A budget is essentially an itemized estimate of revenue and expenditure.
A budget deficit occurs when spending exceeds revenue.
The United States federal government has signed off, with approval from the Senate and House of Representatives, 40 federal budget deficits in the last 42 years. This has created two incredible statistics:
♦ The federal debt now stands at approximately $15.3 trillion (as of March 2012), which is more than the national Gross Domestic Product.
♦ The federal government has paid $5.96 trillion in taxes during the same period for the debt.
Johnson, who has been quoted as saying that the country is ‘essentially bankrupt’ and is ‘on the verge of a financial collapse’, believes that the out of control national debt can only be contained by adopting stringent fiscal policies and getting our troops back home from their expensive excursions in Afghanistan, Iraq and other conflict zones around the world.
Massive budget cuts, one of the hallmarks of his governorship of New Mexico, will once again feature strongly in his economic plan, with military spending being the primary target.
If elected, Johnson intends to present a balanced budget to Congress on his first year in office.
“My first promise as president of the United States is submitting a balanced budget to Congress.
That would include a 43%, that would entail 43% reduction in military spending. What’s a 43% reduction in military spending? That’s nuclear warheads from 2,300 to 500 hundred. That’s reducing military footprint on the planet, that’s us being in foreign countries, that’s the conflicts that we’re currently involved in, extricating ourselves from that conflict, that’s research and development, that’s intelligence, that’s the military that are in uniform and that’s the civilian support staff that goes along with that.
Believing that the biggest threat to our national security is the fact that we are bankrupt and if we don’t balance the budget, we’re gonna find ourselves with nothing.”April 1, 2012: Johnson speaking at the Libertarian Party of Ohio State Convention
“I think we should balance the federal budget tomorrow. I think we’re on the verge of a financial collapse in this country. I based that on the fact that we have $14 trillion dollars in debt, that we absolutely cannot repay if we’re racking up $1.6 trillion dollars in new debt this year and years to come.
So, I would advocate balancing the federal budget tomorrow. I'm optimistic. I think Americans are optimistic. We went to the moon, we can balance the federal budget. We can fix this. If we don’t do it, we’re gonna be left with nothing. So all this budget debate here a couple of weeks ago, was about less than one penny of the 43 cents that we need to cut from federal spending. And it turns out with the budget analysis, that it turned out to be less than one one hundredth of a penny. So we’re not addressing the problems that we faced, and that starts with Medicaid, Medicare, reforming social security and defense. And I mean cutting those areas."
April 22, 2011: Johnson on ABC News’ Topline
• As the country squirms through recession, President Obama's budget plans to reduce the decades of economic inequality that prevails in the United States. By bringing in a progressive tax code which would involve raising the tax rates for the high income category proportionately and increasing the tax cuts and credits of the middle and low income stratum.
• An overhaul of Health care thereby bringing down private health costs is in the agenda. He signed the American Recovery and Reinvestment Act aimed at creating 3.5 million new jobs, making important infrastructural investments and giving tax reliefs to 95% of working class Americans.
• The President aims for a long term plan for the country concerning clean and renewable energy. By developing alternative sources of power like solar, bio fuels, thermal power etc he plans to lessen imports of foreign oil thus reducing existing deficits.
• By focusing on energy efficiency and conservation, and curbing emissions the country would curb deadly pollution thereby playing an active role in climate change issues.
• Obama recognizes the role of children and youth in shaping the quality of America's future demography and thereby supports reforms like 'No Child Left Behind' and improving education in general right from the kindergarten level, giving essential training and skills to teachers and rewarding them for their good work etc.
• He aims to make college education accessible to all who are competent by expanding Pell Grants and initiating new tax credits.
• Obama chooses to cut down on war costs in Iraq and Afghanistan and proposes to keep aside $250 billion to bail out the US financial industry besides the $700 billion already set aside.
• Before his election, Obama said that he would require disclosure of all congressional pet projects and force lawmakers pay for any new spending or tax breaks through new revenue and cuts in other programs.
