Paul Ryan sends shockwaves through D.C. with new GOP budget

The House Republicans’ budget proposal for the next fiscal year and the next decade – as much a political statement as a blueprint for governance – contains a raft of eye-popping provisions. But the threat of a “debt-fueled economic crisis” looms, writes Rep. Paul Ryan (R) of Wisconsin, chairman of the House Budget Committee and the main author of the plan.

Among the highlights of the proposal released Tuesday:

• The end of Medicare and Medicaid as we know them. Medicare, the federal fee-for-service health-insurance program for senior citizens, would turn into a subsidy program. Medicaid, the joint federal-state health-care system for the poor, would become federal block grants to the states. The net effect would be to reduce government spending in these entitlement programs, which are main contributors to America’s unsustainable fiscal path.

• A reduction of the top federal tax rate for individuals and corporations from 35 percent to 25 percent. Tax loopholes would be eliminated to compensate for the loss of revenue.

• Repeal and defunding of President Obama’s health-care reform.

• A reduction of nondefense, nonsecurity discretionary spending to pre-2008 levels. Under the GOP plan, that means cutting $79 billion next year and $1.6 trillion over the next 10 years. Such spending includes education, research and development, and environmental protection. Contrast that spending cut with the current budget impasse over a smaller proposed cut, $61 billion.

• The conversion of food stamps into a block-grant program, with aid contingent on work or job training. The plan would also make federal housing aid contingent on work or job training.

Overall, Republicans say their plan would cut $5.8 trillion in spending over the next 10 years, or $6.2 trillion when compared with Mr. Obama’s plan – without any tax increases. This surpasses the $4 trillion in savings laid out by the president’s fiscal commission late last year, and it provides a stark contrast with Obama’s own 2012 budget plan, which by comparison contains only token budget cuts and does not address entitlements.

In being bold, Representative Ryan sent shockwaves through the nation’s capital. Congressional leaders from both parties are seeking to reach a budget deal for the remainder of the current fiscal year – and avert a partial government shutdown at week’s end.

By proposing changes to entitlements, Ryan not only touches the historically deadly “third rail” of politics, but he also embraces it.

“Americans face a monumental choice about the future of their country,” Ryan writes in the introduction to the plan, called “The Path to Prosperity.” “This budget resolution reflects that choice. It disavows the relentless government spending, taxing, and borrowing that are leading America, right at this moment, toward a debt-fueled economic crisis and the demise of America’s exceptional promise.”

In television appearances before the plan’s release, Ryan said he expected Democrats to demagogue the proposal. In fact, they were attacking it before it came out – slamming the plan, for example, for not eliminating tax breaks for oil companies.

After Tuesday’s release, Democratic allies blasted the plan.

“Chairman Ryan’s slash and burn budget proposal is not a budget at all. It is an all out assault on children, seniors, and the disabled,” said Mary Kay Henry, president of the Service Employees International Union, in a statement. “It is a distorted, dramatically lopsided proposal that fundamentally restructures programs that millions of Americans rely on while giving the corporations and the wealthy another tax break.”

The changes to Medicare and Medicaid are the most controversial element of Ryan’s plan. Critics say the $735 billion savings (over 10 years) that he projects in turning Medicaid into a block-grant program will come as a result of reduced eligibility, not cost-saving reforms.

On Medicare, which Ryan says would save $389 billion over 10 years in comparison with Obama’s budget, the plan is to end the fee-for-service payment structure and instead provide “premium support” for seniors. (Ryan rejects the term “voucher” in descriptions of the plan.)

The Medicare change would not take place until 2022, and those age 55 and above today would continue to have the current program.

“When younger workers become eligible for Medicare, they will be able to choose from a list of guaranteed coverage options, enjoying the same kind of choices in their plans that members of Congress enjoy today,” the plan says. “Medicare would then provide a payment to subsidize the cost of the plan. In addition, Medicare will provide increased assistance for lower-income beneficiaries and those with greater health risks.”

Explaining this plan in a way that makes voters comfortable could be challenging – and Democrats have a huge opening going into the 2012 campaign to exploit the issue. Polls show big resistance to anything that can be construed as a “cut” to Medicare.

A recent Bloomberg poll showed three-quarters of Americans opposing any reductions in Medicare benefits.

But when described differently, changes to the Medicare system do have traction with a significant portion of the public: The same Bloomberg poll, released last month, found 40 percent support for replacing Medicare with government vouchers that help individuals pay for health insurance.

Late Tuesday afternoon, the White House released a statement with Obama’s reaction to the Ryan plan, asserting that the president agrees with the goal of long-term deficit reduction but rejects Ryan’s approach.

“Any plan to reduce our deficit must reflect the American values of fairness and shared sacrifice,” the statement read. “Congressman Ryan’s plan fails this test. It cuts taxes for millionaires and special interests while placing a greater burden on seniors who depend on Medicare or live in nursing homes, families struggling with a child who has serious disabilities, workers who have lost their health care coverage, and students and their families who rely on Pell grants.”

“The president believes there is a more balanced way to put America on a path to prosperity,” the statement continued. “But despite our differences, all of us – Democrats and Republicans – have an obligation to find common ground in a way that is true to our values and meets our responsibilities to the American people.”