GOP proposes $6.2 trillion in spending cuts

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GOP proposes $6.2 trillion in spending cuts

Post by Dr. Manhattan on Tue Apr 05, 2011 12:19 pm

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April 5, 2011, 11:24 a.m. EDT

GOP proposes $6.2 trillion in spending cuts
2012 plan revamps Medicare, lowers corporate tax rate to 25%

By Robert Schroeder, MarketWatch

WASHINGTON (MarketWatch) — Opening a new battle in Washington’s budget wars, House Republicans on Tuesday proposed to slash government spending by $6.2 trillion over 10 years, cut the top corporate tax rate to 25%, and dramatically overhaul the Medicare program.

Republicans’ fiscal 2012 budget blueprint, released by House Budget Committee Chairman Paul Ryan of Wisconsin, would also scrap President Barack Obama’s health-care law, remake federal welfare programs and allow oil and gas companies to drill more freely.

It cuts $6.2 trillion over the next decade compared to Obama’s 2012 budget proposal. Compared to current policy levels, it slashes $5.8 trillion in spending. See text of plan from House Budget Committee web site.

The GOP budget lands in the middle of an intense debate about government spending and debt, and comes a day after Obama announced his 2012 re-election bid. By presenting a plan to lock in spending cuts, replace Obama’s health-care law and allow new Medicare beneficiaries to choose private plans, Republicans say they’re leading where the president has failed.

“This budget helps spur job creation today, stops spending money the government doesn’t have, and lifts the crushing burden of debt,” says the plan, dubbed “The Path to Prosperity.”

The Republican plan is expected to pass the GOP-controlled House, but it is unlikely to garner much support in the Democratic-controlled Senate. That means that the plan will serve as a focus of debate just as both political parties gird for the 2012 election.

Democrats attacked the Ryan plan in a preview of the policy tug-of-wars to come.

“The American people won’t be fooled by your rhetoric, Mr. Chairman. The GOP budget eliminates guaranteed benefits for seniors under Medicare and slashes support for seniors, children, and Americans with disabilities on Medicaid,” said a statement from House Democratic Leader Nancy Pelosi’s office on Tuesday.

Ryan’s plans for Medicare and Medicaid are emerging as flashpoints. For people now 55 and older, there would be no change to Medicare. But beginning in 2022, newly-retiring seniors would no longer have access to the government-run Medicare program. Instead, retirees would choose a privately run insurance plan from guaranteed coverage options.

Medicaid, meanwhile, would be converted into a block grant for states. Ryan estimates that the Republicans’ budget would save $771 billion on Medicaid over the next 10 years.

Overall, the budget would spend $3.53 trillion, which is $179 billion less than Obama’s 2012 plan. The Republican blueprint also aims to balance the budget, excluding interest payments, by 2015.

Tuesday’s proposal arrives as the White House and Democrats are trying to hammer out a separate agreement with Republicans about funding the government for the rest of fiscal 2011, which ends Sept. 30. Obama hosted House Speaker John Boehner, Senate Democratic Leader Harry Reid and other top lawmakers at the White House on Tuesday to try to hammer out an agreement.

Without an agreement the government would partially shut down on Saturday.

Obama sent his $3.7 trillion fiscal 2012 budget to Congress in February, and Republicans immediately attacked the president’s plans for targeted spending in areas including renewable energy and infrastructure. Obama defended that spending even as his budget predicted a record $1.6 trillion budget deficit in 2011.

Republicans re-took the House in last year’s elections on pledges to deeply cut government spending. But the party wasn’t able to fulfill its pledge to trim $100 billion from current levels, disappointing the tea-party movement and other conservatives.

Fiscal 2012 begins on Oct. 1, so lawmakers and the White House have plenty of time to debate competing spending and tax proposals.

But Congress must soon turn its attention to the U.S. debt ceiling. The U.S. will hit the ceiling no later than May 16, Treasury Secretary Timothy Geithner said Monday. In a letter to congressional leaders, Geithner said that the Treasury could delay hitting the limit by using various tactics but warned that those measures would work only for about eight weeks.

Some lawmakers have said they won’t vote to raise the borrowing limit without a corresponding plan to rein in the U.S. budget deficit.

Robert Schroeder is a reporter for MarketWatch in Washington.

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