25 March 2015

  |  CBI America

Update

U.S. budget debate

Republicans divided over differing Senate and House budget proposals.

 

In response to the president’s budget proposal, the Republican-controlled House of Representatives unveiled their budget blueprint that intends to eliminate the federal deficit within an 8-year time frame through spending caps and reduing social welfare programs. 

The House GOP budget proposal would reduce spending by $5.5 trillion over the next 10 years, about 6.5% more than in FY2015’s proposal, leaving a projected budget surplus of $33 billion in 2025. This contrasts with the president’s budget proposal, which intends to reduce deficits by $1.8 trillion over the same period. It would hold deficits to less than 3% of U.S. overall economic output—but not eliminate them. 

In contrast, Senate Republicans have released their own budget, which would cut spending by $5.1 trillion and balance over a 10-year period. This blueprint diverges from the House budget on the matters of defence funding and deficit-cutting measures, illustrating a deep divide between two extreme wings of the GOP. 

The creation of a second Republican budget illustrates the pronounced chasm caused by the political push and pull between the “fiscal hawks” and the “defence hawks”. The Republican Party will have to convene and vote on which budget—and which faction of the party--to support. 

In order to reconcile this impasse, the Republican conference will hold a recorded voting session on whether or not there should be more military spending, and whether there should be some offsetting cuts elsewhere. 

Some Republican officials believe that the fiscal conservatives who bitterly oppose increasing Pentagon spending are more likely to acquiesce and vote to pass the defence heavy budget because a Republican-authored budget will include budget reconciliation, a bicameral process by which the Republican Congress, through sheer majority, could try and dismantle parts of Obamacare or direct instructions to rewrite the Tax Code.