Beltway Confidential

Ryan lays out vision for balanced budget

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Beltway Confidential,Philip Klein

House Budget Chairman Paul Ryan, R-Wis., on Tuesday offered a vision for how he would balance the budget over the next decade and make broader reforms to entitlement programs to put the nation on a sustainable fiscal path over time.

The new Ryan budget has many of the same features of the proposals he’s offered in his previous two years as chair of the budget committee. As with his past budgets, Ryan would save money by block-granting Medicaid to the states and providing governors with more flexibility over how to implement the program. He would also repeal President Obama’s health care law and cap the growth of discretionary spending.

For those under 55, he would transition Medicare into a system in which seniors choose among subsidized private insurance or traditional Medicare, with the value of the subsidies varying by age and health status. In other words, poorer and sicker patients would receive the highest subsidies while wealthier and healthier beneficiaries would receive the lowest.

To achieve a balanced budget, Ryan assumed the higher tax revenue that’s now become current law as a result of the “fiscal cliff” deal in early January.

Annual spending would still grow over the next decade under the Ryan budget – from $3.5 trillion in the coming fiscal year to about $5 trillion in fiscal year 2023. But it would grow more slowly than current projections as revenue increases. As a result, in 2023, the government is projected to run a $7 billion surplus.

Over the next decade, the Ryan budget would spend a total of $41.5 trillion – or $4.6 trillion less than current projections. He would not cut taxes relative to current law. He set the goal of reforming the tax code to a flatter one with two rates (10 percent and 25 percent) rather than seven, and he would cut the corporate tax rate to 25 percent (contingent on closing loopholes and ending deductions).

Over the next decade, Ryan claims $756 billion in savings from cutting the growth of Medicaid and other government health programs, $1.8 trillion from repealing Obamacare, $962 billion in other mandatory spending and $700 billion in savings on reduced interest payments. Ryan’s budget does not touch Social Security, but only calls on the President and Congress to submit plans to shore up the program’s finances.

Ryan’s budget is likely to come under criticism from several fronts, beyond the obvious attacks from Democrats that his plan would destroy Medicare. The issue he’s most vulnerable on is that while he calls for the repeal of Obamacare, he still assumes all of the Medicare savings from the law. As a vice presidential candidate, he supported Mitt Romney’s plan to restore all of those Medicare cuts. He also doesn’t offer any plan to reform the broader health care system beyond repealing Obamacare. On tax reform, he has deferred the details to the House Ways and Means committee.

A budget is a governing vision – an opening bid – and therefore it doesn’t necessarily have to reflect political reality. But at some point Ryan is going to have to grapple with the budget challenges assuming Obamacare is not repealed.

Later this week, Senate Democrats are expected to release their own budget for the first time since 2009, so unlike previous years, Ryan will have the ability to draw contrasts when his budget is attacked.

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