Republican House Budget Chairman Paul Ryan, in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend, predicted a congressional supercommittee will fall short of its goal of finding $1.5 trillion in savings, while saying it should be able to find roughly half that without raising taxes.
(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)
AL HUNT: We begin the show with the House Budget Committee chairman, Paul Ryan of Wisconsin. Thank you for being with us, Mr. Chairman.
PAUL RYAN: Hey, it’s great to be back with you, Al.
HUNT: Let’s first talk about the supercommittee and whether it’s more likely they’ll come up with some sort of bipartisan compromise by Nov. 23 to cut the budget deficit or they won’t.
RYAN: I hope there’s a bipartisan compromise.
HUNT: What do you think?
RYAN: I think there will be. I don’t know how large it will be. If it’s not $1.2 trillion, then that minimizes how much the sequester hits by. So if it’s, say, $600 billion -
HUNT: Then you have a -
RYAN: - which is pretty easy, yeah, then you have a 600 - pretty easy to find. We proposed a budget with $6.2 trillion in cuts. So clearly, we can show many different ways of arriving at $1.2 trillion in spending cuts. The Biden group was getting very close to that. So we’ve had talks earlier that got very close to that number, so I’d like to think we can get pretty close to that number.
HUNT: Will there be any higher revenues in that package? Or is that, as far as you’re concerned, off the table?
RYAN: Well, that’s the grand bargain discussion. And to have a grand bargain, where you have tax reform and higher revenues that result from that, requires wholesale health-care reform -
RYAN: - health care, meaning the president’s health-care law, health-care entitlements, and it doesn’t appear that the Democrats want to do that. From the early parts of these talks, they don’t seem to be willing to put the president’s health-care law on the table, so that’s why I don’t think you’re going to have a grand bargain.
HUNT: So if they - but they’re willing to do a little bit of entitlements, not as much as you’d like.
RYAN: Well, yeah, but a little bit doesn’t fix the problem.
HUNT: Well, what I’m saying, if they do a little bit, would you do a little bit of taxes?
RYAN: I don’t think so, because we want to - the other problem is this. A little bit of taxes means you’re not doing overall reform. You need to reform the tax code to grow the economy. And if you just keep throwing more tax increases on top of tax increases, you’re hurting the economy.
HUNT: Anything on the president’s so-called jobs proposal?
RYAN: So the temporary tax rebates, we have learned from the Bush and the Obama administration, did not work very well. I’m fine with the idea of people keeping more of their own money, but we would like to go with ideas that are proven to work, not ideas that are proven to fail.
HUNT: So is that proposal itself dead?
RYAN: I think it is dead. I think it’s dead because lots of Democrats, when they were in charge of Congress, opposed many of these kinds of provisions to begin with, the permanent tax increases to pay for the temporary tax rebates, bailouts of state government budgets. The federal budget’s in worse shape.
But what I want to say, Al, is I think there’s a chance at some bipartisanship, not in this package, but in what he said in his speech. He said he wanted to do business tax reform. That’s exactly what we want to do. Get rid of the loopholes, lower the rates, a fair, simple, competitive system.
And these trade agreements. We have agreement on that.
HUNT: Well, let’s talk about tax reform, because six months ago, you laid out a blueprint -
HUNT: - of really huge tax changes, eliminate taxes -
RYAN: That’s right.
HUNT: - on capital gains, dividends, and estates, lower the rates to 25 percent on both sides. Presidential candidate Jon Huntsman has offered something quite similar. He says, however, to do it, you have to eliminate all preferences, get rid of home mortgage deduction, get rid of charitables. Would you be willing to do that?
RYAN: You don’t have to do that in what we proposed. We proposed a 25 percent structure that doesn’t require doing that. The fiscal commission, which was what Jon Huntsman sort of based his plan on, does propose doing that.
To me, I want to see the final plan. If it’s one - what I proposed in the House was, give people a choice. If you have an underwater mortgage and the mortgage deduction means a lot to you, give you time to transfer over to a simpler system if you want to do that.
But what I’ve always said, you want to have a two-tier flat tax system that fits on a postcard, you can choose that. If you want to stick with the current system, with all of these loopholes in it, you can choose that, that’s the taxpayer’s choice. That’s always been my preference.
HUNT: Well, we don’t know how to pay for your tax cuts.
RYAN: Well, so what we say is, let’s do these on a revenue- neutral basis. Our budget doesn’t say cut taxes and lose money to the government. Our budget says get rid of the loopholes, which, by the way, are disproportionately used by higher-income individuals -
HUNT: Yeah, but which loopholes do you get rid of?
