Federal budget season is upon us and that means a lot of numbers and political bloviating will come in the weeks to follow. While both Republicans and Democrats agree the country needs to reduce the nearly $16 trillion deficit, they don't agree how to do so or by how much. Here are the top five political takeaways to keep in mind when it comes to the competing proposals.
Here's the bottom line at the top: Neither House Budget Chairman Paul Ryan's proposal, which purports to eliminate the federal deficit in 10 years without raising taxes, nor Senate Budget Chairwoman Patty Murray's pitch, which fails to balance the budget in 10 years but calls for nearly $1 trillion in new taxes, is going to pass Congress as is. Thanks to split leadership, with Republicans in control of the House and Democrats in charge of the Senate, these documents merely present starting points for lawmakers to campaign for or against. President Barack Obama will join in the scrum when he drops his budget proposal next month.
Reforms to Medicare, the federal healthcare program for seniors, will be a major focus of negotiations as both sides of the aisle hope to reduce the deficit. Thanks to ever-increasing healthcare costs, the program represents one of the largest areas of spending growth in the last decade, and promises to eat up a higher percentage of the budget if left untouched. Though it's long been sacrosanct, the combination of public support for deficit reduction and the 2012 election results show Medicare's time may have come.While campaigning during last year's election, Republicans hit Obama hard for making about $700 million in Medicare cuts over a 10-year period, while Democrats pounding House Republicans for supporting Ryan's 2010 proposal that would transition Medicare into a fixed payment system opponents likened to vouchers. But in the end, voters seemed indifferent, re-electing Obama and returning House GOP-ers to power.
Both sides continue to agree to the idea of tax reform, saying there are too many special interest carve-outs that do little to promote economic growth. Ryan's budget calls for closing undetermined loopholes and using that revenue to pay for dropping the top income tax rates to 25 percent. Murray's proposal would generate $975 billion that would go towards deficit reduction by eliminating deductions most commonly used by the country's wealthiest, such as the capital gains tax. There is reason to believe that comprehensive tax reform could be achieved as either part of a larger 'grand bargain' or as a separate smaller proposal, aides say, because tax writers in the House and Senate are motivated and continue to plug away on legislation.
At the outset, both sides will stick to promoting the party line in hopes of beating the American public—and the opposing party—into submission. Once this fails (as it always has in the past), the key is to listen for which side changes their tone first. The top lawmakers to watch are certainly in the leadership (remember when House Speaker John Boehner wasted no time in acknowledging that taxes would likely be increased following Obama's November re-election after the GOP ran against any new tax hikes?), but also be on the look out for key committee chairs or power players to strike a conciliatory tone. Sometimes deals are made from the top, but more recently, lawmakers seems to have better luck working from the bottom up.
The major 'X' factor in moving ahead is the president—both in how much Republicans trust him in negotiations and how much Obama pushes Democrats into conceding. Lawmakers and aides on both sides of the aisle say they believe the president is genuine in his desire to make a deal. And while Republicans have frequently questioned Obama's willingness and ability to lead his party, there's likely no greater opportunity for him to prove his stripes than now. But despite making personal overtures to rank-and-file Republicans and planning a series of trips to speak directly to lawmakers on Capitol Hill, it remains to be seen if the president can seal the deal.