House Republicans Gamble With Election-Year Spending Cuts

A call by House Republicans for budget cuts exceeding those proposed by President Barack Obama - - slicing social welfare programs while reducing taxes for the wealthy -- is inflaming an election-year debate over how to curb trillion- dollar U.S. deficits.

“The American people have figured out somebody is going to have to make some serious suggestions, and they’re probably not going to be all sunshine and cotton candy,” Representative Tom Cole, an Oklahoma Republican, said yesterday as House leaders released their plan.

Republicans say their election-year budget plan makes the difficult decisions needed to reduce the nation’s $1.2 trillion deficit. It contains a revised version of last year’s proposal to overhaul Medicare, which would privatize the health-care program for the elderly and drew widespread public opposition.

Democrats said the new budget would slash important programs to finance tax cuts for the high earners.

“It does not reduce the deficit in a responsible way, instead placing the burden of deficit reduction onto seniors, the middle class, working families, and the most vulnerable by refusing to ask the wealthiest among us to contribute,” said Representative Steny Hoyer, the House’s second-ranking Democrat.

The plan, proposed by House Budget Committee Chairman Paul Ryan, will be considered by his panel today. House Republicans intend to put it to a vote by the end of this month. The proposal is certain to die in the Senate, where majority Democrats said they will skip adopting a budget this year.

Breaking the Stalemate

Lawmakers are unlikely to make much progress resolving their differences soon, with both parties looking to the November election to break the stalemate.

Republican presidential candidate Mitt Romney praised the House plan, calling it an “excellent piece of work” that is “very much needed.” Fellow contender Newt Gingrich said it is “a courageous plan that correctly understands the key to returning to a balanced budget is robust economic growth, spending control and bold entitlement reform.”

Not all Republicans, though, are enthusiastic.

“It’s like gift wrapping an attack for Democrats,” said Representative Steve LaTourette, an Ohio Republican and co- chairman of a group of House moderates. “I don’t know why we have to do that,” he said, saying Democrats plan “to ride that dead Medicare horse to a win in November.”

Others said they are ready for combat. “Do I look like a man who’s concerned?” asked Representative Allen West, a Florida Republican whom Democrats are targeting over his support of the plan. “I’ve been in three different combat zones,” said West, an Army veteran.

Medicare Subsidies

The Republicans Medicare overhaul proposal would offer senior citizens subsidies to buy private health insurance or participate in Medicare. Either way benefits would be capped, a major change in how the open-ended program operates.

The budget also calls for almost $2 trillion in cuts in non-health-related benefit programs, including Pell college tuition grants, food stamps, farm subsidies, federal employees’ pensions and various programs for the poor.

It would cut taxes and consolidate the number of individual tax brackets to two, from the current six, with rates set at 10 percent and 25 percent. That would be financed by clamping down on individual tax breaks, though Republicans didn’t say which ones would have to go.

Mortgage Interest

Ryan’s plan probably would require deep cuts in many popular tax breaks, including one letting homeowners write off the interest on their mortgages, said Marc Goldwein, policy director at the Washington-based Committee for a Responsible Federal Budget, a bipartisan nonprofit group.

“He needs to go pretty far,” Goldwein said. “There’s no way to get there without seriously trimming or eliminating the mortgage interest deduction.”

By comparison, Obama’s February budget request relies on tax increases on the wealthy to narrow the budget gap. It would generate a little more than twice as much in deficits as Ryan’s over the next decade.

“We believe that America deserves a choice of two futures,” and “we are letting the country decide which path they want America to go down,” said Ryan of Wisconsin. “Americans are ready to be talked to like adults on these issues -- not pandered to like children.”

To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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