The boldness of the Ryan plan forced the Obama administration to reconsider and restate its own budget priorities in a speech by President Obama on April 13.
Although the president identified a few opportunities to reduce spending (e.g. finding additional savings in the defense budget and reducing health care costs), he spent considerable time discussing what he didn't want to cut. One major contrast with the House plan was the focus on tax increases to close the budget gap. For example:
"[W]e cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. We can't afford it. And I refuse to renew them again," Obama said. "So my budget calls for limiting itemized deductions for the wealthiest 2% of Americans -- a reform that would reduce the deficit by $320 billion over 10 years."
To read President Obama's remarks, go to: http://www.whitehouse.gov/the-press-office/2011/04/13/remarks-president-fiscal-policy
What would the budget resolution mean for infrastructure?
While many AED members would likely agree with Chairman Ryan's positions on deficits, entitlements, and tax reform, the House budget resolution would have some harsh consequences for government programs that affect equipment markets.
In recent years, annual federal highway appropriations have exceeded the highway user fee revenues to the HTF. As a result, $35 billion has been transferred from the general fund to the HTF over the life of SAFETEA-LU (the most recent multi-year highway law). Republican leaders are determined to limit annual highway spending to the level the HTF can support.
Thus, according to House Transportation & Infrastructure Committee Ranking Member Nick Rahall (D-WV), the GOP budget proposal would provide only $219 billion in HTF spending over the next six years, about $100 billion less than the current budget baseline investment level (which assumes $316 billion in contract authority from the Highway Trust Fund and $15 billion from the General Fund.) By some accounts, this could cause annual federal highway investment to drop from $41 billion to $27 billion. In his speech, Obama also expressed his concern about cuts to transportation funding.
AED maintains that the proper and responsible way to increase infrastructure spending is to increase the user fees (e.g., the gas tax, diesel taxes, etc.) that support the HTF. The House GOP leadership, however, has steadfastly rejected user fee increases for the highway program. We were therefore surprised to find buried in the resolution's "Function 400" transportation section this statement on airport security user fees:
"Require Airports to Fund a Larger Portion of the Cost of Aviation Security. Taxpayers currently subsidize more than half the cost of aviation security for the travelers who use and benefit from the system. This burden could be eased by shifting greater responsibility to those who fly. One way to do so would be by applying a simple flat fee of $5 per one-way trip for security system users – instead of a $2.50 fee for a one-way trip with no stops and a $5 fee for a trip with one or more stops." [Emphasis added]
Increasing security fees for travelers from $2.50 to $5.00? That sounds like a user fee increase to us. And, we're hard pressed to see the difference between raising user fees for people who use airports to pay for security and raising user fees on people who use roads to pay for better infrastructure.
The bottom line
In the final analysis, the budget resolution's practical near-term impact is limited. The version crafted by the GOP House leadership is likely dead on arrival in the Democrat-controlled Senate and even if the House and Senate were, by some miracle, to come to an accord, it wouldn't have the force of law and would only serve as a blueprint to guide appropriations and authorization bills in the years ahead.
The longer term impact will likely be more profound. Chairman Ryan has defined in concise terms the fiscal crisis the nation is facing and he's started to put forth bold and realistic solutions. For this, he is to be applauded.
To read more about the House budget proposal and watch a video explanation by Chairman Ryan, go to:http://budget.house.gov/fy2012budget/