Ryan's Deficit-Cutting Proposals Too Ambitious Even for Fellow Republicans

Paul Ryan, the U.S. House budget chief, rejected President Barack Obama’s efforts to tame government spending as not enough. As Ryan drafts a Republican alternative, he’ll have to reject his own ideas as too much.

Ryan’s “Roadmap for America’s Future,” a long-term proposal for dealing with the nation’s deficit that he introduced long before taking the helm of the budget committee last month, would cut deep into health programs for the elderly and disabled -- the biggest drivers of federal spending -- and partially privatize Social Security.

It would mean about $718 billion less, almost 6 percent, for Medicare and Medicaid over the next nine years, according to a Bloomberg Government study. And while newly empowered House Republicans put shrinking the U.S. debt at the top of their agenda and chose Ryan to lead on budget issues, his own panel won’t produce a spending plan that mirrors his proposals.

House Speaker John Boehner, an Ohio Republican, calls Ryan’s roadmap a “bold vision of conservative reform,” while also saying he doesn’t agree with all of it and that the outline isn’t a budget plan.

Senate Republican leader Mitch McConnell of Kentucky said any cuts in entitlement programs such as Medicare and Social Security must have bipartisan support. There “will be no entitlement reform without the president’s embrace,” McConnell said last month when asked by reporters about Ryan’s roadmap, which would also reduce income taxes and give the wealthiest Americans the most relief, according to another study.

Spending Vote Looms

Even a group of House Republicans pushing for deep budget cuts steered clear of entitlement programs when they introduced a plan to cut $2.5 trillion over the next decade.

House Republican leaders plan a vote the week of Feb. 14 to cut non-security discretionary spending for the rest of the fiscal year that ends Sept. 30. Party leaders made a campaign pledge to cut this year’s spending by $100 billion to narrow a deficit that may reach a record $1.5 trillion this year. They’ve since scaled that back to about $60 billion, because the government is almost halfway through the fiscal year.

Ryan, 41, will introduce legislation next week that sets the overall amount of the reduction for this year, after which various appropriations committees will propose specific cuts. Ryan will unveil his fiscal 2012 budget in April.

‘Spends Too Much’

Obama, who will propose his 2012 budget on Feb. 14, said in his Jan. 25 State of the Union address he wants to start by freezing non-security discretionary spending for five years. He said the plan would save $400 billion over a decade. While offering no specifics, he called for lowering Medicare and Medicaid costs and finding a “bipartisan solution to strengthen Social Security,” the pension program for retirees.

Ryan, delivering the Republican response, said the administration’s “actions show they want a federal government that controls too much, taxes too much and spends too much.”

The Wisconsin Republican hasn’t been afraid to touch entitlement spending, long sacrosanct in U.S. politics.

His roadmap, which he introduced in 2008 and revised last year, would cut funds for nursing homes by $92 billion, or 5 percent, and money for hospitals by $247 billion, or 2.5 percent, according to the Bloomberg analysis. The analysis was based on data from Ryan’s plan, the nonpartisan Congressional Budget Office and the government’s Centers for Medicare and Medicaid Services.

Funds for doctors and other clinicians would fall by $83 billion, or 1.3 percent, from 2011 through 2019, the analysis showed.

$11,000 Vouchers

For Medicare, new beneficiaries in 2021 would be put on a voucher program providing a fixed sum each year they could use to buy private coverage. Under the current system, the government pays doctors and hospitals for the care they give patients.

The Medicare voucher would average $11,000 for each beneficiary and grow at a fixed rate. Ryan’s plan also would gradually raise the age people become eligible for Medicare to 69 and a half from 65.

Spending on Medicaid, which benefits the poor and disabled, would decline by 19 percent over nine years. Beneficiaries would get a fixed payment for care, and annual increases would be capped at about 2.7 percent.

‘Include Entitlements’

“We have to pull our head out of the sand and realize that if you’re going to solve long-term budget woes you are going to have to include entitlements,” said Representative Jack Kingston, a Georgia Republican and member of the Appropriations Committee. “You can cut the National Endowment for the Arts and Amtrak all you want, but you’re not going to be able to balance the budget until you get to the sacred cow of the entitlements.”

Eighty-two percent of Americans are opposed to benefit cuts to the Medicare health-insurance program for the elderly, even though almost half say the budget shortfall is “dangerously out of control,” a Bloomberg National Poll in December showed.

The public’s resistance to entitlement cuts explains the Republican reluctance to get behind Ryan’s detailed proposal. And the failure of both political parties to offer specific plans to curb entitlement spending underlines how difficult it will be to follow through on promises to rein in the deficit.

“In our two-year horizon of political life in Washington, everyone is afraid to sign on to something that is actually long-term thinking,” Kingston said.

Corporate Tax Cut

On the revenue side, Ryan’s roadmap would scrap tax exemptions for employer-sponsored health benefits in favor of individual tax credits, and let workers under age 55 steer part of their Social Security taxes into private accounts. It would keep the current Social Security system for people 55 and older.

He would eliminate income taxes on corporations, capital gains and dividends, and retain all the Bush-era tax cuts, now set to expire in 2012, which would exacerbate the deficit.

Those changes would cause federal revenue to decline as a percentage of GDP, according to an analysis by the Tax Policy Center in Washington. The analysis said Ryan’s plan would reduce taxes for most people, with the largest cuts going to the highest earners.

“He wants a tax system that will generate approximately 19 percent of GDP,” said Joseph Rosenberg, a research associate at the Tax Policy Center who did the analysis. “The plan he laid out doesn’t come close enough to that level.”

Only 17 of 180 House Republicans signed on to Ryan’s roadmap in 2010, an election year. Ryan has said it’s too early to know whether his 2012 budget will include elements of his plan, or if it will address spending on entitlements at all.

“What everybody seems to think these days is, ‘Well, gosh, I’m the chairman now and I can just make my roadmap the budget resolution,’” he said last month at the National Press Club in Washington. “That’s not how it works.”

Ryan said he wrote his roadmap “to reach the consensus of one person -- myself. I now have to write a budget resolution to reach the consensus of at least 218 people, the majority of the Republican caucus.”

To contact the reporter on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net

To contact the editor responsible for this story: Mark Silva in Washington at msilva34@bloomberg.net

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