Wednesday, April 6, 2011

FISCAL YEAR 2012 BUDGET: The House Republican Proposal

The House Budget Committee Majority, led by Chairman Paul Ryan, released on April 5 its Fiscal Year 2012 budget – a 10-year plan that would require significant reductions in discretionary spending, including defense spending, and that would reform two of the largest and least sustainable entitlement programs: Medicare and Medicaid. Compared to the President’s budget, the House Republican’s budget would spend more than $6 trillion less over the next decade, and reduce deficits by over $4 trillion more.

The full House is expected to consider the budget the week of April 10. Below is a look at some of the key numbers, assumptions, and reforms contained in the proposal.


FY 2012 Total Spending: $3.5 trillion.

FY 2012 Deficit: $1 trillion. Deficits would fall to $400 billion by 2020, but it would take 30 years to eliminate deficits completely.

FY 2012 Debt: $16 billion. Debt would continue to rise to $23 billion by 2021.


Total Spending Cuts: $5.8 trillion over 10 years.

Spending as a Percentage of GDP: Reduces to 20 percent over the next decade.

Mandatory Spending. Proposes reform to Medicare and Medicaid, two of the three largest entitlement programs; fails to propose significant reform to Social Security; instead calls for a trigger that would require the President to submit a plan for reform if Social Security is found “not sustainable.”

Medicaid: Reforms Medicaid by reworking the program into a block grant-style system, which House Republicans say will give states flexibility and save taxpayers $750 billion over 10 years.

Medicare: Preserves the Medicare system for current beneficiaries and those near retirement. For younger Americans, it transforms the program into a health care system similar to the one enjoyed by Members of Congress.

Fraud: Increases funding for programs that root out fraud in mandatory spending programs. Republicans estimate this will save $26 billion.

Regular Review: Takes mandatory programs off “autopilot” and require regular review of these spending programs.

Discretionary Spending. Freezes non-defense discretionary spending at Fiscal Year 2008 levels.

Defense: Includes Secretary Gates’ plan to save $178 billion in military spending. According to Republicans, $78 billion of these savings would go to deficit reduction while $100 billion would be “reinvested.”

Federal Workforce: Halts government hiring and makes significant changes to worker benefits, including a freeze on salaries until 2015. Republicans estimate this will save taxpayers $375 billion over 10 years.


Overall Tax Burden: Holds overall tax burden at 18 to 19 percent of GDP by cutting taxes $1.8 trillion over the next 10 years.

Tax Rates: Cuts the top personal income tax rate from 35 percent to 25 percent and the corporate tax rate from 35 to 25 percent. Republicans say they will offset this plan by reducing tax expenditures.