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GOP budget chief calls for $6.2 trillion spending cut

By Dana Bash, Alan Silverleib and Deirdre Walsh, CNN
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Ryan: 'No more gimmicks'
  • NEW: The White House rejects Rep. Paul Ryan's budget plan
  • The House Budget chairman unveils his highly anticipated proposal
  • The GOP budget blueprint calls for a controversial overhaul of Medicare
  • Democrats argue the plan would "dismantle Medicare for seniors"

Washington (CNN) -- Top House Republican leaders unveiled a 2012 budget proposal Tuesday that would cut $6.2 trillion in federal spending over the next decade while radically overhauling Medicare and Medicaid -- two hugely popular entitlement programs that have long been considered politically untouchable.

The proposal, drafted by Budget Committee Chairman Paul Ryan, R-Wisconsin, would also overhaul key portions of the tax code, dropping the top rate for individuals and businesses to 25% while eliminating a number of loopholes.

Under the plan, according to the GOP, total federal spending would drop to under 20% of the economy, compared with at least 23% under President Barack Obama's blueprint. Domestic discretionary spending -- the share of the budget not devoted to entitlements -- would remain frozen below 2008 levels.

The budget, with the exception of interest payments on the debt, would be brought into balance by 2015. The debt would be cut by $4.4 trillion over the next 10 years, and the federal government would have a surplus by 2040, according to calculations from the nonpartisan Congressional Budget Office.

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Ryan defended his plan Tuesday morning, calling it a realistic one for fiscal stability.

"For too long, Washington has not been honest with the American people," he said. "Washington has been making empty promises."

The federal government's current fiscal trajectory "is simply not sustainable," he warned, saying it will lead to an "economic collapse" and a "diminished future."

In contrast, "our goal here is to leave our children and our grandchildren with a debt-free nation," he said. It is a "moral imperative."

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Republicans are bringing back the "fiscal sanity that is so important to this country," said Rep. Jason Chaffetz, R-Utah.

Democrats have excoriated the proposal, characterizing it as a sop to the rich and an assault on the economic well-being of poor and middle-class Americans. It would shred the economic security most Americans have come to expect in recent generations, they contend.

A White House statement said Obama shares the long-range goal of Ryan's proposal, but "we strongly disagree with this approach."

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"Any plan to reduce our deficit must reflect the American values of fairness and shared sacrifice," the statement said. "Congressman Ryan's plan fails this test. It cuts taxes for millionaires and special interests while placing a greater burden on seniors who depend on Medicare or live in nursing homes, families struggling with a child who has serious disabilities, workers who have lost their health care coverage, and students and their families who rely on Pell grants."

Rep. Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee, told a news conference that "the big question facing House Republicans was whether they would break the mold and craft a balanced and serious plan to reduce the deficit."

"Sadly, the answer is no," Van Hollen said, adding: "Behind the sunny rhetoric of reform, the Republican budget represents the rigid ideological agenda that extends tax cuts to the rich and powerful at the expense of the rest of America -- except this time on steroids."

Arguably the most contentious parts of the proposal revolve around changes to Medicare and Medicaid. Medicare, a major contributor to spiraling federal deficits, would be overhauled starting in 2022. The government would no longer directly pay bills for senior citizens in the program. Instead, recipients would choose a plan from a list of private providers, which the federal government would subsidize.

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Individuals currently 55 or older would not be affected by the changes.

Medicaid, which provides health care for the disabled and the poor, would be transformed into a series of block grants to the states. Republicans believe state governments would spend the money more efficiently and would benefit from increased flexibility.

The GOP plan does not call for significant changes to Social Security. Republicans argue that while Social Security is a factor in the nation's fiscal crisis, it doesn't contribute as much to the soaring debt as Medicare.

Two House GOP lawmakers briefed on the proposal told CNN that they and others on the House Budget Committee believe it's a mistake not to tackle Social Security.

Ryan's proposal also accepts Defense Secretary Robert Gates' plan to cut $178 billion from Pentagon spending.

On the tax side, plans to lower corporate rates while closing loopholes are designed to avoid situations such as the recent revelation that General Electric paid no taxes last year.

The plan "maintains a revenue-neutral approach by clearing out a burdensome tangle of deductions and loopholes that distort economic activity and leave some corporations paying no income taxes at all," Ryan wrote Monday in a Wall Street Journal op-ed.

Still, Ryan acknowledged over the weekend that his plan gives Democrats a "political weapon" against Republicans.

A spokesman for the House Democrats' campaign arm has told CNN that Democrats are already planning to target up to 50 House Republicans, challenging them for supporting the plan, which they argued would "dismantle Medicare for seniors."

One news release focused on freshman Rep. Blake Farenthold, R-Texas, who narrowly won election last fall.

"House Republican leaders are now full-speed ahead on a partisan plan that would dismantle Medicare for seniors," said Jesse Ferguson of the Democratic Congressional Campaign Committee. "Now is the chance for Rep. Blake Farenthold to stand up and say he won't end Medicare as we know it because it's too important to seniors. If Rep. Blake Farenthold can't stand up for Texas seniors now against ending Medicare, then he never will."

Knowing the proposed changes will be politically risky and elicit an onslaught of criticism, Ryan and Republican Whip Kevin McCarthy of California have been holding sessions two or three times a week with House Republicans to try to arm them with facts and figures about the gravity of the debt problem and why it needs to be fixed.

CNN was allowed into one of these meetings last month and heard Ryan lay out in stark terms what he calls the "tidal wave" of debt the country is facing.

"The Congressional Budget Office has this economic model where they measure the economy going forward, and they are telling us that the entire economy crashes in the year 2037 because their computer simulation can't conceive of any way in which the U.S. economy can continue," Ryan told the GOP group.

"By the time my kids are my age, just those three programs -- Social Security, Medicaid and Medicare -- will consume all federal revenues. There will be no room for anything else in the federal budget."

Obama has often said it is important for Washington to address entitlement spending. But the president has not offered any specific proposals, and Republicans suggest he is unwilling to back this rhetorical call with specifics because he wants the GOP to take the first risky steps.

GOP sources admit the timing of Ryan's 2012 budget proposal is tricky. It is being released in the middle of down-to-the-wire, contentious negotiations with Democrats about a spending measure to keep the government running for the rest of this fiscal year.

GOP leaders considered delaying the release of Ryan's budget until this year's spending differences are resolved, CNN was told.

They ultimately decided to go ahead with it, however, because they hope showing major cuts and reforms will help calm rank-and-file conservatives who believe the GOP leadership is compromising too much on spending cuts now.