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Opposing budget proposals, same goals

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$4 trillion is a lot of money.

A stack of 4 trillion U.S. dollar bills would reach from the surface of the Earth to the far side of the moon and beyond.

That is how much two proposals claim to reduce the federal budget over the next 10 to 12 years, but each achieves that goal in a different way.

President Barack Obama and Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, proposed separate plans that claim to get the country’s fiscal house in order.

No matter which proposal wins, $4 trillion will impact every American.

Obama’s plan reduces the deficit by $4 trillion through a blend of spending cuts and tax increases for America’s top earners. Ryan has proposed a plan that reduces the deficit by $4.4 trillion with spending cuts alone. In fact, it goes further than that: Ryan’s plan reduces revenue by cutting taxes for the wealthiest Americans.

In a conference call on Thursday, White House Council of Economic Advisers Chairman Austan Goolsbee said these budget decisions will affect Ohio State students directly.

One way students will be affected is through the federal Pell Grant program, which offers financial aid to millions of students, including some 15,000 students at OSU. Over the last few years, the program has outgrown its funding.

According to the U.S. Department of Education website, just under $14 billion in Pell Grants was available in 2007. In 2008, roughly $16.5 billion was available. In 2010, the federal stimulus program pushed that to more than $32 billion.

Obama and Ryan agree the rate of growth in the current system is not sustainable. They disagree, however, on how to fix the problem.

Ryan argues that increases in Pell Grants not only cost more but also drive up the cost of tuition. With that in mind, his plan would return Pell Grants to 2008 levels and target the awards to students who need them most.

“This budget takes the necessary next steps to ensure Pell spending is brought under control and targeted to the truly needy instead of being captured in the form of tuition increases,” Ryan wrote in his proposal.

Goolsbee said Ryan’s plan would cut off aid to 9 million college students and force more than 100,000 to drop out of school.

“Not only does it hurt students to do that, but it also, in the end, costs money to the government because people are going to make less for the rest of their lives,” Goolsbee said.

Obama’s proposal would keep the Pell Grant maximum at $5,550, but students would still endure some painful cuts. The extra costs would be paid for by eliminating Pell Grant awards for summer coursework and graduate student in-school loan subsidy.

The federal in-school loan subsidy pays the interest on graduate student loans while they are still in school. Undergraduate in-school loan subsidies would remain intact. The elimination of year-round Pell Grants and in-school loan subsidies would save $100 billion, according to Obama’s proposal.

Marie Gudz, a graduate nursing student, said the loss of the subsidy doesn’t seem so terrible in the grand scheme.

“Once you’ve taken on as much debt as I have, what’s another couple thousand (dollars)?” Gudz said. “I’m not happy about it. It’ll add another couple years to my student loans, but it’s kind of just another drop in the bucket.”

Jason Seligman, who holds a doctorate in economics, is an assistant professor at the John Glenn School of Public Affairs and worked with the president‘s Council of Economic Advisers under Bill Clinton and George W. Bush. Seligman said spending in areas like education can be a net positive in the long run.

“A government that makes meaningful investments in its people and has policies that make their income grow and then taxes that income receives more revenue in the future,” Seligman said. “But if you have to raise (tax) rates to get that money, that’s sort of cheating.”

That is also Ryan’s argument.

The president’s plan would eliminate tax breaks for oil, gas and coal industries and repeal the Bush era tax cuts for top earners. Ryan says that will slow job growth.

“You can’t make this all up by taxing,” Ryan said on MSNBC’s Hardball with Chris Matthews. “Because the real problem is in spending.”

Ryan’s proposal would make the Bush-era tax cuts permanent and lower the tax rate for top earners and corporations from 35 percent to 25 percent. This, Ryan argues, will allow for more private investment and boost job growth.

Goolsbee said Ryan’s plan requires another $2 trillion in cuts to make up for the lost revenue. Those cuts involve the repeal of the controversial health care reform, which allows college students to remain on their parent’s insurance until age 26.

Ryan would also cut back non-military discretionary spending to below 2008 levels and freeze them there for five years. Obama recommended a five-year freeze at current levels.

Goolsbee said the magnitude of the cuts in Ryan’s proposal is such that it would include cuts to education spending across the board, as well as other key areas of investment.

“Depending what area you were in, what your major was in college, there might be substantially less economic activity, less prospect for getting a long-standing career in various industries because they were not seeded with investment,” Goolsbee said.

Government investment is not what the economy needs, Ryan said.

“This budget helps spur job creation today, stops spending money the government doesn’t have and lifts the crushing burden of debt,” Ryan wrote on his congressional website.

Though they share the same goal, the two sides are determined to reach it in fundamentally different ways. In either proposal, OSU students will have to endure some cuts.

Seligman offers this advice for considering which plan to support.

“To the extent that you can, think about the United States as a group of people trying to wrestle with problems that we all share some responsibility for and that we all share an interest in seeing worked out,” Seligman said. “Then we can stop using the word ‘they’ and start using the word ‘us’ as we think about our policy choices moving forward.”

 

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