RYAN: So the amount of loopholes you get rid of gives you the ability to lower your tax rate. So when you take a look at a 25 percent system we’re saying, you have to get rid of a lot of loopholes -
HUNT: How about charitables? Can you get rid of that?
RYAN: You can keep things like charity. You can keep things like mortgages -
HUNT: But those are the big ones, though.
RYAN: Those are the big ones, but what I wouldn’t do is what the president’s proposing, which is raise tax rates and get rid of things like charitable deductions, get rid of things like mortgage deduction.
HUNT: But, Congressman, it sounds like you’re saying here’s a free lunch.
HUNT: I’m going to give you these tax cuts, but there’s no pain. Nobody loses anything.
RYAN: What I’m saying now - no, the pain is you forego your loopholes.
HUNT: Tell me which ones. Give me two.
RYAN: Across the board - well, on the corporate side, there are a lot of them. Section 199, there are lots of things in the code that provide certain individual industries, like energy industry - there are a lot of things that are accounting issues - I won’t get into the technicalities of it - that cost a lot of revenue. I believe the corporate code needs a big hall cleaning (ph), lower the rates.
Now, the individual side, give people a choice. If you want to get rid of these things except for generous personal and family exemptions, you can have a simplified system with a much, much lower rate.
HUNT: Let’s take another signature Paul Ryan issue, which is to replace Medicare with a program where seniors in the future could pick their own private plan, with government assistance, if need be. The Bloomberg poll this week says - this has been around now for six months, widely discussed - 57 percent to 37 percent of people say it’s a bad idea. Republican presidential candidates seem to be running from it. Are you going to stick with this? Should this be the Republican position next year? Or are you starting to change?
RYAN: We just won two special elections where this was a big piece of the debate. So how you question or phrase the question in a poll can usually determine the outcome of a poll.
HUNT: So this is the Republican position, you think, in 2012?
RYAN: Absolutely, because you know why? Because this is a big problem for this country. This is the driver of our debt. If we’re going to be serious with the country about getting this debt under control, we have to give solutions. And we believe this solution, which is a healthier system for future seniors that works just like the system that members of Congress and federal employees have, where the government gives you assistance to pay for your government-decided selected health care plan, these are options, guaranteed cover options that the government lays out for you, Medicare negotiates with these companies, insurers, forcing them into competition. You pick the plan that meets your needs, just like 20 percent of Medicare beneficiaries do today with Medicare Advantage, just like all Medicare beneficiaries do today with Part D.
HUNT: You accused President Obama last week of practicing class warfare in his so-called millionaire’s tax. Whatever the merits, you’ve proposed really huge tax cuts for wealthier Americans, dividends, capital gains, estates, the like, and there would be major cuts in programs like Medicaid and food stamps that primarily affect lower-class, poorer Americans. Aren’t you practicing class warfare, too, just a different class?
RYAN: First of all, those things you just said, food stamps, Medicaid, they continue to grow under our budget. Second of all, we take away the subsidies that are going to higher- income people. We take away the extra subsidies in entitlement programs that are going to wealthy people.
HUNT: But that -
RYAN: We proposed means testing in this program. That’s income adjusting them.
HUNT: That’s - that’s teeny compared to estate taxes and capital -
RYAN: Actually, it’s not. It’s not teeny. That - we get more savings -
HUNT: It’s not nearly as much.
RYAN: We get more savings in our budget by going after means testing, income-adjusting subsidies. And what we’re saying on taxes is, it is the people in the top two tax brackets that enjoy almost all of the deductions, all of the tax shelters.
HUNT: You don’t think that you are practicing a form of class warfare just the other way around?
RYAN: No, because what I think class warfare is, is divisive rhetoric.
HUNT: Is it only against the rich, class warfare?
RYAN: What I would say, the president is using rhetoric that divides people, that preys on people’s sense of anxiety, fear, envy. And what we’re trying to do is appeal to people’s sense of hope, aspiration. We want an equal opportunity society. We want a society of upward mobility, and that is what we’re striving for, which is prosperity.
RYAN: Well, I don’t know if - who’s unelectable or not. It’s not the word I would choose to describe it. Ponzi was a criminal enterprise. Obviously, that’s not the case with Social Security. But there are problems with it, with Social Security, that we all acknowledge. It’s going broke. If we do nothing, an across-the-board benefit cut hits current seniors, a critical program that millions of people rely on, and the next generation will get a bankrupt program, and so let’s save it.
HUNT: Thank you very much, Chairman Ryan.
RYAN: You bet, Al.
HUNT: Good to see you.
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