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Ryan budget introduced in the House

This week, House Budget Committee Chairman Paul Ryan unveiled his newest budget plan. Despite a couple of trial balloons floated by Ryan over the last few weeks suggesting there could be some significant changes to this year’s budget, his latest plan looks remarkably similar to his previous budgets.

After receiving push back from House Republican centrists, Ryan kept 55 the magic number in his latest budget proposal: no one age 55 and older would be affected by any of his proposed changes to Medicare.

For those 54 and younger, Ryan proposes turning Medicare into a fixed-cost program beginning in 2024, by giving them a set amount of money to purchase their own health care or a traditional Medicare plan on the private market. This assumes that the business competition will keep prices low enough to make health insurance affordable for senior citizens.

The Ryan budget turns Medicaid and food-stamp funding over to the states—effectively transforming these programs from open-ended entitlements and forms of assistance for anyone in need into programs with set budgets. This would mean that people could only receive Medicaid or Supplemental Nutrition Assistance Program benefits vis-à-vis state governments as long as the federal money lasted.

The Ryan budget would also end government programs such as housing giants Fannie Mae and Freddie Mac. His budget also proposes to simplify the tax code by having just two tax brackets – 10% and 25%.

The biggest change in this year’s Ryan budget is that this budget would balance in 10 years (last year’s Ryan budget didn’t balance for 28 years). Ryan is able to make the leap to balance in 10 years in part due to sequestration cuts, as well as revenue raised in the fiscal cliff deal negotiated at the end of last year.

The Ryan budget came under attack this week by Democrats and by non-partisan analysts for reaching its balance in 10 years by assuming the repeal of the Affordable Care Act (aka Obamacare). Critics of the Ryan budget point out that repeal of President Obama’s signature health care proposal is a political fantasy.

Senate Democrats introduce budget

Senate Democrats, led by Budget Committee Chair Patty Murray (D-WA), unveiled their own budget this week. Murray’s budget, which is supported by every Democrat on the Budget Committee, as well as by independent Senators Bernie Sanders (VT) and Angus King (ME), calls for almost $1 trillion in new revenue by closing loopholes and eliminating deductions for high income earners and corporations.

The Murray budget also claims to achieve almost $1 trillion in deficit reduction through spending cuts. Roughly $500 billion of the spending cuts come from the domestic spending side with an additional $240 billion in cuts coming from defense. The final roughly $240 billion in savings is an assumption based on savings from reduced interest payments on the federal debt. Critics have assailed this “savings” as a “gimmick.”

The Murray budget also includes new spending in the form of a $100 billion jobs and infrastructure package. The Senate Democrats say this new spending would: “start creating new jobs quickly, begin repairing the worst of our crumbling roads and bridges, and help train our workers to fill 21st century jobs.”

On Thursday night, the Senate Budget Committee passed the Murray budget out of committee by a 12 to 10 vote.

Senate legislation to fund government introduced

Funding for the federal government is scheduled to expire on March 27th. In order to avoid a government shutdown, both the House and the Senate have been working on temporary spending bills known as Continuing Resolutions (CR). The House CR passed last week by a wide bipartisan majority – with more than 50 Democrats joining all but 14 Republicans in voting for the legislation.

This week, the Senate has proposed a bipartisan CR – introduced by Senator Mikulski (D-MD) and Senator Shelby (R-AL) – that includes higher total spending than the House-passed CR.

The House-passed CR checks in at $982 billion, while the Senate has proposed a $1.043 trillion CR: a difference of more than $200 billion additional dollars in the Senate CR.

In addition to the six-month funding extension, the House CR includes full-year funding for Defense and for Military Construction/VA. The Senate added full-year funding for three additional departments.

The Senate CR includes full-year funding for the following departments:

  • Agriculture - $19.565 billion in 2012, $20.532 billion in 2013 (+$977 million)
  • Commerce - $52.744 billion in 2012, $50.210 billion in 2013 (-$2.534 billion)
  • Defense - $633.229 billion in 2012, $604.900 billion in 2013 (-$28.329 billion)
  • Homeland Security - $39.600 billion in 2012, $39.609 billion in 2013 (+$9 million)
  • Military Construction and VA - $71.7 billion in 2012, $71.9 billion in 2013 (+$200 million)

Speaker of the House John Boehner (R-OH) had threatened to put all remaining FY2013 funding into a CR, a move that would cut additional spending for Defense and Military Construction/VA included in the House CR, if the Senate got “greedy” in its CR.

There is another hurdle for the Senate CR before dealing with House Republicans because it must still get 60 votes on the Senate floor to win passage in the upper chamber. Given the bipartisan nature of the bill, however, most experts believe it has a good shot of passage in the Senate.

Small business tax reform

This week, Ways and Means Chairman Rep. Dave Camp (R-MI) released a discussion draft of tax reform aimed at creating a simpler and fairer tax code for small businesses. As part of a broader, comprehensive tax reform package that significantly lowers rates for individuals, small businesses and corporations, the discussion draft reforms and simplifies a number of tax rules affecting small businesses and their workers.

