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GOP Budget Point Man Unveils Major Budget Cuts

This article is more than 12 years old.

Republicans controlling the House have fashioned plans to slash the budget deficit by about $5 trillion over the upcoming decade, blending unprecedented spending cuts with a fundamental restructuring of taxpayer-financed health care for the elderly and the poor.

The decade-long plan brought forth by House Budget Committee Rep. Paul Ryan, R-Wis., far exceeds the $1 trillion-plus in budget cuts outlined in President Obama's February budget and is on par with recommendations from Obama's own bipartisan deficit commission in December.

Under the decidedly arcane congressional budget process, the GOP plan is not actual legislation but provides a nonbinding, theoretical framework for future action in Congress. And with Democrats controlling the Senate, the GOP plan serves more to frame the debate heading into next year's election than represent a program with a chance of passing Congress and actually becoming law.

Despite cuts already deemed draconian by Democrats, Ryan's plan can't claim a balanced budget by the end of the decade - getting the deficit to the $400 billion range after six years - because of promises to not increase taxes or change federal retirement benefits for people 55 and over.

Tuesday's unveiling of the 2012 budget blueprint comes amid a separate, escalating battle between Republicans and the Obama administration over smaller but more immediate spending cuts for the current budget year. House Speaker John Boehner, R-Ohio, had a meeting scheduled at the White House Tuesday for a session with Obama aimed at staving off a government shutdown this weekend.

Compared with Obama's budget, the Ryan plan actually would cut $6.2 trillion over 10 years. But measured against Congressional Budget Office estimates that assume permanent extension of the Bush-era tax cuts, Ryan's budget would cut $5.8 trillion. However, $1 trillion of savings comes from the unrealistic assumption - also made by Obama - that overseas military operations would soon cost just $50 billion a year - less than half those requested by Obama for 2012.

Ryan's plan, released Tuesday morning, features a controversial proposal to convert the traditional Medicare health plan for the aged into a system in which the government would provide payments for private health insurance plans - a fundamental shift from the traditional Medicare program that directly pays doctors and hospitals.

Current Medicare beneficiaries or workers age 55 and older would stay in the existing system. But for people now under the age of 55, the Medicare program would operate like a voucher system that provides subsidies that are unlikely to keep pace with medical inflation, critics say.

At the same time, Republicans propose to sharply cut projected spending on the Medicaid state-federal health program for the poor and disabled and transforms it into a block grant program that gives governors far less money than under current estimates but considerably more flexibility.

The savings from Medicaid would top $700 billion over the coming decade and that's before another $1.4 trillion would be reaped over the same period by repealing Obama's health care law. In the first decade, the plan barely touches overall Medicare spending.

Legions of critics of the curbs to both Medicare and Medicaid say the moves would inevitably lead to poorer quality coverage. Future Medicare beneficiaries are likely to pay more out of their own pockets while states seeking to preserve Medicaid would have to provide more state taxpayer money to replace federal cuts.

Ryan counters that the spiraling growth of both Medicare and Medicaid are simply unsustainable, a view shared by Democratic deficit hawks like Alice Rivlin - a former White House budget director during the Clinton administration - who helped design Ryan's Medicare plan as a member of Obama's deficit panel. Under this view, simply curbing payments to doctors and other health care providers would cause the system to collapse.

Ryan's proposal largely sidesteps Social Security, offering a vague requirement that the president and Congress develop a plan to save the program "in the event that the Social Security program is not sustainable." The trustees who oversee Social Security have been projecting for years that the program will run out of money by about 2037.

Last year, Social Security paid out $37 billion more in benefits than it collected in payroll taxes, the first such deficit since Social Security was last overhauled in the 1980s. The program is instead tapping into $2.5 trillion in accumulated savings from previous program surpluses.

On taxes, Ryan would rescind all tax increases in both the new health care law and in Obama's proposed 2012 budget. He would extend Bush-era tax cuts for taxpayers at every income level, including the wealthy. He would reject Obama's call to increase taxes on oil and natural gas companies, which were included in the president's proposed 2012 budget.

Ryan's goal for tax reform calls for a top tax rate of 25 percent for both individuals and corporations, down from the current top rate of 35 percent for both. That would mirror a proposal by Rep. Dave Camp, R-Mich., chairman of the tax-writing House Ways and Means Committee. Ryan embraces the popular goal of simplifying the tax code. For individuals, Ryan's plan calls for "clearing out the burdensome tangle of loopholes that distort economic activity."

The measure also makes unprecedented cuts to the operating budgets of domestic agencies, slashing Obama's requests for programs like education, law enforcement and homeland security, along with highway building. Ryan endorses Obama's Pentagon requests, which provide for small increases over current levels.

Ryan's plan, if enacted into law, would produce a $995 billion deficit next year that wouldn't drop below $400 billion until 2018. The deficit is currently projected at $1.6 trillion for the current fiscal year, and the administration estimates that under Obama's budget, it would drop to $1.1 trillion next year and $774 billion in 2021.

Republicans intend to move quickly to advance their new blueprint. They hope to have the Budget Committee approve it Wednesday and push it through the House next week.

The plan is expected to serve as a rallying point for Republicans who took power in January, but it is also likely to give Democrats a ready target to attack.

This program aired on April 5, 2011. The audio for this program is not available.


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