Despite the fact that a deficit-reduction deal probably won’t be reached through the adoption of a comprehensive budget package, lawmakers continue to produce them, tweaking the available deficit-reduction mechanisms to just their liking. So far this week, Sens. Pat Toomey and Kent Conrad have both released budgets, although Conrad’s has yet to go public. What they both show is a response to the backlash to Paul Ryan’s budget and the GOP’s current budget strategy.
Toomey, taking a hint from the town halls, public opinion polls, and a special election in New York state, not only spares Medicare in his budget proposal -- he increases spending on it relative to Obama’s budget proposal. That’s great news, but it may signal that the debate is getting so focused on Medicare that we’re forgetting all the other programs Republicans want to cut. Toomey’s budget cuts nondefense discretionary spending to 2006 levels, which is crazy enough on its own (previous GOP budgets have only proposed cutting back to 2008 levels, also unrealistic), but it then proposes to cap spending at that level for six years. This is the equivalent of suggesting the 2012 budget revert to 2000 levels (12 years ago), before we had two wars, an array of homeland security needs, or retiring baby boomers. Using the CBO’s fiscal multipliers, that nondefense discretionary cut of $214 billion would result in 2.5 million job losses in 2012 alone. It’s an absurd proposal, but one that might fly under the radar while he touts Medicare spending.
Meanwhile, Conrad introduced a budget to Senate Democrats yesterday that reduces the deficit through a 50-50 combination of tax increases and spending cuts, a fairer formula than even what Obama is proposing. He too is probably responding to public opinion, which now acknowledges that balancing the budget will require tax increases. According to a Reuters survey, a majority of Wall Street fund managers and economists recognize the reality that tax increases are needed to balance the budget. The public, too, supports tax increases for at least the wealthy. Eighty-one percent of Americans support a millionaire’s tax like the one rumored to be in Conrad's budget, which could bring in as much as $78 billion per year. According to Gallup, they’d most like to see deficit reduction through a 50-50 approach like what Conrad is suggesting.
All in all, these budgets show good progress. The public is starting to understand what’s at stake, and the terms of debate are shifting in the Democrats’ favor.