GO
Loading...

House GOP Budget Slashes Taxes, Benefit Programs

AP
Tuesday, 20 Mar 2012 | 10:50 AM ET

Conservative Republicans controlling the House unveiled a budget blueprint Tuesday that combines slashing cuts to safety net programs for the poor with sharply lower tax rates in an election-year manifesto painting clear campaign differences with President Obama.

Paul Ryan (C), Eric Cantor (L) and Kevin McCarthy (R)
Bloomberg via Getty Images
Paul Ryan (C), Eric Cantor (L) and Kevin McCarthy (R)

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.

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. As if to underscore that reality, Ryan released a campaign-style video Monday evening telling viewers that "Americans have a choice to make" in a none-too-subtle appeal to voters.

"It's up to the people to demand from their government a better budget, a better plan, and a choice between two futures," Ryan said. "The question is: which future will we choose?"

The Budget panel is slated to debate and vote on the measure Wednesday and 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. That means big cuts to food stamps, student loans, welfare, farm subsidies and other programs whose budgets now mostly run on autopilot.

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.

Medicaid would be sharply cut and awarded to states as a flexible block grant.

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.

"The country wants to be spoken to like adults, not pandered to like children," Ryan said Tuesday on "CBS This Morning."

The Wisconsin Republican said, "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."

Ryan said he has grown weary of the GOP being accused of endangering the benefits that senior citizens have come to expect. "We preserve the program for people in and near retirement," he said. "We want to take all the empty promises our government is making and make sure they're not broken promises

Featured

  • Pro-Russian activists seized the main administration building in the eastern Ukrainian city of Donetsk.

    Deadly clashes in eastern Ukraine have spiked fears of all-out war in the region. So who are the armed, flag-waving rebels who appear to be behind it all?

  • An employee wipes a TV screen in a shop in Moscow, on April 17, 2014, during the broadcast of President Vladimir Putin's televised question and answer session with the nation.

    Russian President Vladimir Putin warned of possible disruption to Europe's gas supply on Thursday, as the U.S. confirmed it would send additional military support to Ukraine.

  • The recovery in the EU's car industry carried on through March, providing some much needed cheer for automakers.

  • Amazon is facing fresh strikes in Germany after pay negotiations with the country's second-largest union Ver.di broke down, the Financial Times reports.

Contact Europe News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Europe Video

  • Jan Dunning, CEO of St Petersburg-headquartered hypermarket chain Lenta, says the situation in Ukraine has had no impact on the group, as consumer confidence remains unaffected in Russia.

  • Vincent Deluard, European strategist at Ned Davis Research Group, says the strong euro is a problem for the region's companies, especially for the large exporters.

  • European shares closed higher on Thursday as investors brushed aside concerns regarding Ukraine and focused instead on Wall Street earnings and the latest U.S. jobs data.