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![handle is hein.taxfoundation/iretcgadv0013 and id is 1 raw text is: RE
May 24, 1993 No. 14
THE BOREN-DANFORTH BUDGET
ALTERNATIVE: A PLAN FOR REAL
DEFICIT REDUCTION
Senators Boren and Danforth have crafted a
bold and innovative deficit reduction plan as an
alternative to the present Budget Resolution
covering fiscal years 1994-1998. The Boren-
Danforth plan warrants the closest scrutiny by
Democrats and Republicans alike in both chambers
of the Congress.
Boren-Danforth would significantly modify the
strategy of the Budget Resolution. In lieu of the
$272 billion in tax increases
called for by the Budget
Resolution, Boren-Danforth ...the [Boren
would raise taxes by the recognition
substantially lesser amount of spending,
$150 billion. It would reduce discretionary
spending by $337 billion '
relative to the CBO projected coanigful s
baseline amounts, almost twice
as much as the $174 billion of
Clinton cuts in the Budget
Resolution. In short, Boren-Danforth would
significantly blunt the tax-and-spend strategy
incorporated in the Budget Resolution.
The heart of the Boren-Danforth plan, on the
tax side, is the elimination from the Budget
Resolution of the Btu tax proposed by the President.
The Btu tax would cast up a huge roadblock to the
attainment of the President's goal for fortifying
-Dan
that
no0
,yen
I sill(
ficit I
economic progress and creating millions of new
jobs. The tax would raise production and operating
costs for every business and household in the
country. It would reduce real output, employment,
and income and would reduce national saving. It
would, moreover, create an artificial spur for
changing the economy's energy technology and use,
requiring allocating a significant amount of the
nation's meager saving for investment in less
efficient energy production and consumption instead
of for modernizing and adding to the stock of
productivity-enhancing capital. It would create a
significant incentive for American businesses to
move operations to lower-cost locations abroad,
while impairing the ability of American exporters to
compete effectively with foreign producers. Its
elimination from the Budget Resolution would be a
major improvement in budget policy.
The Boren-Danforth proposal calls for deferring
the increases in individual and corporate income tax
rates proposed by the President from the beginning
to the middle of 1993. The proposal would
maintain the existing cap on the wage base for the
hospital insurance tax, instead of eliminating the cap
as the President proposed. These features of Boren-
Danforth would moderate the
adverse effects of President
forth] plan's Clinton's proposed rate
entitlement increases on the capacity and
less than willingness of upper-middle
ring, must be and high-income individuals to
qua non fior save and invest and on the cost
'eduction. of capital for corporate
businesses. Finally, Boren-
Danforth would introduce an
option for indexing the bases
of capital assets for inflation, a proposal that
recognizes the importance of moderating the
additional burden on saving and investment imposed
by the existing tax treatment of capital gains.
On the spending side, Boren-Danforth would
provide a real breakthrough in controlling the surge
of federal spending by capping entitlement programs
other than Social Security. The proposed cap would
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