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Spending Cuts: Will Congress Play Along?

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April 07, 2011 | comments

By Michael Crowley and Jay Newton-Small

The standard image of a cost-cutting Washington politician is a certain kind of dour old man — a pinch-fisted Dickensian fussbudget who wags his finger and scolds Americans about living within their means. But on April 5, the U.S. met the new face of federal frugality in the form of Republican Congressman Paul Ryan.


Marco Grob | TIME

Just 41 years old, with jet black hair and a touch of Eagle Scout to him, the House Budget Committee chairman unveiled an ambitious package of huge budget cuts designed to dig the country out of its crippling debt crisis. For Ryan, reining in spending is nothing less than an act of patriotic valor. "For too long, Washington has not been honest with the American people," he said. "We owe it to the country to give them an honest debate ... We're not just here so we can get this lapel pin that says we're a member of Congress. We are here to try and fix this country's problems." (See TIME's Q&A with Paul Ryan on his ambitious 2012 budget.)

Plenty of Republicans fear that Ryan's ideas could cost them those pins. His vision of $6 trillion in budget cuts over the next decade is certainly bold. But it would mean fundamental changes to Medicare and Medicaid (though not Social Security — yet), which happen to be two of the U.S.'s favorite government programs. About 4 in 5 Americans consider protecting Social Security from big cuts more important than mopping up our national red ink, according to a March Reuters/IPSOS poll, and about 70% feel that way about Medicaid, which serves the poor and disabled, and Medicare. That's why so many politicians see the deficit as a nuclear reactor in the middle of a meltdown: rush in to repair it and you may absorb a lethal dose of radiation.

Ryan is taking that risk. His plan, says Republican political consultant Mark McKinnon, "will completely transform the fiscal debate. It will either be a brilliant blaze that illuminates Republican courage or a roaring fire that immolates the party in a spectacular political suicide." It shapes the debate over the nation's fiscal future just as the next presidential campaign is getting under way. And it could become the theme song of the 2012 Republican ticket, no matter which candidates are singing it. Already several Republican hopefuls, including Mitt Romney and Tim Pawlenty, have offered welcoming words, if not quite full endorsements.

The Obama White House, on the other hand, had a cool response, and liberals are already portraying Ryan as a heartless ideologue, noting that his approach would cut taxes for the wealthy. House minority leader Nancy Pelosi called the plan "a path to poverty for America's seniors [and] children and a road to riches for Big Oil."

Anticipating such attacks, some Republicans wish Ryan had waited for Democrats to offer their own plan. Yet Ryan argues that he just couldn't hold off any longer. "The Democrats clearly aren't taking up this challenge," Ryan told TIME. "They decided not to deal with this ... This debt is literally going to get out of our control pretty soon." (See the nitty-gritty details of Paul Ryan's medicare plan.)

Ryan sounds bold where others have been timid because he's spent years preparing for this moment. Before his 1998 election from a swing district in southeastern Wisconsin, dotted with industrial plants and lake resorts, he earned a degree in economics and political science at Miami University in Oxford, Ohio, then went on to work for a series of GOP luminaries, including the late policy innovator Jack Kemp and think-tank founder William Bennett. Arriving in Congress when he was just 29, Ryan made a name for himself fast, burrowing into health care policy and showing an appetite for politically risky budget fights. It was enough to make even some of Ryan's colleagues question his political sense. (Some may just be jealous of his fast-rising stock: Sarah Palin, among others, has singled him out for praise.)

He may be a modern political star, but there's still something a little old-fashioned about Ryan, right down to his crow's-beak nose. Maybe it's the premature seriousness that comes from finding your father dead of a heart attack when you were 16 and then helping to care for a grandmother with Alzheimer's disease.

Now a married father of three, Ryan is a PowerPoint fanatic with an almost unsettling fluency in the fine print of massive budget documents. "I love the field of economics," Ryan says. "I have a knack for numbers. And I've just delved into this issue for my adult life, basically." (See Paul Ryan as part of the 2011 TIME 100 Poll.)

Of course, the U.S.'s political battlefields are littered with brave warriors who once spoke hopefully of taking on budgetary sacred cows. (Recall George W. Bush's dead-on-arrival push to overhaul Social Security in 2005 or Newt Gingrich's politically toxic bid to cut Medicare spending in 1995.) But Ryan is gambling that the climate is different today. Washington has talked ad nauseam about the need to shrink our debt before world financial markets lose faith in America's solvency, leading to unimaginable economic chaos. But when a bipartisan fiscal commission created by President Obama — who has repeatedly spoken of the need for deficit reduction — came up with a set of proposals in December, partisans on both sides bashed its ideas and Obama kept a cautious distance. Nor did Obama offer substantial deficit-reduction ideas in his State of the Union address. "When the President decided not to do anything in his budget, that's when I made my mind up," Ryan says.

