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VOL. 127 | NO. 56 | Wednesday, March 21, 2012

House GOP Unveils Budget Blueprint

ANDREW TAYLOR | Associated Press

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WASHINGTON (AP) – Conservative House Republicans on Tuesday set up what appears to be a potential re-run of last year's turbulent domestic policy fight with President Barack Obama, putting forward an election-year budget manifesto that would blend steep social program cuts with reduced tax rates.

The GOP plan released by House Budget Committee Chairman Paul Ryan would, if enacted into law, wrestle the deficit to a manageable size in short order, but only by cutting Medicaid, food stamps, Pell Grants and a host of other programs that Obama has promised to protect.

To deal with the influx of retiring Baby Boomers, the GOP budget reprises a controversial approach to overhauling Medicare that would switch the program – for those under 55 today – from a traditional "fee for service" framework in which the government pays doctor and hospital bills to a voucherlike "premium support" approach in which the government subsidizes purchases of health insurance.

Republicans say the new approach forces competition upon a wasteful health care system, lowering cost increases and giving senior more options. But Democratic opponents of the idea say the new system – designed by Ryan and liberal Sen. Ron Wyden of Oregon – cuts costs too steeply and would provide the elderly with a steadily shrinking menu of options and higher out-of-pocket costs. Starting in 10 years, the plan also calls for gradually raising the Medicare retirement age from 65 to 67.

"If you want to save Medicare and keep it from going bankrupt, you must reform the program, and that's what we intend to do," countered Ryan, R-Wis.

Even as Ryan was describing his plan to reporters, it became election-year fodder for both parties.

"The House budget once again fails the test of balance, fairness, and shared responsibility," White House Communications Director Dan Pfeiffer said in a written statement charging that the GOP proposal would dole out tax cuts to rich while protecting tax breaks for oil companies and hedge fund managers.

"What's worse is that all of these tax breaks would be paid for by undermining Medicare and the very things we need to grow our economy and the middle class – things like education, basic research, and new sources of energy," Pfeiffer said.

This year's GOP measure would produce deficit estimates that are significantly lower than a comparable measure passed by the House a year ago, claiming deficit cuts totaling $3.3 trillion – spending cuts of $5.3 trillion tempered by $2 trillion in lower taxes – below Obama over the coming decade. The deficit in 2015, for example, would drop to about $300 billion from $1.2 trillion for the current budget year. Last year's GOP draft called for a 2015 deficit more than $100 billion higher.

The measure would cut spending from $3.6 trillion this year to the $3.5 trillion range in 2013 and freeze it at that level for two more years.

The GOP plan doesn't have a chance of passing into law this year but stands in sharp contrast to the budget released by Obama last month, which relied on tax increases on the wealthy but mostly left alone key benefit programs like Medicare.

The resulting political battle is sure to spill beyond the Capital Beltway into the presidential race and contests for control of the House and Senate this fall.

"The president and his party are ignoring this problem and if we have a debt crisis the people who are getting hurt first and the worst are the poor and the elderly," Ryan said Tuesday. "We are sharpening the contrast between the path we are proposing and the path of debt and decline that the president has placed us upon."

The Budget panel is slated to debate and vote on the measure Wednesday in hopes of a vote by the full House next week.

The Senate has no plans to debate a budget and will instead rely on last summer's bipartisan budget and debt pact to govern this year's round of spending bills.

The annual budget debate in Congress plays out on an arcane battlefield of numbers and assumptions, often difficult to understand even by Capitol Hill veterans. Basically, however, the so-called budget resolution sets broad parameters for follow-up legislation. Sometimes that is just a round of agency budget bills; other times lawmakers take on taxes and benefit programs like Medicare whose budgets otherwise run on autopilot.

The lower deficit figures build on cuts to annual agency budgets imposed last year and rely on new savings comes from benefit programs outside Social Security and the costly Medicare and Medicaid health care programs for the elderly and the poor.

Almost half of Ryan's spending cuts come from $2.5 trillion in cuts to federal health care programs – including repeal of Obama's signature health care law – over the coming decade.

This year, under pressure from conservatives to cut even more, Ryan doubled down on cuts to food stamps, student loans, welfare, farm subsidies and other programs whose budgets now mostly run on autopilot. A cut of $33 billion over 10 years to farm subsidies are larger than a bipartisan plan hatched last year and will be difficult for farm state lawmakers to choke down.

On taxes, the measure calls for eliminating a host of tax deductions and credits in order to produce a far simpler income tax code with just two rates for individuals: 10 percent and 25 percent. But Ryan doesn't say the income levels at which the new rates would apply, nor does he specify which popular tax breaks – like the child tax credit or the mortgage interest deduction – might be spared.

"The only way to cut the top tax rate to 25 percent is to essentially end the tax deductions for health care coverage, mortgage interest expenses and charitable contributions, even as Republicans would keep the temporary lower rates for capital gains and dividends that mainly benefit very high-income taxpayers," said Rep. Sander Levin, D-Mich.

Medicaid would be sharply cut and awarded to states as a flexible block grant as would food stamps and housing assistance.

Just as Obama's budget was dead on arrival last month with Capitol Hill Republicans, the House GOP plan is a nonstarter with Democrats controlling the Senate.

On Monday, two powerful Senate committee chairmen sent top House GOP leaders a letter protesting a GOP plan to cut agency operating budgets funded annually by Congress below levels negotiated just last summer. Instead of going with a $1.047 trillion cap on agency budgets as called for under last summer's debt and budget pact, the House panel is looking at cutting domestic agencies by $19 billion more.

Senate Budget Committee Chairman Kent Conrad, D-N.D., and Appropriations Committee Chairman Daniel Inouye, D-Hawaii, warned that breaking with the agreement only guarantees delays later this year and "represents a breach of faith that will make it more difficult to negotiate future agreements."

Also at issue, though, are across-the-board spending cuts set to take effect in January, punishment for the failure of last year's supercommittee to come up with a new package of $1.2 trillion in deficit cuts over the next decade as part of last summer's deal to let the government keep borrowing.

Those cuts, including $55 billion from defense accounts and $43 billion from non-defense accounts approved by lawmakers each year, are universally opposed by defense hawks and liberals alike.

The GOP plan would reverse the cuts by requiring various committees and try come up with at least $261 billion in other savings over the coming decade, including curbs to food stamps, federal employee pensions, and further cuts to federal health care programs. Republicans are likely to reprise a bid to tighten oversight of the child tax credit to make sure illegal immigrants don't claim it.

The measure would produce a $797 billion deficit in the upcoming 2013 fiscal year, as opposed to $977 billion under Obama's budget. The deficit would fall to $241 billion by 2016, compared to a $529 billion deficit in 2016 under Obama's plan.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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