Ryan’s Budget-Cutting Zeal Focuses Election Debate on Medicare

U.S. Representative Paul Ryan, named yesterday as Mitt Romney’s running mate, is perhaps his party’s most zealous advocate of slashing the government’s growing debt.

As chairman of the House budget committee, he’s called for major cuts in Medicare, Medicaid, food stamps and scores of other politically sensitive programs. At the same time, he wants to overhaul the tax code, including slicing taxes on the wealthy -- one reason why his plan cuts the deficit while falling short of balancing the budget anytime soon.

It’s a proposal that has transformed the public debate over what to do about the government’s trillion-dollar deficits, and one now at the center of the presidential campaign.

“Politicians from both parties have made empty promises, which will soon become broken promises with painful consequences if we fail to act,” Ryan, 42, said yesterday in Norfolk, Virginia, as Romney introduced him as his vice presidential candidate. “We might have been able to get away with that before, but not now. We’re in a different and dangerous moment. We’re running out of time.”

Democrats have lined up against Ryan’s plan and so far he’s mostly eschewed the compromises that might produce a grand bargain to curb the debt. As a member of President Barack Obama’s bipartisan debt-reduction committee, he voted against a proposal by the panel’s chairmen, Democrat Erskine Bowles and Republican Alan Simpson, in part because it would raise taxes.

Revamping Medicare

The centerpiece of the so-called Ryan plan is the overhaul of Medicare, the health-insurance program covering 50 million elderly Americans whose cost is projected to swamp the federal budget. Ryan wants to replace the traditional system with a plan to give seniors a fixed amount of money to buy private coverage. The theory is that competition among health insurers for their business will bring down spiraling costs.

The Wisconsin lawmaker originally called for phasing out the Medicare program in favor of the vouchers, though this year, in a bid to win bipartisan support, he softened the plan by offering seniors a choice between the two.

Either way, Democrats say it won’t work, predicting that seniors will be left to either shoulder bigger bills or forgo care -- or both. The proposal “would end Medicare as we know it by turning it into a voucher system, shifting thousands of dollars in health-care costs to seniors,” Jim Messina, Obama’s campaign manager, said after the vice presidential announcement. Democrats say a board of experts, created in the administration’s health-care overhaul, should decide how to wring savings from the program.

Tax Cuts

While Obama calls for raising taxes on higher-income earners, Ryan would do just the opposite, dropping the top income-tax rate to 25 percent from next year’s 39.6 percent, arguing that will give higher-income Americans more incentive to earn and invest. It’s part of a proposed tax overhaul that would collapse the number of brackets to two from the current six, with the other rate set at 10 percent.

Ryan would finance that by eliminating individual tax breaks, though he has declined to spell out which ones. The math would dictate major cuts in popular tax expenditures such as those allowing homeowners to write off their mortgage interest and companies to offer health insurance.

Because he takes a hard line against tax increases, shields the Pentagon from significant cuts and would only slowly phase in his Medicare plan -- it wouldn’t begin until 2023 -- Ryan has called for cuts in food stamps, Medicaid and other programs for low-income Americans to reduce the deficit.

Slowing Medicaid Growth

Where Obama’s health-care law will open Medicaid to some 17 million more Americans in coming years, Ryan goes in the reverse direction. His budget calls for a one-third reduction in the program, which provided care last year at various times to almost 70 million low-income children, pregnant women and seniors.

He’s also proposed cutting off food stamps to almost 2 million Americans to avoid scheduled cuts in defense spending next year. While the administration has expanded funding for Pell grants for college tuition, Ryan has sought reductions, suggesting those recent increases have only prompted colleges to raise fees.

He says those cuts will empower the poor, describing the federal safety net as a “hammock that lulls able-bodied people into lives of complacency and dependency.”

Democrats disagree, and Ryan ran into criticism from some fellow Roman Catholics this year when he said his proposed cuts were inspired by the church’s teachings.

Lawmaker Balks

Some Republican lawmakers, such as Montana Representative Dennis Rehberg, who is running in a close Senate race, have distanced themselves from Ryan’s plans. “I simply refuse to gamble with something as important as Medicare,” Rehberg said this year after a House vote endorsing the proposal.

Romney has backed the House plan, and long before he was chosen to be on the ticket, Ryan said they had coordinated their proposals.

“We’ve talked to him and his staff about this over the last couple of months and come to a mutual understanding about how we think we can preempt a debt crisis,” Ryan said in a July 11 interview with Bloomberg News. “Our policies are pretty remarkably similar.”

Unanswered Questions

Still, Ryan’s deficit-reduction proposal leaves some questions unanswered. It steers clear of offering ideas on how to shore up Social Security, though its disability insurance program is headed for insolvency in just four years. His plan is fuzzy on many of the specific programs that would have to be cut to bring down the deficit. Some Republican lawmakers say Ryan’s budget takes too long to cut the debt, noting it would not produce a single balanced budget until 2040.

The publicly held debt of $11.1 trillion is 73 percent of the nation’s gross domestic product, up from 40 percent just four years ago. That’s the highest level since the World War II era, and is expected to continue spiraling upwards as the baby- boom generation marches into retirement.

Though Ryan has focused on economic matters, he has sided with his party on social issues as well, opposing abortion rights and gay marriage.

“I’m as pro-life as a person gets,” he told the Weekly Standard in 2010. He also supports amending the Constitution to ban same-sex marriage. Still, he has supported legislation by Massachusetts Democratic Representative Barney Frank prohibiting discrimination against gays in the workplace.

Some Blemishes

While Democrats will target the Romney-Ryan ticket’s economic blueprint, some Republicans are likely to find what they would consider blemishes in Ryan’s record, too.

He supported the 2008 government bailout of Wall Street, loathed by anti-spending Tea Party activists, as well as the rescue of the automobile industry. He backed the creation of the Medicare prescription-drug benefit, which had been the biggest entitlement expansion in decades until Obama pushed through his health-care overhaul. Though the drug benefit is now expected to cost less than initially projected, the price tag is still estimated to top $350 billion.

He also supports so-called Davis-Bacon rules requiring the government to pay workers on construction projects locally “prevailing wages.” That’s a priority for unions, because it raises workers’ pay, and anathema to many Republicans because it increases the cost of building highways and other infrastructure projects.

Clear Choice

Yet Ryan’s views on the budget will be the main topic of conversation, and Democrats signaled they are eager for the debate.

“Romney now owns the Republican Ryan budget,” House Minority Leader Nancy Pelosi of California said in a statement. “As Democrats, we will always preserve Medicare, strengthen the middle class and work to re-ignite the American dream” and “the choice Americans are facing could not be more clear.”

Nonpartisan deficit hawks hailed Romney’s pick because they said it would force presidential and congressional candidates to debate the unpopular budget choices politicians typically avoid.

“This is going to make the campaign far more focused on the deficit and debt than it may have otherwise been, and that is a tremendously important thing,” said Maya MacGuineas, head of the Washington-based Committee for a Responsible Federal Budget. “Whatever you think about his proposed entitlement reforms, he has them -- and that’s a really important first step.”

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

To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net

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