Paul Ryan budget: Cut Medicare and taxes to end deficit in 10 years

U.S. Rep. Paul Ryan (R-WI) arrives for the U.S. Rep. Paul Ryan (R-WI) arrives for the presidential inauguration at the U.S. Capitol. (Jan. 21, 2013) Photo Credit: Getty Images

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U.S. House Budget Committee Chairman Paul Ryan Tuesday unveiled a revised tax-and-spending proposal that he said would eliminate the deficit within a decade by cutting $4.6 trillion out of a vast swath of federal expenditures.

The budget for fiscal year 2014 would cut Medicaid, food stamps, Pell college tuition grants and scores of other programs while sparing the Defense Department and reducing individual and corporate income tax rates. The result, according to his estimates, would be a rapidly shrinking deficit, falling by more than 80 percent in just two years and disappearing altogether by 2023.

Ryan, a Wisconsin Republican who was his party’s vice presidential candidate in 2012, downplayed the severity of the proposed cuts, saying his plan would amount to restraining annual spending increases to 3.4 percent from what would otherwise be 5 percent.

“The budget provides an exit ramp from our current mess,” he wrote in the budget plan’s introduction. “The fact is we owe the American people a balanced budget. The less we owe to foreign creditors, the more of our future we will control.”

The plan, which is similar to previous iterations of Ryan’s budgets, will surely be dead on arrival in the Senate, where the majority Democrats have long complained that his proposals take too much from the poor while asking too little of the wealthy.

BUDGET BATTLE

It will set up yet another budget battle in Washington, where lawmakers are deadlocked over what to do about $85 billion in automatic cuts, known as sequestration, that took effect earlier this month. In addition, they need to agree on separate spending legislation to keep federal agencies operating beyond March 27.

The House Budget Committee’s top Democrat, Chris Van Hollen of Maryland, said that Ryan’s proposal protects “tax breaks for special interests and the very wealthy” while “ending the Medicare guarantee.”

Republicans are “dead set on balancing the budget on the backs of working families, seniors, and kids’ education,” he said in a statement released Tuesday.

Senate Democrats are preparing to start work on their own budget proposal, which is expected to call for significant tax increases on the wealthy. There is little prospect of an accord between the two chambers on a single plan, which means that Congress probably will go a fourth consecutive year without agreeing on a budget.

HIGH GROUND

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Republicans are attempting to seize the rhetorical high ground in the debate over the deficit with their call to eliminate a shortfall currently projected to total nearly $1 trillion in 2023. While economists say it makes little difference whether the budget is technically balanced, contending that what matters is getting debt down to manageable levels, “balancing the books” is synonymous with “good government” for many voters.

A balanced budget is a “common-sense goal,” Ryan said, while “an unbalanced budget is a sign of overreach.” He writes in his proposal that “when a government does too much, it doesn’t do anything well.”

Senate Majority Leader Harry Reid called the proposal “an extreme budget that’s anything but balanced.”

“It will shower more tax breaks on millionaires,” the Nevada Democrat said on the Senate floor.

BUDGET DEAL

Ryan, whose budget proposal last year wouldn’t have eliminated the deficit until 2040, found his path to balance cleared somewhat by a January budget deal in which lawmakers agreed to raise taxes on the wealthy. That’s projected to pump an additional $600 billion into the Treasury, which Ryan is including in his budget proposal. He has also been helped by revised Congressional Budget Office projections showing that health-care spending is growing less quickly than anticipated.

As in previous years, the centerpiece of Ryan’s plan is his proposal to overhaul Medicare by giving people now under age 55 fixed sums with which to buy either private insurance or use in Medicare. Either way, their benefits would be capped under his plan, which would be a major change in how the currently open-ended program operates. Ryan omitted a proposal floated in recent days among colleagues to phase in the changes a year more quickly, sticking with his original plan to exempt those 55 and older from any changes.

DEEP CUTS

The plan reiterates his previous calls for deep cuts in Medicaid, the health-care program for the poor, as well as in food stamps, agriculture subsidies, federal workers’ benefits, Pell college tuition grants and many other programs.

It would impose cuts in discretionary spending beyond this year’s sequestration. His plan would set aside $1.14 trillion for such spending for the 2014 fiscal year, which would amount to rolling back that portion of the budget to below 2008 levels -- and even less when inflation is taken into account.

Still, his plan leaves many questions unanswered. It would call for almost $1 trillion in cuts to mandatory programs outside of health care without saying where much of those cuts would be made. The plan also doesn’t propose changes in Social Security, the government’s single biggest program; it has begun running a cash deficit, and the program’s trustees have projected that its disability program will go bust by 2016.

Likewise, Ryan’s plan proposes to overhaul the tax code by dropping the top rate to 25 percent and collapsing the number of brackets to just two from the current seven, with the other rate set at 10 percent. It would finance those reductions by squeezing individual tax breaks, without identifying which would have to go.

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