WASHINGTON (Reuters) - The chairman of the U.S. House of Representatives Budget Committee on Tuesday said he and other senior Democrats aim to write a fiscal blueprint this year that would cut annual budget deficits by 50 percent in the next 10 years, possibly including tax hikes on corporations and the wealthy.

Chairman of the House Budget Committee John Yarmuth (D-KY) speaks during an interview with Reuters in Washington, U.S., January 29, 2019. REUTERS/Joshua Roberts

Representative John Yarmuth, in an interview with Reuters, said part of the effort could focus on raising the U.S. corporate tax rate to 26 percent or 27 percent, up from the 21 percent enacted through a broad Republican tax cut law in 2017.

Even with added tax revenues, Yarmuth conceded the difficult path toward deficit-reduction.

Annual federal budget deficits are hurtling toward $1 trillion and Yarmuth said it is “not going to be easy to cut them by half a trillion dollars” by around 2029, especially given looming economic cross-currents and a Republican-controlled Senate hostile to tax increases.

“We have so many threats to the economy going on with trade wars and a slowdown in other (nations’) economies,” said Yarmuth, who took control of the Budget Committee early this month with the new Democratic majority in that chamber.

“The odds of there being a significant slowdown if not a recession are pretty substantial,” Yarmuth said, which likely would cut into Washington’s revenue collections. That, in turn, could pump up deficits further in the short-term.

On the spending side, Yarmuth said House Democrats will advance legislation to lower prescription drug prices that contribute to higher government healthcare costs.

Many of the House’s freshmen Democrats are liberals who were elected last November on an agenda of expanding Medicare, the healthcare program for seniors, as well as boosting access to pre-kindergarten and college education and bolstering environmental programs.

At the same time, Democrats vaulted into their House majority with the election of several lawmakers representing districts that either backed Trump in 2016 or typically swing between Republican and Democratic majorities.

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As a result, Yarmuth faces a difficult balancing act in advancing a fiscal 2020 budget plan this winter and spring and said he will conduct “education sessions” for his fellow Democrats that typically occur at the start of a new Congress.

“We have some members I believe in the caucus who believe in the theory that you can spend whatever you want to spend. And I don’t think that’s possible,” said Yarmuth, 71, who is in his 13th year representing a district that includes Louisville, Kentucky.

He did, however, express optimism the House would vote to broaden Medicare by the end of next year.

MODERATE, PROGRESSIVE APPEALS

Yarmuth’s concern for fiscal restraint may appeal to the more moderate wing of House Democrats.

Progressives might be heartened by Yarmuth’s openness to tax increases for corporations and top income earners.

While the budget plan Yarmuth produces will cite revenue goals, it is up to another major committee, House Ways and Means, to write the actual tax policy.

“There’s no reason we have the maximum (tax) rate ended at $400,000” in annual income, Yarmuth said.

“I think certainly taxes at the high end (of the income scale) need to be looked at,” he added - but probably not to the level of 70 percent for top earners, as Representative Alexandria Ocasio-Cortez, a darling of progressives, has advocated.

Referring to what arguably is the biggest legislative achievement of President Donald Trump’s first years in office, Yarmuth said, “We have to look at that entire 2017 tax cut program and see what if anything is positive coming out of it.”

Furthermore, the Republican-controlled Senate is unlikely to embrace any of House Democrats’ tax-increase plans, which are also likely to be rejected by Trump.

But Yarmuth’s audience is far broader than Washington’s political establishment. It is the electorate at large, which in November 2020 will be choosing a president and a new Congress.

“It’s fair to say that virtually everything the Democratic majority in the House will be doing for the next two years will be demonstrating a different vision for the country and direction for the country,” Yarmuth said.

Trump and Republicans, meanwhile, are expected to tout the many conservative federal judges they have installed since early 2017, along with the rollback of federal regulations that they argue slow economic growth.

The U.S. budget deficit last year came in at $779 billion and is projected to hover around $900 billion this year. But government debt is rising at a significantly faster pace when counting interest payments on that debt.

Washington started 2019 with a national debt of nearly $22 trillion, amid slowing economic growth.

On Monday, the non-partisan Congressional Budget Office said that unless Congress makes fiscal adjustments, the debt held by the public will grow to 93 percent of the economy in 2029, its highest proportion since just after World War Two, and to about 150 percent of the economy by 2049, a level that many economists fear is unsustainable.