Here's what Ryan came up with:

Health Care for Seniors. Ryan estimates he'd save more than $2 trillion over the next decade by transforming the government's two major health care programs and repealing Obama's 2010 health care law. Medicare, which provides health care for more than 45 million American seniors, already consumes about an eighth of federal spending, and its costs are set to explode as the baby boomers start retiring. Ryan would phase out Medicare's current mechanism, which reimburses health care providers without payout limits for patients, and begin federal payments to private health plans chosen by future seniors. Republicans say that competition would lower prices — and that seniors who can't count on automatic coverage will be more judicious about their health care consumption, which would also lower costs.

Critics worry that Ryan won't give seniors enough money to take care of themselves. His plan would cap Medicare payments at a rate slightly above inflation, far less than the rate health care costs are projected to grow — meaning that seniors would pay much more of the health care burden out of their own pockets (although Ryan's plan would provide extra assistance to some low-income seniors).

Ryan has partly insulated his vision from electoral blowback by exempting Americans 55 and over from any changes to their Medicare coverage, although GOP operatives worry that Democratic attacks will lead current seniors — who have the highest voter turnout — to believe otherwise.

Health Care for the Poor. Ryan would also blow up the Medicaid program, which gives health care to more than 50 million Americans, mostly poor and disabled. He would save $771 million over the next 10 years by cutting Medicaid and sending it as a block grant to states, which would be given new flexibility on how to spend the money. Some may find creative savings, but many — especially those under GOP control — are likely to cut benefits.

Taxes and Other Spending. Ryan proposes a scrubbing of the tax code that would wipe out hundreds of complex loopholes and apply the savings to lower income tax rates for everyone. (He would lower the top tax bracket from 35% to 25%.) But he wouldn't raise any new tax revenue — in part because new taxes are anathema to the GOP faithful. Ryan does not ask the wealthy or Big Business to help with the budget rescue; such a move, he says, would smother job growth. To the contrary, Ryan's plan would extend the Bush tax cuts on the wealthiest Americans, now set to expire in 2013, which would forgo $700 billion in revenue over 10 years.

Ryan also wants deep budget reductions in nearly every category, saving up to $925 billion by cutting spending back to 2008 levels and freezing it there for five years. That's quite a dramatic sum when you consider how much Congress has been fighting over a few tens of billions of dollars in this year's budget. The White House has been quick to point out that those cuts would hit popular programs, including Pell Grants to make college more affordable. A big exception is defense spending: Ryan endorses only the cuts already planned by Defense Secretary Robert Gates, amounting to $78 billion over five years. Many defense experts believe the Pentagon could safely slash many times that amount.

And although Ryan is being called courageous for taking on Medicare and Medicaid, his plan punts on perhaps the most electrified political rail of all: Social Security. That program is still solvent, but as millions of baby boomers retire, it's going to start running big deficits. Ryan has talked before about reforming Social Security, but his latest plan simply calls for bipartisan action down the road. (He's also been criticized for peddling fuzzy math and rosy projections. A Washington Post fact check deemed his budget full of "dubious assertions, questionable assumptions and fishy figures.")

Even if lawmakers find the courage to act, Ryan's plan won't become law in anything like its current form. As long as Democrats control the Senate — at least through next year — no budget deal will be adopted without an O.K. from the Obama White House. (The 2010 health care law, for instance, won't be repealed so long as Obama holds a veto pen.) After that, it is harder to predict, but even some of Ryan's GOP colleagues are nervous about taking on entitlement programs. Ryan's backers say they have to start somewhere, however. "When you win an election, you have a responsibility to lead," says Republican Congressman Steve LaTourette of Ohio. Says Republican Senator Tom Coburn of Oklahoma: "If we don't do something on deficit reduction, [we] won't be here in a couple of years."

That's why Ryan's vision could provide a blueprint in the coming months for a grand budget deal between the parties later. The U.S. will reach its federal borrowing limit in early July and will default on its debt without a congressional vote authorizing more borrowing. Some Republican leaders want to tie major spending reductions to any such vote, although Obama officials discourage such talk.

The great unknown is whether the two parties are prepared for the kind of honest debate Ryan says Americans deserve. Can Democrats accept any significant cuts to entitlement programs? Will Republicans ever tolerate tax hikes? Obama said on April 5 that he's "looking forward to having that conversation." But in the shadow of the 2012 presidential campaign, in which both sides will be elbowing for any political advantage, that's not going to be easy.

http://www.time.com/time/politics/article/0,8599,2063709,00.html

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