WASHINGTON - The 10-year spending plan released Tuesday by Rep. Paul Ryan is virtually identical to last years GOP budget: It would defund President Obamas health-care initiative, end guaranteed Medicare coverage for future retirees and sharply restrain spending on the poor, college students and federal workers.
The one big new development: Ryans latest blueprint would balance the budget, producing a small surplus in 2023 a goal achieved not primarily through deeper spending cuts, but by the addition of more than $3.2 trillion in new tax revenue.
The tax hike is already in effect. Ryan (R-Wis.) merely adopts new revenue projections laid out by the nonpartisan Congressional Budget Office in the wake of a year-end deal to raise rates on income over $450,000. But the impact on his budget is huge.
Last year, Ryan, the 2012 GOP vice-presidential nominee and chairman of the House Budget Committee, proposed big tax cuts that would leave the government taking in $37 trillion in revenues over the coming decade. This year, Ryan adopts CBOs 10-year projection of $40.2 trillion in revenues, an increase that lets him wipe out the deficit even though he would let spending grow a bit compared with last years proposal.
Ryan has acknowledged the tax increase, which would push collections to 19.1 percent of the national economy, with oblique references to the CBO baseline and the year-end fiscal cliff fight.
We dont want to refight the fiscal cliff. Thats current law, Ryan said when asked about the tax hike on Fox News Sunday. Thats not going to change.
But the tax increase, combined with the one-year shift forward in the 10-year budget window, produces far more new revenue than the estimated $600 billion the tax deal would raise over the coming decade. Ryans presentation of his budget plan, offered in an op-ed published Tuesday in the Wall Street Journal, makes no reference to the primary cause of his new fiscal achievement.
On Tuesday, were introducing a budget that balances in 10 years without raising taxes. How do we do it? We stop spending money the government doesnt have, Ryan writes, adding that he proposes to cut $4.6 trillion over the next decade compared with current law to match spending with available revenue.
Conservatives are grumbling the influential Red State blog calls the new Ryan plan imperfect because it uses Obamas tax hikes to balance but, so far, seem resigned to his decision. Democrats are crying foul even as Senate leaders prepare a budget blueprint of their own that would add nearly $1 trillion more in new taxes on top of the fiscal cliff revenues.
House Republicans, meanwhile, see the claim to a balanced budget as a powerful new message that will overshadow their decision to accept the tax hikes and give them a fresh edge as they begin another months-long dance with Democrats to tackle the swollen national debt and raise the federal debt limit later this year.
We owe the American people a balanced budget, Ryan writes in the introduction to his 91-page spending blueprint. The less we owe to foreign creditors, the more of our future we will control.
Ryans proposal, which includes a $3.5 trillion spending plan for the fiscal year that begins in October, would not wipe out deficits immediately. The 2014 gap between spending and revenue would fall by less than $100 billion, from $616 billion under current law to $528 billion.
But Ryan projects rapid savings thereafter, primarily from cuts to health care, which account for more than half of his total savings. All told, Ryan would slash spending on Medicare, Medicaid and the new Affordable Care Act health subsidies by $2.7 trillion over the next decade. Another $700 billion in savings would come from lower interest payments on a lower national debt.
Ryan proposes to cut another $1 trillion from other mandatory programs, including farm subsidies, food stamps, student loans and federal worker pensions, though he does not explicitly detail those cuts. And he would reduce agency spending by $250 billion beyond the automatic sequester cuts that took effect this month, while restoring $500 billion to the Pentagon. That suggests unprecedented cuts to domestic agencies, though Ryan, again, provides no details.
As he did last year, Ryan make no explicit proposals to rein in Social Security spending, calling instead for the White House and Congress to develop separate proposals to shore up the Social Security trust fund.
And he again calls for a sweeping overhaul of the tax code to eliminate a proliferation of tax breaks and collapse the current welter of tax brackets into just two: a top rate of 25 percent and a bottom rate of 10 percent. But the tax rewrite would not produce fresh revenue to reduce budget deficits.
With $41.5 trillion in spending over the next decade and $40.2 trillion in revenues, Ryans budget would add about $1.2 trillion to the national debt. But shrinking deficits would reduce borrowing and cause the debt to shrink as a percentage of the economy. By the time a $7 billion surplus emerges in 2023, Ryan predicts that the Treasury would owe $14.2 trillion to outside creditors (compared with $11.8 trillion today), or about 55 percent of the gross domestic product (compared with about 76 percent today).
During a Capitol Hill news conference Tuesday, Ryan defended his decision to keep the tax hikes, as well as another controversial pot of savings -- roughly $700 billion in Medicare cuts enacted to help pay for Obamas health care initiative. Ryan and other Republicans excoriated the cuts during last years presidential campaign.
By defunding Obamacare, Ryan said, his budget makes sure the savings serve to strengthen Medicare, rather than financing a vast new entitlement for the uninsured. As for the tax hikes, he said, his budget would keep the revenue but replace the underlying tax system with a simpler code.
We still think with the revenue line we have we have, we can still have a very good, internationally competitive tax code, Ryan said.
Democrats blasted the proposal. In addition to higher taxes, Ryan said the proposal includes sharp new cuts to federal employee pensions and two more years of caps on agency spending to meet the balanced-budget goal.
The House Republican budget is totally lopsided, said Rep. Chris Van Hollen (Md.), the senior Democrat on the House Budget Committee. They claim they are reigniting the American Dream but only for those who have already succeeded, while smothering it for everyone else. For the vast majority of working Americans, it only makes it harder to make ends meet.
White House press secretary Jay Carney said Ryans math just doesnt add up and that his budget plan exempts wealthy Americans from making any sacrifices at the expense of the middle class.
Deficit reduction that asks nothing from the wealthiest Americans has serious consequences for the middle class, Carney said in a statement. By choosing to give the wealthiest Americans a new tax cut, this budget as written will either fail to achieve any meaningful deficit reduction, raise taxes on middle class families by more than $2,000 or both. By choosing not to ask for a single dime of deficit reduction from closing tax loopholes for the wealthy and well-connected, this budget identifies deep cuts to investments like education and research investments critical to creating jobs and growing the middle class. And to save money, this budget would turn Medicare into a voucher programundercutting the guaranteed benefits that seniors have earned and forcing them to pay thousands more out of their own pockets. Weve tried this top-down approach before. The President still believes it is the wrong course for America.
Ryan plans to put his plan to a vote in the House Budget Committee in the coming days. House leaders predict it will easily win the support of enough Republicans to win approval by the full House before the Easter break.
Senate Budget Committee Chairman Patty Murray (D-Wash.) is working on her own blueprint, the first Senate budget since 2009. That framework proposes to reduce future borrowing by about $2 trillion, split evenly between tax increases and spending cuts.
If Murrays budget is adopted by the Senate, congressional leaders see a Ryan-Murray conference committee as the most likely forum for negotiations over a new deficit-reduction package. In recent days, Obama has begun an aggressive outreach campaign to rally support among Republicans in the Senate for a balanced package of tax hikes and spending cuts, a campaign that will continue this week as Obama travels to Capitol Hill on Tuesday, Wednesday and Thursday for separate meetings with rank-and-file Democrats and Republicans in each chamber.
In the introduction to his budget, Ryan seemed to anticipate, and even welcome, the opportunity for compromise, in sharp contrast to the combative tone he adopted last spring, when a Republican takeover of the White House and the Senate seemed a real possibility.
Last year, the American people chose divided government. So this year, we have to make it work, Ryan wrote. We offer this budget in recognition of that need and in a spirit of good will.
David Nakamura contributed to this report.