• Mitt Romney believes in the principle of reaganomics wherein you cut taxes which is believed to bring in economic growth. According to him the budget should cut taxes on people earning incomes less than $200,000 a year and also cut payroll taxes on people aged sixty five years or older.
• He supports setting up a national catastrophic fund to ensure that people are entitled to home owners insurance in the event of some natural disasters like hurricanes, tornadoes etc.
• He brought forward an economic stimulus package with a price tag of $233 billion which is aimed at generating long term growth incentives. This can be achieved by expensing capital expenditures in the next two years and lowering corporate tax rate so that businesses will thrive and generate revenue.
• He perpetrates the need for becoming energy independent by making investments in alternative energy sources, reduce gas prices and reduce taxes on middle income Americans.
• Mitt Romney suggests bringing a cut in the 342 odd different economic programs. Of course protecting the nation's defense and military personnel is important therefore allocation of funds for their welfare is important.
• He believes that he can bring in savings worth $300 billion dollars in 10 years by capping non defense discretionary spending at inflation minus 1% and will veto any budget that exceeds that cap.
• He wants to be known as the job senator by convincing the government to cut deficits and raise American's savings rate by making more capital available for companies for investment and thereby increase employment opportunities.
Ryan first burst into national prominence in May 2008 following the introduction of his Roadmap for America's Future Act of 2008 (H.R.6110). The proposal was a landmark budget proposal that was anchored to the concept of fiscal conservatism and small governance. Credited by some as the primary instrument in the reshaping of mainstream and Congressional Republican conservative fiscal ideology, it was also embraced wholeheartedly by the nascent tea party movement.
The Act proposed to reform federal health care, Social Security, the tax code and the budget process. The proposed bill, however, failed to gain enough traction among Congressional GOP leaders and subsequently failed to move past the House Committee on Ways and Means and the House Budget Committee. The latter proved to be especially surprising, as by then, Ryan was the ranking Republican member in the committee. Nevertheless, the proposal unexpectedly propelled Ryan into a leadership position among Congressional Republicans.
In January 2010, Ryan released a revised version of his Roadmap (H.R.4529), which focused on tax reduction and privatization of Medicare and Social Security. Two days after the release of H.R.4529, President Barack Obama called the plan “as an entirely legitimate proposal,” while speaking to Ryan during a Q&A session at a Republican Congressional retreat in Baltimore. The bill once again fell during the committee stage, failing to move out of six House committees (Education and the Workforce, Energy and Commerce, Rules, Budget, Judiciary and Ways and Means).
Nonetheless, the proposal solidified Ryan’s leadership of the party’s fiscal conservatives, and in 2011, he leapt ahead of his more established Republican colleagues to become the chair of the House Budget Committee.
Ryan re-introduced a modified version of the Roadmap once again the following year. This time, the Wisconsin Representative’s bill, H.CON.RES.34, not only cleared the committees, it also passed the House (235-193). However, the legislation failed to pass the Senate (40-57).
Remarkably, the plan received some stinging criticisms from some Republicans, most notably from former Speaker of the House Newt Gingrich, who termed it as “radical” and likens it to “right wing social engineering.” But the plan had already captured the hearts and minds of the majority of Republicans in the country, and it received the backing of almost all prominent members of the party, as well as conservative opinion makers. After almost four years, Ryan has almost single-handedly reinvented the fiscal ideology of the Republican Party.
In March 2012, Ryan introduced a new version of his plan, and the H.CON.RES. 112 was passed by the Republican-controlled House six days later (228-191). As anticipated, the bill was defeated in the Democrat-controlled Senate (58-41).
Following the bill’s defeat, Ryan prepared a new plan for 2013, one that was aimed at charting and focusing the party’s collective effort towards next year’s budget proposal, in tandem with the 2012 presidential election. The plan, named The Path to Prosperity: Restoring America's Promise (though more frequently referred to as the Ryan Plan), consists of these major elements:
♦ Providing for the Common Defense
• Provides $554 billion for national defense spending for the next five years, bringing it back to pre-2008 levels.
