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House GOP proposes austere, balanced budget

March 12, 2013|By Lisa Mascaro

WASHINGTON – Reprising austerity themes that define the party, House Republicans unveiled a budget proposal Tuesday that they say would achieve the ambitious goal of balancing in 10 years, but it has no chance of acceptance by Democrats in what is largely an opening bid in talks with President Obama.

House Budget Committee Chairman Paul D. Ryan of Wisconsin, the former GOP vice presidential nominee and the party's most influential budget guru, resumed his effort to revamp Medicare and other social safety net programs, bolster the Pentagon and dramatically lower tax rates to no more than 25% for individuals and corporations.

The blueprint will reignite a debate over the proper size and scope of government, which Republican leaders are eager to have, but which Democrats insist was resolved when voters returned Obama to the White House in November over Mitt Romney and Ryan.

Democrats are preparing to introduce a counterproposal this week as Obama resumes his charm offensive on Capitol Hill in search of a "common sense" caucus of lawmakers willing to set aside partisan ideology to tackle the nation's budget problems. Over the next three days, Obama plans to meet separately with Democrats and Republicans in the House and Senate.

The president has yet to produce his own formal proposal beyond his deficit-reduction blueprint. Democrats are likely to propose tax hikes on corporations and the wealthy, with little expectation of balancing revenues and spending by a specific date, as Republicans propose.

Ryan gave a nod to the conversation ahead. "This budget provides an exit ramp from the current mess — and an entry ramp to a better future," he wrote in the document.

"We understand that not everyone shares our view. Last year, the American people chose divided government. So this year, we have to make it work."

Bringing the budget into balance by 2024 was a promise GOP leaders made to the House's rebellious conservative majority, many of them tea party adherents elected with pledges to cut spending to reduce the nation's mounting debt. 

Ryan's once seemingly impossible task was made easier this year with the improved budget outlook, thanks mainly to the New Year’s tax deal, which will bring in $650 billion in revenue over the decade through higher tax rates on the wealthy, and the $1.2-trillion "sequester" cuts that are beginning to course through the federal government.

The nonpartisan Congressional Budget Office projected earlier this year that the annual federal deficit would dip below $1 trillion for the first time since Obama took office. The red ink flowed during a decade of war and the Great Recession that followed as tax revenues plummeted and spending increased to shore up the economy – piling on debt that helped stir the tea party movement.

Ryan's latest budget is not much different from his efforts over the past two years and even shares the same title: "Path to Prosperity."

The blueprint would do away with the nation's new healthcare law and turn Medicare into a voucher program for future seniors – those born in 1959 or later who become eligible for the senior health program at age 65.

Ryan had considered starting the Medicare changes sooner, for those now 56, but backed off amid what was certain to be a political battle; Republicans had campaigned on a promise not to change the program for those 55 and older.

The Medicaid health program for the poor, disabled and seniors in nursing homes would be substantially reduced under Ryan's proposal to shift operations to the states.

Welfare also would be cut as part of a broader overhaul of poverty programs, including food stamps.

Spending cuts from the sequester would continue, but defense accounts would be largely spared.

Total spending, expected to grow by 5% in coming years, would grow by 3.4% under his plan.

"Hardly draconian," Ryan wrote.

On the tax side of the ledger, Ryan, a student of supply-side economics, hews to the belief that cutting taxes will spur economic growth.

Top tax rates, 39.6% after the New Year's tax deal, would drop to 25%. The code would be simplified with just one other bracket, at 10%. Corporate tax rates would similarly be decreased to 25%.

Critics of Ryan's past budgets have argued that tax breaks cannot be relied on to generate revenue through economic growth. And they warn that the Medicare proposal would shift costs away from the government and onto seniors.

Under the Medicare changes, the government would provide a voucher that future seniors could apply to the cost of private insurance or Medicare. The value of the government support would be set to the second-cheapest plan, which means it would not be guaranteed to cover the cost of Medicare.

Higher-income seniors would be asked to pay higher premiums.

Ryan’s budget counts about $700 billion in Medicare reductions achieved under Obama's healthcare law, even though he seeks to repeal "Obamacare," critics note.

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