U.S. Republican budget targets tax reforms, Medicare
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Analysis & Opinion
WASHINGTON, March 20 | Tue Mar 20, 2012 10:00am EDT
(Reuters) - U.S. House Republicans on Tuesday unveiled an ambitious plan to cut and simplify taxes, slash spending and make a new run at overhauling the Medicare health program in a bid to draw a stark election-year contrast between their vision and that of President Barack Obama.
While it has little chance of becoming law, Republicans in the House of Representatives are looking for the plan from Congressman Paul Ryan to provide a lift to their re-election fortunes in November.
The Republican budget plan would produce deficits totaling $3.13 trillion over the next 10 years - significantly below the $6.39 trillion in deficits that the Congressional Budget Office says Obama's fiscal 2013 budget plan would produce.
The Republican plan claims to put the U.S. debt on a downward path, to 62 percent of U.S. economic output by 2022, versus Obama's 76.3 percent, which is slightly above current levels.
The plan would cut taxes for individuals and have only two brackets - 10 percent and 25 percent - down from six now. It also would push through a corporate tax reform plan that would lower nominal tax rates to 25 percent from about 35 percent and largely eliminate taxes on U.S. companies' overseas profits.
The Republican budget achieves much of its deficit reduction goals through savings gained by dismantling Obama's 2010 healthcare reform law and by turning social safety net programs like food stamps and the Medicaid healthcare program for the poor into block grants for states.
After proposing last year to convert Medicare into a into a voucher-like program to allow seniors to purchase private insurance, Ryan has modified his reforms in an effort blunt criticism that it would shift too much cost on to the elderly.
The new plan offers so-called "premium support" to allow beneficiaries to purchase either traditional Medicare or competing plans through a government-run exchange.
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March 20, 2012
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March 20, 2012
House G.O.P. Lays Down Marker With New Budget Plan
By JONATHAN WEISMAN
WASHINGTON — House Republicans, believing that worries over the deficit will trump affection for Medicare and other popular programs, will unveil a federal budget blueprint Tuesday morning that would cut deeply into domestic spending, transform the tax code and balance the budget by 2040.
Because tax revenues would remain unchanged, the deficit under the plan would be almost as deep as the red ink under President Obama’s feet in the fiscal year that begins in October. But by mid-decade it would drop precipitously, and over decades, significant changes toMedicaid and Medicare, the federal health care plans for the poor and the elderly, would help bring the budget into balance.
“We’re back with a budget that offers real solutions again,” Representative Paul D. Ryan of Wisconsin, the chairman of the House Budget Committee, says in a slick video preview that posits the choice between “greater opportunity, greater prosperity” and “debt, doubt and decline.”
Ultimately, the House budget is a political document, since the Senate has no intention of passing a budget of its own.
The plan amounts to a political bet, with high stakes wagered by both parties.
“This isn’t just matter of the House battling with the Senate or arm-wrestling with the president,” said J. D. Foster, a fiscal policy expert at the conservative Heritage Foundation. “For better or for worse, what they produce is going to be the standard for conservatives and Republicans going into this election season.”
Republicans believe voters will reward them for what one what member of the House Budget Committee, Jason Chaffetz of Utah, called a “bold and realistic” effort to transform and shrink government. Democrats are equally certain that because the plan fundamentally changes Medicare without raising taxes on the rich, they can pummel vulnerable Republicans.
On Monday, the Democratic Congressional Campaign Committee began a “Millionaires over Medicare” campaign against 41 House Republicans who Democratic officials believe are vulnerable to the line of attack. “Under the leadership of Budget Committee Chairman Paul Ryan and Speaker John Boehner, House Republicans are again proposing a budget that ends the Medicare guarantee while protecting millionaires,” a memo from the group said. “It’s not only bad politics, it’s very bad policy.”
The budget plan embraces a Medicare plan similar to the one put forward by Mr. Ryan and Senator Ron Wyden, Democrat of Oregon, which would change the health plan from a guaranteed, fee-for-service government insurance program to a menu of private insurance plans subsidized by the government. Older Americans would be able to buy into the existing fee-for-service program, although annual expenditures would be capped.
The other flashpoint will be total spending on programs under Congress’s annual discretion. The budget will cap that spending at $1.028 trillion, the same level set by last year’s budget but $19 billion below the cap set in July after protracted negotiations to raise the nation’s statutory borrowing limit.
Democrats argue that the level in the new budget amounts to a broken promise that will lead to more strife as the House and Senate forge 12 spending bills this summer that will add up to two different totals. The House will aim for the $1.028 trillion cap in the new House budget while the Senate will aim for $1.047 trillion, the summer Budget Control Act cap.
“Ignoring the B.C.A. represents a breach of faith that will make it more difficult to negotiate future agreements,” two senior Democratic senators said Monday in a letter to Mr. Boehner and Representative Eric Cantor of Virginia, the House majority leader.
“Rather than trying to tear down the B.C.A., we should be holding it up as an example of what can be accomplished if we are willing to set aside our differences and work hard to find bipartisan solutions to our nation’s challenges,” said the letter from Kent Conrad of North Dakota, chairman of the Senate Budget Committee, and Daniel K. Inouye of Hawaii, chairman of the Senate Appropriations Committee.
House Republicans argue that additional cuts to both discretionary and entitlement spending are needed now to head off an automatic $110 billion in across-the-board cuts to defense and domestic programs in 2013. Even with the lower total, the House would still be above the $950 billion that domestic programs would reach if the across-the-board cuts take effect.
Under the House plan, the current $1.18 trillion deficit would fall to $797 billion in the coming fiscal year, compared with $977 billion under Mr. Obama’s plan. By 2016, the deficit would fall to $241 billion by Republican estimates. The Congressional Budget Office estimated last week that Mr. Obama’s budget would still have a $529 billion deficit in 2016.
The Ryan plan would accumulate $3.1 trillion in additional debt through 2022. The president’s would add $6.4 trillion, more than twice that total. The Republican budget cuts spending by $5 trillion more than the president’s plan, mandates the repeal of Mr. Obama’s health care law and assumes the elimination of the government-backed mortgage giants Fannie Mae and Freddie Mac.
The tax code would be simplified to just two tax rates, 10 percent and 25 percent, with the closure of tax credits and deductions. The 35 percent corporate income tax would be lowered to 25 percent and the existing, worldwide system of taxing corporate profits would be changed to a territorial system in which only domestic profits were subject to United States corporate taxation. But the budget assumes revenues would stay consistent with revenues under the current individual and corporate tax codes.
Medicare would be turned into something like Mr. Obama’s health care plan for the uninsured, a subsidized set of private insurance plans, while Medicaid would be converted to fixed block grants to the states.
Bipartisan talks continue over a so-called grand bargain on deficit reduction that would combine tax increases, spending cuts and changes to entitlement programs such as Medicare and Social Security. But hopes are dimming as both parties frame the election around their vision of deficit reduction.
“The idea of a grand bargain in 2012 is very hard to find credible,” Mr. Foster said. “To a large extent this election is about deciding what the grand bargain is supposed to look like.”
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