Ryan budget to cut $5.3 trillion in spending over the next decade

Republicans rallied around an election-year budget produced by Rep. Paul Ryan on Tuesday that they said would cut $5.3 trillion in spending over the next decade compared to President Obama’s budget while slashing tax rates for households and businesses.

The blueprint from Ryan (Wis.), the House Budget Committee chairman, would collapse the tax code from six individual tax brackets into a 25 percent top rate and a 10 percent lower rate, significantly cutting taxes and reducing revenue to the government by $4 trillion over the next decade.

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It would increase defense spending compared to Obama’s budget and includes a mechanism to avoid automatic spending cuts next year that were triggered by the supercommittee’s failure to reach a deficit-cutting deal.

Ryan would also reform Medicare with a new plan that would provide future seniors with subsidies to use for Medicare or private insurance.

Republicans quickly predicted their conference would unify around the budget. 


Speaker John Boehner (R-Ohio) on Tuesday predicted “a strong vote of support” for the budget, while Ryan confidently said: "We have the votes." 

Ryan estimates his budget would reduce next year’s deficit to $797 billion, a lower figure than the $977 billion deficit the Congressional Budget Office estimates would result from the president’s budget.

He also estimates it would reduce deficits over the next decade by $3.3 trillion more than the Obama budget.

The proposal dovetails with plans from some of the GOP presidential candidates, and Ryan framed his work as an effort to end the debt crisis while retaining economic growth.

“The core idea is that we want to get ahead of this debt crisis,” Ryan said Tuesday morning on CBS.

“We want to take all of the empty promises that our government is making and mak[e] sure that they’re not broken promises,” he said. “We want to save Medicare from bankruptcy, we want to put our debt on a pathway to balance and to pay off the debt and we want to get our economy going again.”

It is difficult to determine just how the Ryan budget would reduce deficits, however, given a lack of details in the tax section. Republicans don’t say on what income levels the new tax rates would be applied, and the budget doesn’t include specifics on the tax loopholes that would be culled as part of a reform of the tax code.

A side-by-side comparison with a CBO budget baseline set to current law suggests the Ryan budget would raise deficits by $240 billion over 10 years. That CBO baseline anticipates the Bush-era tax rates would expire as scheduled at the end of the year and that Congress would allow a scheduled cut in Medicare payments.

Democrats, who for much of the last year have pressed Republicans to raise taxes on wealthier households, criticized the Ryan plan as a handout to millionaires. 

"This is the same plan as last year, warmed over," House Budget Committee ranking member Chris Van Hollen (D-Md.) told The Hill on Tuesday. "It is a big tax break for millionaires at the expense of benefits for the middle class."

Rep. Sander Levy (D-Mich.) predicted Republicans would have to eliminate popular tax deductions for mortgage interest and charitable deductions, something Ryan denied. 

Democrats also focused on Ryan's Medicare proposal, with the White House dusting off their playbook from last year and communications director Dan Pfeiffer saying the Republican plan would “end Medicare as we know it.”

“Nothing is more sacred to House Republicans than giving tax breaks to Big Oil, companies that ship American jobs overseas, and billionaires even if means pulling the plug on Medicare and increasing seniors’ health care costs,” said Democratic Congressional Campaign Committee Chairman Steve Israel (D-N.Y.).

As expected, the new Ryan budget offers a modified version of the controversial Medicare plan from last year. Whereas last year's plan moved all future seniors into a privatized system, where the government subsidized premium payments, the current plan keeps traditional Medicare as an option. It also has new protections for low-income seniors and restrictions that could keep the traditional plan from being saddled with only the sickest patients.

It is based on a models developed by Ryan and Sen. Ron Wyden (D-Ore.) and long championed by Budget Committee member Tom Price (R-Ga.).

While Ryan would cut domestic discretionary spending, he would increase the 2013 defense budget from $546 billion to $554 billion.

Ryan’s budget would shield the Pentagon from $500 billion in cuts triggered by the supercommittee failure while rolling back the $487 billion in defense cuts planned over the next 10 years by Obama, whom Ryan argues is funding favored domestic programs at the expense of national security.

“Rather than choosing to lead by addressing the fundamental drivers of near‐ and long-term deficits and debt, the president has defaulted to slashing the defense budget. The unmistakable fact is that the president has chosen to subordinate national-security strategy to his other spending priorities,” Ryan’s budget states.

The increase in defense spending was key to sealing a deal with appropriators on the Budget panel who had wanted to keep the August debt-ceiling level of $1.047 trillion.

Rep. Tom Cole (R-Okla.), one of three appropriators on the Budget Committee, told The Hill on Tuesday that he agreed to a new top-line number of $1.028 trillion after $200 billion was added to the Pentagon's budget over 10 years.

"I think it's a compromise," he said. "So you give a little bit, and you get something back."

He said Democratic charges that rewriting the August debt deal could lead to a government shutdown later this year are "nonsense" and "political theater."

The Ryan budget turns off an initial $97 billion in automatic supercommittee-triggered cuts scheduled to begin in January.

It puts $20 billion of the cuts into the 2013 spending cap, bringing that cap down from the August debt deal's $1.047 trillion figure. Ryan’s budget then instructs six committees to find $261 billion in replacement savings over 10 years, and $18 billion in savings in the next year alone.

The instructions come under the umbrella of budget reconciliation, a fast-track procedure that could help Congress find a quick way to avoid the automatic cuts. The Ryan plan deals with these cuts by changing the caps on future discretionary spending and capping mandatory spending.

Some House conservatives were already grumbling about this reconciliation compromise on Monday evening. They had preferred to keep the cuts upfront by capping 2013 spending at $950 billion or even $931 billion, rather than have committees find savings.

A tighter spending cap on 2013 appropriations could have forced action this year because spending bills eventually have to be passed based on the House budget. Passage of the reconciliation savings is more hypothetical as budget reconciliation would require the Senate to do a budget this year, something Senate Democrats say is unnecessary.

On taxes, the Ryan plan also eliminates the Alternative Minimum Tax, cuts the 35 percent corporate rate to 25 percent and eliminates taxes on foreign profits.

The budget would not be balanced until nearly 2040 under Ryan's plan, something that could lead to criticism from conservatives. The Club for Growth has demanded a blueprint to balance the budget in 10 years.

The Ryan plan's reconciliation instructions contain suggestions for the committees on where to find savings, such as by cutting the federal workforce and freezing salaries through 2015. The plan calls for $30 billion in farm subsidy cuts, more than the $24 billion rural lawmakers are comfortable with but slightly less than Obama has called for.

Similar to last year, the new plan cuts spending on Medicaid and food stamps by converting the programs into block grants at the state level. It calls on Congress and the president to develop a way to keep Social Security solvent, but does not back a particular approach.

The plan would repeal Obama's healthcare reform law and financial reforms and lift restrictions on oil-and-gas exploration. Throughout the plan, Ryan paints Obama as a crony capitalist, handing out corporate welfare to the likes of companies such as failed solar energy firm Solyndra.

Democrats will attack the budget this week as an attempt to cut benefits for the poor and elderly while ensuring millionaires do not face tax increases.

Ryan, in contrast, frames his budget as an attempt to liberate Americans from a strangling bureaucracy.

“This budget serves as a blueprint for American renewal. Its principled reforms empower individuals with greater control over their futures,” Ryan writes.

—This story was updated at 2:45 p.m.