• The defense budget is slated to be cut by $55 billion, or 10 percent, in January of 2013 through the sequester mechanism enacted as part of the Budget Control Act of 2011. This reduction would be on top of the $487 billion in cuts over ten years proposed in President Obama’s budget.
♦ Restoring Economic Freedom
• Federal Budget: Cut $5 trillion from the federal government budget over the next 10 years
• Reduce federal spending from the current 24% to 20% of GDP by 2015.
• Repeal Dodd-Frank.
• Winding down government guarantees and subsidies for Fannie Mae and Freddie Mac, with an eye towards its eventual elimination
• Pell Grants: Cut back to pre-2008 levels
♦ Repairing the Social Safety Net
• Healthcare: Repeal President Obama’s controversial Affordable Care Act
• Medicaid: Shift the federal share of Medicaid to the states, by providing states with block grants that are indexed for inflation and population growth
• Supplemental Nutrition Assistance Program (Food stamps): Shift the federal share of SNAP to the states, by providing states with block grants that are indexed for inflation and population growth
• Medicare: Privatized, voucher based; pegged at GDP+1%
♦ Pro-Growth Tax Reform
• Tax: Slashing income taxes to 10% and 25% by cutting all tax deductions.
• Prevents the Bush tax cuts from expiring in 2013, making the cuts permanent.
• Repeal the Alternative Minimum Tax - reduces the corporate tax rate from 35 percent to 25 percent
♦Lifting the Crushing Burden of Debt
• Relative to President Obama’s budget, the Ryan budget estimates more than $3 trillion in lower deficits over the next ten years.
• The non-partisan CBO estimates that this budget will balance and begin to produce annual surpluses by 2040, and it will start paying down the national debt thereafter.
Ryan’s proposal to convert the current structured Medicare benefits into a fixed, albeit unformulated, voucher program raises concerns over its flexibility and coverage. There are questions about how these vouchers will fulfill the varying levels of health care required by individuals.
The plan also does not directly address the cost issue of Medicare. It merely sends the management of Medicare to state level via block grants, and idealistically forecast that market forces will ultimately bring the cost of health care down – despite historical data that conflict with the assertion.
♦ Spending cuts
There are concerns over the plan’s proposed nondefense budget cuts over the next decade and thereafter. The Center on Budget and Policy Priorities argues that “a deficit-reduction plan that lacks significant revenues would almost certainly deeply cut federal funds that support states and localities,” and the “Ryan budget would heavily shift costs to states,” and in the process, facilitate “deep cuts in funding for a wide range of other state and local services.”
The Center projects that the plan would
• cut federal funding for the federal-state Medicaid program by 34 percent by 2022
• cut non-defense “discretionary” (i.e. non-entitlement) funding by 22 percent in 2014 and later years… About one-third of this category of funding goes for grants to state and local governments to support services that states and localities provide, such as education, law enforcement, water treatment facilities, and disaster response.
• would reduce discretionary state and local grants to an estimated 0.6 percent of GDP, less than half the average of the last 35 years.
“Cuts of such magnitude would force states and localities to reduce the quality and reach of their basic public systems - their schools, clean water facilities, and law enforcement activities, for example — or raise new revenue or cut other programs to continue meeting these needs. Either way, the result would be a huge cost shift from the federal government to states and localities.”
♦ Federal Budget Deficit
Despite the plan’s extreme nature, the CBO projects that the federal budget would only be balanced in 28 years (by 2040). In addition, there are also questions on the specific details of the plan’s proposed cuts, which was not incorporated into Ryan’s Path to Prosperity.
Our budget continues to grow, contributing to the rapid rise in the nation’s deficit. The first step in regaining a measure of control is to reverse the current trend and reduce the size of our government. The next step is to begin suspending and cutting programs that are not completely vital to our country’s successful operation.