Paul Ryan budget slashes spending by $5.7 trillion to reach 10-year balance

House Budget Committee Chairman Paul Ryan (R-Wis.) unveiled a new budget Tuesday that would cut spending by $5.7 trillion, reduce the top tax rate to 25 percent and balance the budget within 10 years.

The plan would make profound changes to government, bringing spending down from 22.2 percent of the economy to 19.1 percent by 2023. It doubles down on many of the proposals Ryan advanced as his party’s vice presidential candidate in 2012.

“The election didn’t go our way, believe me I know what that feels like,” Ryan said Tuesday at a press conference to unveil his proposal. “Does that mean we surrender our principles?” 

{mosads}The budget includes virtually the same Medicare plan that Ryan put forward last year, giving seniors the option of purchasing private insurance on an exchange and receiving “premium support” payments.

People age 54 and younger would see changes starting when they retire in 2024. Ryan had floated applying the changes to those 55 and younger but faced resistance from his caucus.

The Ryan budget once again would make no changes to Social Security but would require the president and Congress to come up with plans to ensure the retirement system remains solvent. Last year’s budget only made that requirement of the president.

In forceful prose, Ryan’s budget calls for Washington to act quickly to address what he describes as a looming national bankruptcy.

“By living beyond our means, we’re stealing from the next generation. By promising a higher standard of living today, the federal government is guaranteeing a lower standard of living tomorrow,” Ryan writes. “Unless we change course, we will have a debt crisis.”

But the budget does not contain language from last year about a “hammock” culture of dependency. GOP presidential candidate Mitt Romney’s campaign was severely hurt by his characterization, captured surreptitiously on video, that “47 percent” of Americans are dependent on government and see themselves as victims. 

The details of Ryan’s budget are remarkably similar to last year’s blueprint, even though this year’s plan would balance the budget in 10 years instead of 25 years.

Ryan’s budget would cut $5.7 trillion in spending over the next 10 years compared to the Congressional Budget Office’s current baseline. Under a separate baseline devised by Ryan, which unlike the CBO figures does not assume large savings from a reduction in war and disaster spending, Ryan’s budget would reduce spending by $4.6 trillion.

Ryan argues it is a faulty assumption to think that spending will be severely reduced.

The budget would increase defense spending compared to current law by $500 billion over 10 years. Even though Ryan’s plan increases defense spending compared to the sequester, the numbers are a cut compared to his last budget.

The budget would also cut the top individual tax rate from 39.6 to 25 percent as part of an overhaul of the tax code that would eliminate breaks within the system. Like last year’s budget, the overhaul would leave two remaining rates at 10 and 25 percent.

The Ryan budget counts the $600 billion in new tax revenue raised under the January “fiscal cliff” deal as budgetary savings. Ryan also counts hundreds of billion in additional revenue being raised due to rosier economic growth projections by CBO.

The main differences from last year’s budget are the new revenues from the fiscal-cliff deal, lower healthcare spending measured by CBO, lower pension benefits for all federal workers and an extension of existing budget caps to two additional years at the end of the budget window.

Ryan defended his use of the fiscal-cliff revenue at a press conference. “The law is the law, it is not going to change,” he said.

He also admitted that even though he lambasted President Obama for cutting Medicare spending in his healthcare reform law during the campaign, his new budget again assumes the cuts to Medicare. Ryan said that the difference is that the cuts are used to reduce the deficit rather than create a new entitlement. He added that “ObamaCare” is so egregious that it must be repealed.

Senate Democrats are expected to produce their own budget this week — their first in four years. It is not expected to target a date for balancing the budget and is likely to include higher taxes.

“It’s the same old approach,” Senate Majority Leader Harry Reid (D-Nev.) said of the Ryan budget in comments on the Senate floor. “No amount of rebranding can hide that.”

The White House immediately took aim at the Republican approach saying that while it aims to cut the deficit, “the math just doesn’t add up.”

Obama, who campaigned on a populist approach, has said repeatedly that the wealthy must do their share to pay higher taxes which would help pay down the deficit. 

“Deficit reduction that asks nothing from the wealthiest Americans has serious consequences for the middle class,” White House press secretary Jay Carney said in a statement on Tuesday. “By choosing to give the wealthiest Americans a new tax cut, this budget as written will either fail to achieve any meaningful deficit reduction, raise taxes on middle class families by more than $2,000 — or both.

“We’ve tried this top down approach before,” Carney said. “The president still believes it is the wrong course for America.”

Carney added that both parties will have to compromise and “make tough choices” to help shrink the deficit.

The details on both the spending and revenue side are sparse, with Ryan deferring to the committees of jurisdiction. For example, it does not spell out what tax breaks would be closed to lower tax rates without adding to the deficit.

Ryan’s budget cuts $1.5 trillion in discretionary spending compared to the CBO’s baseline, which assumes the 10 years of automatic spending cuts known as sequestration remain in effect.

It cuts nearly $1 trillion from “other mandatory” spending and counts $1.8 trillion in savings by repealing Obama’s healthcare reform law, while keeping its cuts to Medicare for deficit reduction.

Ryan argues the spending cuts are “hardly draconian.”

“This budget doesn’t make sudden cuts. Instead it increases spending at a more manageable rate,” his budget states.

Ryan’s budget once again would provide block-grant funding to states for Medicaid and food stamps that would be capped. It would eliminate the healthcare law’s expansion of Medicaid eligibility.

In a section entitled “opportunity expanded,” it caps Pell Grant educational subsidies at $5,645 for 10 years.

It would streamline elementary school education programs and job training and cut the federal workforce by 10 percent in two years.

As in past years, the budget attacks Obama’s healthcare reform and clean energy policies as “crony politics.” It calls on the government to stop buying “unnecessary” land so that the space can be opened to energy exploration. It also urges approval of the Keystone oil pipeline.

The budget proposes ending government support for housing giants Fannie Mae and Freddie Mac and revisiting the Dodd-Frank financial reform law to prevent future bailouts.

It recommends paring transportation funding for high-speed rail and a new farm bill that reduces farm subsidies to the tune of $31 billion.

Other details are vague, but the budget points to an annual Government Accountability Office study to root out government waste.

Ryan says in the budget that he hopes his blueprint could lead to a compromise with Democrats, even as he acknowledges there will be disagreements.

“We understand that not everyone shares our view. And we respect that difference of opinion. Last year, the American people chose divided government. So this year, we have to make it work. We offer this budget in recognition of that need — and in a spirit of good will,” he writes.

This story was last updated at 11:22 a.m.