The discussion draft includes two separate options designed to achieve greater uniformity between S corporations and partnerships. The Committee is soliciting comments from stakeholders on both options – one that revises current rules and a second that replaces current tax rules with a new unified pass-through regime.

The discussion draft is designed to provide more uniform tax treatment for pass-through businesses, such as sole proprietorships, partnerships and S corporations. The discussion draft includes proposals that would:

  • Spur investment in equipment needed to grow business operations by providing permanent expensing of investments and property under section 179 of the tax code;
  • Simplify tax and accounting practices by expanding the use of the simpler “cash accounting” method to businesses with gross receipts of $10 million or less;
  • Provide relief for start-up and organizational costs by establishing a unified deduction for these expenses; and
  • Make tax compliance easier for partners and S corporation shareholders by reordering and simplifying the due dates of tax returns for partners and S corporations.

In addition, the draft outlines and seeks feedback on two separate options for reform of tax rules governing S corporations and partnerships.

  • Option 1 improves the ability of S corporations to compete, grow and gain access to capital by revising and modernizing current tax rules affecting S corporations and partnerships.
  • Option 2 simplifies the tax treatment of non-publicly traded companies by repealing existing tax rules governing partnerships and S corporations and replacing those rules with a new unified pass-through regime

Bipartisan tax reform meetings begin in Senate

On Thursday, members of the Senate Finance Committee - from both parties – met for the first time to discuss comprehensive tax reform. The bipartisan Senate effort comes on the heels of a similar bipartisan tax reform effort in the House led by Ways and Means Committee Chairman Dave Camp (R-MI).

Senate Judiciary passes assault weapons ban

On Thursday the Senate Judiciary Committee passed an assault weapons ban. The vote was 10 to 8 and along party lines with every Democrat on the committee voting for the ban and every Republican voting against it. While the ban has now made it out of committee, it is extremely unlikely to pass on the Senate floor.

Graph of the week:

Highway Trust Fund running out of gas

On tap for next week:

In the House:

Monday, March 18 — The House Energy and Commerce Committee will hold a Health Subcommittee hearing on "Saving Seniors and Our Most Vulnerable Citizens from an Entitlement Crisis” at 4 p.m. in 2322 Rayburn.

Tuesday, March 19 — The House Oversight and Government Reform Committee will hold a hearing on "DOD and DHS: Implementing Agency Watchdogs' Recommendations Could Save Taxpayers Billions” at 10 a.m. in 2154 Rayburn.

Tuesday, March 19 — The House Energy and Commerce Committee will hold an Energy and Power Subcommittee hearing on "American Energy Security and Innovation: The Role of Regulators and Grid Operators in Meeting Natural-Gas and Electric Coordination Challenges” at 10 a.m. in 2322 Rayburn.

Tuesday, March 19 — The House Appropriations Committee will hold an Energy and Water Development and Related Agencies Subcommittee hearing on the Energy Department environmental management budget at 10 a.m. in 2362-B Rayburn.

Tuesday, March 19 — The House Appropriations Committee will hold a State, Foreign Operations and Related Programs Subcommittee hearing on agencies under its jurisdiction at 12:30 p.m. Location TBD.

Tuesday, March 19 — The House Energy and Commerce Committee will hold a Communications and Technology Subcommittee hearing on "Health Information Technologies: Harnessing Wireless Innovation” at 10:30 a.m. in 2123 Rayburn.

Tuesday, March 19 — The House Appropriations Committee will hold a Labor, HHS, Education and Related Agencies Subcommittee hearing on "Children's Mental Health” at 10 a.m. in 2358-C Rayburn.

Wednesday, March 20 — The House Appropriations Committee will hold a Homeland Security Subcommittee closed hearing on "Cybersecurity and Critical Infrastructure” at 10 a.m. in H-405.

Wednesday, March 20 — The House Homeland Security Committee will hold a Cybersecurity, Infrastructure Protection, and Security Technologies Subcommittee hearing on "Cyber Threats from China, Russia and Iran: Protecting American Critical Infrastructure” at 2 p.m. in 311 Cannon.

In the Senate:

Tuesday, March 19 — The Senate Energy and Natural Resources Committee will hold a hearing on reauthorizing and reforming the Secure Rural Schools and Community Self-Determination Act and Payments in Lieu of Taxes program at 10 a.m. in 366 Dirksen.

Tuesday, March 19 — The Senate Armed Services Committee will hold a hearing on U.S. European Command, U.S. Northern Command, and U.S. Southern Command in review of the Defense Authorization Request for FY2014 and the Future Years Defense Program, at 9:30 a.m. in 216 Hart.

Washington by the numbers:

$74,000 is the average cost per week of White House tours.

Washington humor:

“No pope has ever been elected without carrying Ohio” — David Letterman



 Steven C. LaTourette, President | 202.737.8933

McDonald Hopkins Government Strategies LLC

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