Paul Ryan budget: Change Medicare, slash spending, lower taxes

Reporting from Washington —  House Republicans would slash federal spending, lower tax rates and substantially overhaul Medicare in the 2013 budget unveiled by Rep. Paul Ryan of Wisconsin that offers a do-over of sorts to last year’s blueprint that left the party in political trouble.

Democrats are poised to attack the GOP plan as one that would destroy the Medicare safety net for seniors and renege on an earlier agreement over government spending levels made between Congress and the White House last summer.

But GOP leaders believe their approach will provide a contrast with President Obama and give voters a defining choice in this election as the party seeks to show it is seriously handling the nation’s debt and deficit problems.

“Like last year’s budget, it seeks to guide the nation’s policies by those principles, freeing it from the crushing burden of debt now threatening its future,” Ryan wrote in the document released by the chairman of the Budget Committee.

Read Ryan’s proposed budget in full

In a nod to conservative Republicans who wanted even steeper reductions in federal spending, Ryan imposes a new cap on federal outlays that would stretch into the next decade.

Yet even as the GOP proposal reduces deficits beyond what Obama offered in his fiscal 2013 budget, the mix of spending cuts and lower taxes may not be enough for the most conservative elements in the GOP who wanted the budget balanced within the decade. Ryan’s budget would not bring the nation’s finances into balance in that time frame.

The budget also sets up the possible threat of a government shutdown this fall, when Congress will need to pass legislation to fund the government at the start of the new year Oct. 1, because it violates an agreement reached last summer on federal spending levels.

Ryan’s budget dismantles the Pentagon spending cuts required under the accord reached between Congress and the White House, shifting the cuts to other domestic accounts. Both parties have balked over the 10% reduction in defense spending mandated in January, but Republicans have been particularly intent on halting that reduction.

That approach has already drawn swift opposition from Democrats in the Senate, who want to prevent deep cuts to nondefense accounts.

“The House’s action would risk a government shutdown,” wrote Sen. Kent Conrad (D-N.D.), and Sen. Daniel Inouye (D-Hawaii). They warned that reneging on the summer debt ceiling agreement “represents a breach of faith that will make it more difficult to negotiate future agreements.”

The House is expected to vote on the budget next week, but it is essentially dead on arrival in the Senate, where Democrats have the majority.

The proposal would lower individual and corporate tax rates to no higher than 25%, preventing a tax hike on wealthy Americans that Obama has proposed with the expiration of the George W. Bush-era tax breaks in December.

Yet it is the Medicare changes that may draw the most scrutiny, as Ryan again proposes to overhaul the healthcare program for seniors. Ryan draws on a proposal co-authored by Sen. Ron Wyden, the Oregon Democrat, that would provide future seniors with a fixed amount of money to be used to purchase either a traditional Medicare-like healthcare plan or a privately run option.

“Republicans are again proposing responsible solutions to tackle it once and for all, including cutting spending, reforming our broken tax code, and strengthening health and retirement security,” said House Speaker John A. Boehner (R-Ohio) in supporting the plan.

The White House quickly attacked the budget as one that “fails the test of balance, fairness, and shared responsibility,” said communications director Dan Pfeiffer.

“What’s worse is that all of these tax breaks would be paid for by undermining Medicare and the very things we need to grow our economy and the middle class — things like education, basic research and new sources of energy,” Pfeiffer said. “And instead of strengthening Medicare, the House budget would end Medicare as we know it, turning the guarantee of retirement security into a voucher that will shift higher and higher costs to seniors over time.”

Supporters say this proposal would stem the rising costs of Medicare, which now operates as an open-ended fee-for-service system, and create competition. Opponents say there is no guarantee the stipend from the government would be sufficient even for traditional Medicare, shifting the burden of affording healthcare onto seniors.

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Paul Ryan budget: Change Medicare, slash spending, lower taxes