The announcement reignited a full-throated budget battle. Republicans cast themselves as stepping up to a federal deficit crisis long ignored by both parties, while Democrats and their allies responded with promises to protect the elderly and the poor from drastic cuts they said would harm the most vulnerable Americans.
The GOP plan doesn’t have a chance of becoming law this year — the Democratic-controlled Senate has no plans to even take it up — but it provides a sharp election-season contrast to the budget released by Obama last month. His proposal would rely on tax increases on the wealthy to curb trillion-dollar-plus deficits but for the most part would leave alone key benefit programs such as Medicare.
The Republican proposal, released by House Budget Committee Chairman Paul Ryan, would wrestle the federal spending 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 and other Democrats have promised to defend.
The plan calls for steep drops in personal and corporate tax rates in exchange for clearing away hundreds of tax deductions and preferences. It would eliminate oft-criticized corporate tax boondoggles but also tax deductions and credits claimed by the poor and middle class.
To cope with the unsustainable growth of Medicare and the influx of retiring baby boomers, the GOP budget reprises a controversial approach 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 would force competition upon a wasteful health care system, lowering cost increases and giving seniors more options. But Democratic opponents of the idea say the proposed system — designed by Ryan and liberal Sen. Ron Wyden of Oregon — would cut costs too steeply and would provide the elderly with both a 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,” declared Ryan, R-Wis.
Mitt Romney, the GOP presidential front-runner, praised the measure.
“The House Republican budget rejects the out-of-control spending and higher taxes proposed by President Obama in his budget last month,” Romney said in a statement. “By proposing prescriptions that will strengthen Medicare for generations to come, it also highlights President Obama’s failed leadership on entitlement reform.”
Democrats and the White House responded with a verbal fusillade.
“House Republicans once again are trotting out their well-worn playbook to ensure that billionaires and Big Oil triumph over Grandma, Grandpa, the poor and the struggling middle class,” said Rep. Edward Markey, D-Mass. “The Republican budget scheme would end the guarantee of Medicare and force seniors to pay more out of pocket for healthcare or forgo coverage because they cannot afford it.”
For all its sweep and scope, the blueprint unveiled Tuesday isn’t actual legislation. Instead, the annual budget debate in Congress will play out on an arcane battlefield of numbers and assumptions, often difficult to understand even by Capitol Hill veterans. The budget resolution, however, 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.
This year’s debate on the budget measure promises to have little impact on the ultimate resolution of a pile of unfinished business, including the expiration of Bush-era tax cuts and efforts to stop painful across-the-board spending cuts required because of the failure of last year’s deficit supercommittee to come up with $1.2 trillion in deficit savings.
The GOP measure unveiled Tuesday would produce deficit estimates significantly lower than a comparable measure passed by the House a year ago. It claims 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 would drop to about $300 billion from $1.2 trillion for the current budget year.
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. It would produce a $797 billion deficit in the upcoming 2013 fiscal year, as opposed to $977 billion under Obama’s budget.
“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 Committee 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.
Almost half of Ryan’s spending cuts would 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. The measure proposes no changes to Social Security.
This year, under pressure from conservatives to cut even more, Ryan increased 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 would be larger than a bipartisan plan hatched last year and would be difficult for farm state lawmakers to choke down.
On taxes, the measure calls for eliminating a host of 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.
Tax experts say, however, that the only way to get the top rate down to 25 percent — from 35 percent today — is to eliminate popular but expensive tax breaks like the deductions for mortgage interest, charitable contributions and employer subsidies of health care coverage,.
Medicaid would be cut $770 billion below Obama’s budget over 10 years and awarded to states as a flexible block grant as would food stamp and housing assistance programs.
The GOP measure also would replace $55 billion in Pentagon spending cuts and $43 billion in cuts to non-defense appropriations set to take effect in January 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. Committees would develop the savings, which would be bundled together and brought to the floor in May.
The measure would leave in place, however, $12 billion in cuts to other programs, including a less than 2 percent cut in Medicare payments to providers and cuts to farm price supports