House Budget Committee Chairman Paul Ryan outlined his proposal today for major cuts to programs such as Medicare and lower tax rates for high earners as lawmakers gear up for an election-year battle over the federal deficit.
The Wisconsin Republican's plan would reduce spending by $5 trillion over the next decade with Medicaid, food stamps, Pell college tuition grants, and other programs facing reductions.
The Pentagon would be spared while the top individual and corporate tax rates would fall to 25 percent under the plan.
The proposal would lead to a $3.1 trillion deficit over the next decade, a little less than half as much as President Barack Obama’s budget plan. The deficit would shrink to $166 billion in 2018 under the proposal, though it would begin growing again in subsequent years. The plan wouldn’t balance the government’s books until 2040.
“We feel morally bound to offer a choice,” Ryan said at a news conference today in Washington. “We are sharpening the contrast between the path that we’re proposing and the path of debt and decline the president has placed us upon.”
White House spokesman Dan Pfeiffer said the plan would hurt programs such as Medicare to finance tax cuts for high earners.
“It would shower the wealthiest few Americans with an average tax cut of at least $150,000, while preserving taxpayer giveaways to oil companies and breaks for Wall Street hedge fund managers,” Pfeiffer said. House Democratic leader Nancy Pelosi of California said the plan would “shift costs to seniors and let Medicare wither on the vine.”
Rep. Steve Israel, a New York Democrat, said the Democratic Congressional Campaign Committee that he leads will begin targeting 41 House Republicans over their support for the Republican plan.
Republicans aim to adopt the plan by the end of this month. It’s certain to die in the Senate where Democrats have said they don’t plan to adopt a budget resolution this year. The budget plan is a marker by Republicans in the deficit debate lawmakers probably will revisit in earnest after the November election.
The proposal reiterates Republicans’ call last year for overhauling Medicare, though with some changes reflecting a compromise plan Ryan of Wisconsin has since written with Senator Ron Wyden, an Oregon Democrat. It would offer seniors, starting in 2023, subsidies they could use to buy private health insurance or use in Medicare. Either way, benefits would be capped, which would be a major change in how the open-ended program now operates.
The plan doesn’t propose changes to Social Security.
It would waive automatic cuts set to begin hitting the Pentagon in January, the penalty for the failure last year of a deficit-cutting supercommittee to agree on a plan. The budget calls for a half-dozen congressional committees to come up with cuts of $116 billion over the next five years.
It also bows to demands from self-described conservatives for additional cuts in the operating budgets of federal agencies, which Democrats say would renege on a budget agreement with Obama in August. Senate Democrats urged House leaders yesterday to stick to the deal, known as the Budget Control Act.
The plan would carve an additional $19 billion from so-called “discretionary” spending, capping that portion of the budget next year at $1.028 trillion. Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, denounced the plan and said his colleagues will follow last year’s $1.047 trillion agreement.
“They made an agreement — they shook on it,” Conrad told reporters today.
Speaker John Boehner predicted “a strong vote of support” among House Republicans for Ryan’s proposed budget and disputed Democrats’ argument that House Republicans were breaking the debt-limit deal reached last year.
“People have limits on credit cards,” Boehner said. “That doesn’t mean that you are required to spend up to the limit.”
The plan calls for overhauling the U.S. tax code by reducing rates as well as the number of income tax brackets. It would consolidate the number of brackets to two, from the current six, with rates set at 25 percent and 10 percent. The top rate is currently 35 percent.
It would cut the corporate tax rate to 25 percent while eliminating the alternative minimum tax. To help finance the rate cuts, Ryan’s plan calls for getting rid of individual tax preferences without identifying which ought to go.
The proposal is similar to Republican presidential candidate and former Pennsylvania Senator Rick Santorum’s tax plan, which would replace the current system with two rates set at 28 percent and 10 percent. Former Massachusetts Governor Mitt Romney has proposed cutting rates by 20 percent while Newt Gingrich, the former House speaker, wants a 15 percent flat tax.
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