It's the budget that's been stuck in limbo. Sen. Kent Conrad (D-ND), chairman of the Senate Budget Committee, has reportedly been working on a Senate Democratic budget for months, seemingly having held off to see what happens first with the Gang of Six and now with the debt ceiling negotiations. While there has been no official release yet, we do have some broad outlines of what the budget looks like from a speech Sen. Conrad gave yesterday on the floor of the Senate.
The overall budget looks to save $4 trillion over ten years, roughly comparable to the House budget, but with half of the savings coming from increased revenue. The deficit would be put on a downward trajectory, reduced to 2.5 percent of GDP in 2015 and 1.3 percent of GDP in 2021. Although Sen. Conrad only gives a gross debt path for the plan, based on his deficit numbers we roughly estimate that public debt would be 68-70 percent of GDP in 2021, compared to 91 percent of GDP under the CRFB Realistic Baseline. Here are the major components of the savings:
- Revenue Increases: The Conrad budget slightly alters the formula of the "Obama plan" for the tax cuts by extending them for people making less than $500,000/$1 million. The estate tax is set at 2009 parameters and the AMT is patched. In addition, the budget assumes $2 trillion in new revenue above that from cutting tax expenditures. The exact policies are not specified, but it seems that the plan's logic is that cutting tax expenditures should raise $2 trillion and any rate cuts on top should be paid for with further tax expenditure cuts. Also, though the plan doesn't increase revenue, there is corporate tax reform which cuts the rate to 29 percent and eliminates unspecified tax expenditures.
- Defense Savings: Again, the specific changes that the budget makes are not yet known, but the Conrad budget aims to be more aggressive than either the President's Budget Framework or the House Budget in this area. This budget saves $886 billion in total security spending, equal to the savings from the Fiscal Commission plan. Whether these savings are accomplished through caps--like the Fiscal Commission--or with specific policy changes (for example the Sustainable Defense Task Force) remains to be seen.
- Other Domestic Savings: These are a number of small measures such as freezing Congressional pay, freezing White House and Congressional budgets, reducing printing and travel costs, and reducing the number of contractors. Considering the topline savings and the size of the other areas of savings, this is not likely to be a big area of cuts.
Social Security is not touched in this budget, consistent with many of the other budgets that have been released this year. In addition, however, health care also appears to be left untouched (or at least there hasn't been any information about health-care changes). We will have to wait for the release of the final budget to be sure; for now, it sounds as if Sen. Conrad's plan is taking the "wait and see on health care reform" approach.
While we are eagerly awaiting the full details and numbers of Sen. Conrad's budget, we also hope that the White House and Congressional leaders can agree to a debt ceiling increase and the beginnings of a comprehensive plan as soon as possible.