Senate Democrats

The Democratic Budget: Strengthening the Economy and the American Middle Class

The Democrats’ Fiscal Year 2009 Budget Resolution, which was reported out of the Senate Committee on Budget on March 6, 2008, and which will be considered on the Senate floor the week of March 10, outlines the proposed federal budget for next year, as well as proposed budget levels for Fiscal Years 2010 through 2013.  The Budget Resolution reflects the Democratic commitment to strengthening the economy by creating jobs, cutting middle-class taxes, and making key investments in energy, education, and infrastructure.  The budget also rejects the cuts proposed by Republicans that would harm middle-class priorities And all this is accomplished with fiscal discipline and without raising a penny in new taxes.

The Democratic Budget Makes Fiscally-Responsible Investments to Get Our Economy Moving Again

The Democratic Budget Resolution provides for the rebuilding of our nation’s aging infrastructure, which will help spur economic growth and create good-paying jobs here in America.  The Budget Resolution would provide almost $4 billion more than the Bush Budget for key discretionary transportation accounts.  The Democratic budget also includes $6.5 billion to fully fund highway and mass transit systems and allows for increased spending for Airport Improvement and “ready to go” infrastructure projects.  “Ready to go” infrastructure projects are state and local projects that could begin construction almost immediately but cannot proceed because of a backlog federal funding.  The Budget Resolution also includes a deficit-neutral reserve fund for to create a new National Infrastructure Bank, which would identify, evaluate, and help finance infrastructure projects of regional and national significance.

A Department of Transportation study has found that every billion dollars of federal investment in our nation’s transportation infrastructure supports and creates 47,500 jobs and generates $2 billion in economic activity. (Federal Highway Administration Presentation 1/2/2004)  Thus, the level of funding in the Budget Resolution could support or create approximately 500,000 jobs and $21 billion in additional economic activity.  In addition, a recent study by economist Mark Zandi has shown that, under the weak economic conditions prevailing now, each additional dollar of federal investment in “ready-to-go” infrastructure projects could raise real GDP by $1.59. 

At a time when the labor market has slumped – 7.4 million Americans are unemployed and 6.5 million are underemployed, employers have cut 63,000 jobs in the last month, and job growth has slowed to 0.6 percent (adding only an average of 72,000 jobs per month in the last year compared with 300,000 or more jobs per month during previous Administrations) – these and other investments in job creation are necessary to keep Americans working and our economy strong. (Bureau of Labor Statistics, Employment Situation Summary, 3/7/2008 and Current Employment Statistics Highlights, 3/2008)  Over the short term, such effective stimulus could create a significant number of new jobs.  Over the longer term, infrastructure spending can also reduce the costs of travel for households and businesses, thereby raising their productivity.

The Democratic Budget Resolution provides for smart investments in clean renewable energy that could create hundreds of thousands of green jobs in the United States.  The Budget Resolution provides $2 billion in discretionary funding for renewable energy and energy efficiency programs (wind, solar, geothermal, biofuels, and weatherization assistance) which is $738 million more than the President’s proposed funding level.  The Budget Resolution also includes $2.7 billion for investment in “green jobs” and a reserve fund that can be used in the future to extend and expand renewable energy tax incentives like the renewable energy production tax credit and the solar investment tax credit.

According to a recent study by Apollo Alliance and Urban Habitat, an investment by the federal government of $30 billion per year for 10 years in renewable energy would increase our gross domestic product by $1.4 trillion.  The production of electricity from renewable energy resources can also help to create jobs as every additional megawatt of electricity generated by solar cells creates 22 jobs, 10.5 jobs per additional megawatt generated by geothermal energy, and 6.4 jobs per additional megawatt generated by wind energy.  In comparison, every megawatt of electricity generated by natural gas creates 1.1 jobs.  (Apollo Alliance and Urban Habitat, Community Jobs in the Green Economy, 2007)

The Democratic Budget Resolution provides for investments in education and training programs, so America’s workers are prepared to compete in the global economy.  The recently-released Global Competitiveness Report, 2007-2008 shows that, while the United States is ranked at the top of the overall global competitiveness index, we ranked only 45th in the quality of math and science education, 28th in the quality of primary education, and 17th in the quality of higher education. 

