The Republican Party in the US will unveil a conservative fiscal package today that they claim would cut government spending by $4.6tn over the next 10 years and balance the budget within a decade without increasing taxes.
The spending cuts, which exclude defence, will impact social programmes in the country.
Paul Ryan, chairman of the House Budget Committee, will present the budget today. He wrote in an opinion piece for the Wall Street Journal: “We’re offering a credible plan for all the country to see. We’re outlining how to solve the greatest problems facing America today. Now we invite the president and Senate Democrats to join in the effort.”
The US President Barack Obama and congressional Democrats are likely to dismiss the House Republican budget that impacts spending for the poor and the elderly, while senate Democrats will unveil their own competing budget today that is expected to include a mix of spending reductions and tax rises.
Obama, however, will follow with his own fiscal blueprint later this month or in April, according to the Financial Times.
In his previous two budgets, Ryan proposed a massive restructuring of Medicare health plan to convert it into a premium support system.
In 2011 and 2012, Ryan’s plans were unable to reach balance over a decade. However, this year it was possible because of the additional revenues generated in the January deal to avert the fiscal cliff as well as a slowdown in healthcare spending projections, both of which helped America’s long-term budgetary outlook, reported FT.
Republicans had a goal of achieving balance at around 19.1 per cent of GDP to restrict the size and scope of government.
According to the Congressional Budget Office (CBO), federal spending this year is expected to be roughly 22.2 per cent of the economy, while revenues are 16.9 per cent of output.
Over the next 10 years, revenues are forecasted to increase to 19.1 per cent of the economy, while spending is expected to increase to 22.9 per cent of GDP, according to the CBO.
The 2010 bipartisan fiscal commission, co-chaired by Alan Simpson and Erskine Bowles, eventually balanced its books at around 21 per cent of GDP.
Neither the forthcoming budget from Senate Democrats nor that of Mr Obama is expected to come close to balance, highlighting the wide gap on fiscal policy worrying Washington, reported FT.
Usually, the House Republican and Senate Democratic budgets would be reconciled into one compromise document, however, such possibility is not likely to happen.
In the recent times, Obama made efforts to reach out more aggressively to congressional Republicans to find a way out of the impasse without achieving a breakthrough.