation -- and House Republicans hear that Democratic leaders have already decided that the House position will ultimately be adopted.

Why is this so egregious? Because the House does not have a filibuster, or a rule that protects reconciliation bills from a filibuster. Those rules apply in the Senate alone. So when the Senate draws up the portion of the budget resolution that affects only itself, they'll be politically 'brave,' and stand up to Obama on his biggest priorities. But they'll ultimately cave to the House, and grease the skids for another massive expansion of government. Some of the Senate's red-state Democrats will undoubtedly lament the fact that the conferees rejected the Senate language, but vote for it anyway. Then people like Kent Conrad, Ben Nelson, and Blanche Lincoln will then try to convince their local press to give them political cover, rather than call them out for their opportunism.

Still, it is possible that a filibuster would succeed in the Senate, so they're trying a backdoor approach and throwing at least the health care piece into the budget reconciliation process, which would mean the Dems need only 51 votes to pass it instead of 60, with no opportunity for Republicans to filibuster it.  They admit it's an underhanded approach, but they're doing it anyway.  In a somewhat amazing show of unity, all 41 Senate Republicans sent a letter to key Congressional leaders urging the Dems to reconsider and attempt to do something with bipartisan support.  Personally, I wouldn't count on it.  Furthermore, if the Dems do shove this thing through like this, the GOP needs to begin campaigning for 2010 on it immediately.

So, what about the Republicans' plan?  A summary (emphasis mine):

Minority Leader John Boehner (R) said in a conference call yesterday [that] it would replace the $410 billion omnibus bill with a spending freeze for the rest of fiscal 2009. ... [it would cancel about half of] the stimulus package, ... roughly $250 billion in refundable tax-credits and the $500 billion in direct spending would disappear...

The Republican budget also "refuses to assume" additional spending for bailouts, proposing instead an industry-financed FDIC-type program for saving failing financial institutions. It privatizes Fannie Mae and Freddie Mac gradually, just as Sallie Mae was privatized over seven years beginning in the late 1990s.

Another major area of savings in the GOP budget comes in the area of health care. Instead of making a $1 trillion down-payment for a system with far more vigorous government involvement, they appear to be pursuing several market-based solutions they have proposed in the past few years: a tax-deduction (or credit) for health insurance, the Shaddegg bill (allows one to buy insurance across state lines), and tort reform for medical malpractice. The first two items would decrease insurance prices and broaden coverage. The third would help contain medical costs.

On the revenue side, the Republican budget is very ambitious in cutting taxes and reforming the tax system. It includes a simpler alternative tax code, an idea proposed in the past as a bill by Rep. Paul Ryan (R). It makes the lower 2001 and 2003 tax rates permanent and additionally cuts the rates for the lowest two brackets of the existing tax code. It scraps President Obama's cap-and-trade energy tax. On the plus side, it anticipates revenues and economic growth from offshore drilling.

Personally speaking, based on this summary, I think this is the ideal budget plan.  It cuts rampant spending and taxes all over the place, it simplifies the tax code, and it increases domestic energy production.  It doesn't get any better than that!

The Wall Street Journal also has an article contrasting the two plans, but this post is already long enough so I'll post that separately later today.  The nutshell of this battle is: tax-and-spend vs. cut-and-control.

I know which one sounds better to me.  If you have a clear opinion, call your reps.

There's my two cents.