Democrats have sought to turn the budget into a lightning rod to use against Romney by highlighting items such as its proposal that Pell Grants be reduced to pre-stimulus levels – cutting it roughly in half – along with its entitlement-reform proposals.
The “Path for Prosperity” budget, as the most recent incarnation is referred to, aims to reduce total federal spending under 20 percent of GDP and prevent a return to high inflation and economic stagnancy.
The budget document warns that continuing on the current course would lead to a financial crisis far worse than what happened during the 2008 financial crisis. And were such stagflation to occur, it would make youth unemployment even worse than it already is just as it did during the last wave of stagflation in the 1970s.
“Even if high debt did not cause a crisis, … the nation would still be in for a long and grinding period of economic decline if it stayed on the current path,” the budget report says.
It promises that if it were enacted that it would result in the following:
- $1.5 trillion in additional economic growth over the next decade;
- $1.1 trillion in higher wages and salaries;
- and 1 million new jobs next year and in 2.5 million new private-sector jobs in 2020.
Were the budget enacted and its predictions to come into fruition, it would reduce unemployment and potentially reduce problems young Americans have been having finding jobs.
“Their budget would bring spending to the low end of its historical average (20 percent of GDP) and keep it there throughout the Baby Boomer retirement period,” said Ryan Ellis, tax policy director with Americans for Tax Reform. “After that, it would drift down below the historic tax level (18-19 percent of GDP), generating surpluses to pay off the national debt by mid-century.
“Spending today is 24 percent of GDP, and on its way to 40 percent of GDP without entitlement reform soon. So this macromeasurement is by far the biggest impact.”
The budget proposal notes that tuition inflation will negate any sort of benefits gained as a result of increased spending on Pell Grants and that spending should be targeted at truly needy students.
The budget would simplify the tax code for corporations and individuals by establishing a 25 percent top bracket, and corporations would see many of the loopholes that allow them to get away without paying taxes closed.
“If you are under age 30, the principal way in which this budget affects you is through healthcare. It repeals Obamacare’s community rating rules, which now dictate that young people pay higher premiums so that older people can have lower premiums,” Ellis said. “It also makes sure younger workers will actually be guaranteed the Medicare they’ll be paying into their whole lives. It does this by assigning a means- and health-adjusted subsidy to each future retiree, and letting them choose a health plan which is cheaper, more expensive, or the same as that subsidy.
“If they choose the cheaper plan, they can pocket the difference. If they choose a more expensive plan, they have to pay the difference themselves.”
But the budget’s main weakness falls in the fact it never balances.