Ryan Budget Sets Up Clash With Democrats Over Safety Net

Representative Paul Ryan’s budget plan will frame an election between a Republican Party that wants to eliminate the deficit partly by cutting U.S. social spending and Democrats who want to boost the safety net.

“It’s very important to offer people a choice,” Ryan said yesterday of his proposal, which would lower the top income-tax rate to 25 percent from 39.6 percent now.

The budget plan unveiled yesterday would increase defense outlays while cutting non-defense programs -- a broad category of spending that covers everything from national parks and housing vouchers to NASA and environmental regulation.

The House Budget Committee chairman’s plan has little chance of being enacted this year. He and Senator Patty Murray, a Washington Democrat who heads the Senate budget panel, reached a deal in December to set top-line spending at $1.014 trillion for the 2015 fiscal year that starts Oct. 1.

Ryan’s proposal, which his committee described as “an expression of our governing philosophy,” will be considered by the panel tomorrow and reach the House floor next week.

“It’ll pass,” said House Majority Whip Kevin McCarthy.

It may serve as a road map for Republicans to follow in the November election that will decide party control of Congress. Senate Democrats said they plan to campaign against it in such states as Louisiana, Colorado and Montana, where party incumbents face challenges from Republican House members.

‘Strong Contrast’

“House Republican members running against our Democratic Senate incumbents” will “have to defend the Ryan budget,” Senator Charles Schumer, a New York Democrat, told reporters, saying it was a “really strong contrast” between the parties.

Ryan and Murray’s two-year accord ended months of partisan stalemate over spending and revenue. It set the budget at $1.014 trillion for fiscal 2015, up from $1.012 trillion this year.

The proposal by Ryan, of Wisconsin, is written to comply with that accord. Murray has said the Senate won’t consider a budget plan because the top-line spending deal has been reached.

President Barack Obama released a budget proposal for fiscal 2015 last month that highlighted Democratic priorities in the election year, including spending to boost low-income families, college students and infrastructure projects. It also envisioned asking more from U.S. multinational companies and higher-income earners, who would pay a “fair share tax.”

White House press secretary Jay Carney said in a statement yesterday that Ryan’s plan would “raise taxes on middle-class families with children by an average of at least $2,000 in order to cut taxes for households with incomes over $1 million.”

Mandated Spending

The $1.014 trillion doesn’t include mandated spending on entitlement programs such as Medicare and Social Security that total about two-and-a-half times the discretionary spending whose levels lawmakers decide on annually.

Including mandated spending, the budget would be about $3.7 trillion. Ryan’s plan would balance the budget in the 10th year, assuming the policies yield enough economic growth to bring in more revenue.

“We owe it to the American people to demonstrate how we will allocate their tax dollars and balance the budget,” House Majority Leader Eric Cantor said in a March 21 memo.

Ryan’s budget calls for increases in defense spending and cuts in non-defense discretionary spending to stay within the caps agreed to with Murray, said Loren Duggan, chief legislative analyst for Bloomberg Government.

Domestic programs would be reduced by $791 billion from fiscal 2016 to 2024, while defense spending would be $483 billion more than envisioned under current law, he said.

‘Prosperity’ Path

“This is essentially the same budget we’ve put forward for the last four years, updated for the fact that we’re in the fourth year of the budget,” said House Speaker John Boehner, an Ohio Republican. “But it’s a path to prosperity.”

Boehner said Democrats don’t have a plan to solve structural problems in retirement programs Medicare and Social Security, and were instead “whistling past the graveyard” as the post-World War II Baby Boomer generation ages into retirement.

The plan assumes that lawmakers will repeal the 2010 health-care law, Obama’s signature legislative initiative, while making substantial changes to U.S. safety net programs for the elderly and the poor.

Food Stamps

Ryan’s proposal would revamp nutrition aid to the poor by converting food stamps in five years from a mandatory program that spends under a formula into block grants that would give states greater control over the money. The plan would end a program that links heating aid to additional food stamp spending. Those on minimal welfare assistance would no longer be categorically eligible for food stamps.

The food stamp changes, which would set additional work or job-training requirements, would cut spending by $125 billion over 10 years.

On Medicare, the budget plan would keep the current system for those who are 55 and older in 2013. Those who reach age 65 in 2024 or later could choose private plans on a “Medicare exchange” backed by subsidies to help pay premiums.

The provision is one of the most politically risky in Ryan’s plan. Republicans say such a shift is necessary to shore up Medicare for future generations, while Democrats accuse Ryan of wanting to gut the federal insurance program for the elderly and disabled.

‘Fundamental Reform’

The budget envisions a “fundamental reform” of Medicaid, which provides health-care coverage for the poor. Though the plan doesn’t specifically endorse an alternative, it points out an option that would transform the program into a block granted program that states would run. The plan also would repeal the expansion of Medicaid in several states under Obamacare.

Democrats say the budget plan is built on fuzzy logic and cuts that would harm the economy.

“As in previous years, Chairman Ryan relies on gimmicks, magic asterisks, and spurious accounting assumptions to presume that his budget will achieve its anticipated deficit savings,” Representative Steny Hoyer of Maryland, the second-ranking House Democrat, said in a statement. “His budget simply doesn’t work.”

Senate Majority Leader Harry Reid, a Nevada Democrat, said on the Senate floor that Ryan’s plan would be a path to prosperity only for “the really rich.”

Referring to billionaire energy executives Charles and David Koch, supporters of the small-government Tea Party, Reid called the plan a blueprint for a “Kochtopia.”

Spending Room

The $1.014 trillion cap in fiscal 2015 gives Ryan more spending room than his proposed total last year of $966 billion, which would have required cuts so deep that they weren’t supported by most Republicans.

Proposed spending cuts in future years, intended to balance the budget while avoiding large tax increases, may be a political liability in the Nov. 4 election that will determine control of the Republican-held House and Democratic-held Senate.

Ryan is seeking to avoid opposition within his party and allow Republicans room to make cuts and revise the social safety net. He branded as a failure the U.S. “war on poverty,” which began in the 1960s and now includes 92 anti-poverty programs costing $799 billion annually, and urged lawmakers not to measure success by what they spend.

Even so, budgets don’t spend money, appropriations bills do. House committees may consider spending bills for military construction and the Veterans Affairs Department, as well as for the legislative branch itself, as soon as this week.

House Appropriations Committee Chairman Hal Rogers, a Kentucky Republican, said his panel intends to write spending bills to the levels in the Murray-Ryan budget deal, with a goal of passing all 12 measures before government funding expires Sept. 30.

House Republicans rebuffed questions as to whether unveiling a budget at all might be a political liability in November. “This is our vision,” said Representative Tom Price of Georgia, the budget panel vice chairman. “It would be irresponsible for us not to do it.”

To contact the reporter on this story: Derek Wallbank in Washington at dwallbank@bloomberg.net

To contact the editors responsible for this story: Jodi Schneider at jschneider50@bloomberg.net Jodi Schneider, Mark McQuillan

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