Recognizing that investing in education and training programs at all levels is key to ensuring our nation’s workforce is properly equipped to compete in today’s global economy, the Budget Resolution provides for an increase for discretionary education and training funding of $8.8 billion above the Bush Budget.  The Budget Resolution provides for investments in Head Start, Pell Grants and job training.  To help schools meet requirements of the No Child Left Behind Act and Individuals with Disabilities Act, the resolutionprovides the largest increase for elementary and secondary education programs since 2002.  The Budget Resolution also includes a deficit-neutral reserve fund to facilitate consideration of legislation, including tax relief, to make higher education more accessible, modernize schools, and support teachers.

The Democratic Budget Rejects Bush Republicans’ Misplaced Priorities and Policies that Harm the Middle Class

The budget proposal that President Bush sent to Congress last month reflects more of the same misplaced priorities and fiscal irresponsibility that got us into this mess in the first place.  Republican policies have weakened the economy and saddled our hard-working middle class families with the worst economic conditions in years. 

·        Bush Republicans chose to hand out tax beaks to multimillionaires and special interests at the expense of middle-class families.

·        Bush Republicans’ economic mismanagement has burdened our children with trillions in debt.

·        The Bush Budget underfunds initiatives that are important to working families, including healthcare, education, and veterans, as well as other key economic investments like infrastructure and energy.

By contrast, the Democratic Budget Resolution reflects the priorities of America’s families.  For example, the Democratic budget rejects the inadequate funding proposed by President Bush’s budget for the Children’s Health Insurance Program (CHIP), and instead provides for up to $50 billion for CHIP over five years to expand coverage to the estimated six million children eligible but not enrolled in either CHIP or Medicaid, and to maintain coverage for all currently-enrolled children. 

The Democratic budget also provides $30 billion for the National Institutes of Health in 2009, which is $950 million more than the President’s budget and $400 million more than the Fiscal Year 2008 level adjusted for inflation.  This additional funding would enhance the NIH’s ability to provide leadership and financial support to biomedical researchers, resulting in medical discoveries that would improve the health and save the lives of Americans.  The budget also ensures that veterans get the quality health care they deserve by providing $3.2 billion more than the President’s budget for veterans programs.

The Democratic Budget Is Fiscally Responsible without Raising Taxes

The Budget Resolution provides a fiscally-responsible blueprint for our country.  Reversing the Bush Republican’s fiscal policies of record deficits and an explosion in federal debt, the Democratic budget would take the country in a new direction.  It balances the budget and makes critical investments in key programs while holding the line on overall spending.  Spending as a share of the economy would decrease every year after 2009.  The Democratic budget also retains key budget enforcement tools we re-instituted last year, such as the pay-as-you-go rule (“paygo”) that requires any new tax cut or increases in mandatory spending programs be offset or get 60 votes.  This rule helped us to restore fiscal discipline in the 1990s and its reinstatement represents a major step toward a return to fiscal responsibility. 

The Senate Budget Resolution addresses long-term fiscal problems.  Given that health care costs are rising much faster than wages and inflation, combined with the impending retirement of the baby boom generation, the United States faces a significant long-term imbalance between revenues and spending.  Unfortunately, the nations budget outlook and capacity to meet the anticipated needs of our citizens deteriorated dramatically under Republican policies during the last seven years. 

When President Bush took office in 2001, we enjoyed a record $5.6 trillion ten-year projected surplus.  That surplus has been squandered.  Gross debt has exploded – rising from $5.8 trillion in 2001 to over $9 trillion.  This debt is accumulating at the worst possible time, just before the retirement of the baby boom generation.  Much of the debt incurred during the Bush Administration has been purchased by foreign investors, making us more vulnerable to economic and political pressure from abroad.

The President’s budget proposes to continue the fiscal approach that has brought these large deficits and growing debt.  For instance, instead of setting forth a plan to address the underlying reasons for rising health care costs, the President’s budget proposes over $150 billion in legislative Medicare over the next five years and $23 billion in net Medicaid cuts over five years – this on top of $13.9 billion in cuts resulting from the Administration’s proposed regulatory changes to Medicaid last year. 

In contrast, the Budget Resolution will put the nation back on a sound fiscal path and recognizes that a comprehensive effort, focused on the long-term fiscal imbalance should be undertaken on a bipartisan basis.  The budget includes a point of order against legislation that would increase the deficit over the long term. 

The Budget Resolution also includes a number of measures to begin to address our nation’s long-term fiscal challenges, including:

·        A “comparative effectiveness” reserve fund so important research can be done to evaluate and compare the effectiveness of different health care treatments, procedures and outcomes – potentially reducing unnecessary and inefficient care and, thus, reducing health care costs; and

·        Program integrity initiatives in programs such as Medicare and Social Security, in order to reduce fraud and encourage efficiency, with potential long-term savings.

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