House passes $6 trillion spending cut plan

By ANDREW TAYLOR, Associated Press

WASHINGTON (AP) — The House on Friday passed a Republican budget blueprint proposing to fundamentally overhaul Medicare and combat out-of-control budget deficits with sharp spending cuts on social safety net programs like food stamps and Medicaid.

The nonbinding plan lays out a fiscal vision cutting $6.2 trillion over the coming decade from the budget submitted by President Barack Obama. It passed 235-193 with every Democrat voting "no."

The vote sets up the Republicans' next round of confrontation with Obama and Democrats over the country's long-term deficit levels - a standoff likely to come to a head this summer and set the stage for 2012 elections. In an interview with The Associated Press earlier Friday, the president said the Republican's budget represents "a pessimistic vision."

"The biggest threat to Medicare is the status quo and the people defending it."

"It's one that says that America can no longer do some of the big things that made us great, that made us the envy of the world," he said.

Acknowledging that spending cuts would have to be made, Obama said he's pushing for "a smart compromise that's serious."

Under the House Republican plan, deficits requiring the federal government to borrow more than 40 cents for every dollar it spends would be cut by the end of the decade to 8 cents of borrowing for every dollar spent.

The plan by Budget Committee Chairman Paul Ryan, R-Wis., a rising figure in the party, exposes Republicans to political risk. It proposes transforming Medicare from a program in which the government directly pays medical bills into a voucher-like system that subsidizes purchases of private insurance plans. People 55 and over would remain in the current system, but younger workers would receive subsidies that would steadily lose value over time.

The budget measure is nonbinding but lays out a vision to fundamentally reshape government benefit programs for the poor and elderly whose spiraling costs threaten to crowd out other spending and produce a crippling debt burden that could put a big drag on the economy in the future.

"Which future do you want your children to have? One, where the debt gets so large it crushes the economy and gives them a diminished future?" Ryan asked. "Or this budget ... that literally not only gets us on the way to balancing the budget but pays off our debt?"

The GOP's solution to unsustainable deficits is to relentlessly attack the spending side of the ledger while leaving Bush-era revenue levels intact. It calls for tax reform that would lower the top income tax rates for corporations and individuals by cleaning out a tax code cluttered with tax breaks and preferences, but parts company with Obama and the findings of a bipartisan deficit commission, who propose devoting about $100 billion a year in new revenues to easing the deficit.

Democrats and many budget experts say this spending-cuts-only approach is fundamentally unfair, targeting social safety net programs like Medicaid and food stamps while leaving in place a tax system they say bestows too many benefits on the wealthy.

"The Republican plan is not bold. It's just the same old tired formula we've seen before of providing big tax breaks to the very wealthy and powerful special interests at the expense of the rest of America," said top Budget panel Democrat Chris Van Hollen of Maryland. "Except this time it's dressed up with a lot of sweet-smelling talk of reform."

But Obama and Speaker John Boehner, R-Ohio, his chief GOP adversary, do agree on something: that an upcoming vote to increase the government's ability to borrow to pay its bills will have to contain spending cuts.

"Let me be clear: There will be no debt limit increase unless it is accompanied by meaningful spending cuts and budget reforms," Boehner said.

"I think (Boehner's) absolutely right that it's not going to happen without some spending cuts," Obama told the AP.

In their budget, Republicans shied away from tackling Social Security shortfalls, steering clear of what pundits sometimes call the "third rail of American politics."

Virtually every budget expert in Washington agrees that projected Medicare cost increases are unsustainable, but the GOP initiative - attacked by Democrats as ending Medicare's guarantee as we know it - has launched a major-league Washington imbroglio.

"We hear a lot about Medicare as we know it," said Rep. Tim Griffin, R-Ark. "Well, unfortunately Medicare as we know it is going bankrupt. If you are for the status quo with regard to Medicare, you are on the side of the elimination of Medicare as we know it."

Democrats countered with official estimates showing the GOP plan would provide vouchers whose value would steadily erode.

"The Republican proposal breaks the promise that our country has made to our seniors - that after a lifetime of work they will be able to depend on Medicare to protect them in retirement," said Democratic Leader Nancy Pelosi of California. "The Republicans' plan forces seniors to buy their insurance from health insurance companies where the average senior will be forced to pay twice as much for half the benefit."

Also Friday, the House easily defeated two liberal budget alternatives. A plan offered by the conservative Republican Policy Committee failed as well, while a Democratic alternative that called for higher taxes on the wealthy and special interests fell on a 259-166 vote.

The GOP plan isn't actual legislation. Instead, under the arcane congressional budget process, the measure sketches out a nonbinding blueprint each year for running the government. The resolution doesn't require the president's signature, but it does set the framework for changes to spending or tax policy in follow-up legislation.

The most immediate impact of the GOP plan would be to cut the $1 trillion-plus budget for appropriated programs next year by $30 billion, following on $38 billion in cuts just adopted. That would return domestic agency accounts below levels when George W. Bush left office.

The Democratic-controlled Senate has yet to produce its alternative plan. Senate Budget Committee Chairman Kent Conrad, D-N.D., and other members of Obama's independent fiscal commission are pursuing a bipartisan "grand bargain" blending big spending curbs with new revenues flowing from a simplified tax code.

The budget deficit is projected at an enormous $1.6 trillion this year, but more ominously, current projections show an even worse mismatch as the baby boom generation retires and Medicare costs consume an ever-growing share of the budget.

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NOTE: An earlier version of this story stated the House bill would cut $6 billion from the federal budget instead of the correct figure of $6 trillion. This has been corrected and we apologize for any confusion this might have caused.

(Copyright 2011 by The Associated Press. All Rights Reserved.)