UPDATE 3-Republicans take gamble with 2012 budget proposal
* Plan calls for $5.8 trillion cuts in next 10 years
* Overhaul Medicare and Medicaid, cut taxes and spending
* White House strongly disagrees with Ryan approach (Adds White House reaction, CBO analysis)
By Richard Cowan and David Alexander
WASHINGTON, April 5 (Reuters) - Republicans on Tuesday unveiled a politically risky 2012 proposal that aims to bring down huge U.S. budget deficits by cutting healthcare benefits for the poor and elderly.
The 2012 budget blueprint from Paul Ryan, chairman of the U.S. House of Representatives's budget committee, builds on the Republican Party's campaign promise to scale back the size of the federal government.
His plan for the fiscal year that begins Oct. 1 would achieve nearly $6 trillion in savings over the next decade, chipping away at a budget deficit that this year is expected to hit $1.4 trillion. [ID:nN04213172]
"This is a budget that creates economic growth. It is a budget to pay off our national debt. It is a budget to get our fiscal track on the right track," Ryan said.
But the plan drew harsh criticism.
"While we agree with his ultimate goal, we strongly disagree with his approach," White House Press Secretary Jay Carney said. The House Republican plan, Carney added, "cuts taxes for millionaires and special interests while placing a greater burden" on the elderly, children with disabilities, students and workers who have lost their health coverage.
The non-partisan Congressional Budget Office, in its analysis of the Ryan budget, cautioned that some of the Medicare proposals would shift healthcare costs to elderly recipients. Similarly, Medicaid changes would shift some costs to the states, which already are cash-strapped.
Republicans hope deficit-cutting scores big with voters concerned about gaping federal budget deficits, but public opinion polls find opposition among Americans to many of the domestic spending cuts Republicans are offering. That could come back to haunt the party in the 2012 elections.
Ryan's plan could move quickly through the Republican-led House, where fiscally conservative Tea Party members are clamoring for even deeper spending cuts. It is unlikely to clear the Senate, where Democrats still have a majority.
Ryan put forward his 2012 blueprint while his colleagues continued to wrangle about a budget for the current fiscal year ending Sept. 30. That bitter debate, if unresolved by Friday night, could lead to a partial government shutdown.
Negotiations this week on the 2011 budget have stalled over some $33 billion in proposed cuts. [ID:nN05129523]
Ryan's proposal for 2012 includes much steeper cuts and sets the stage for an even more contentious debate.
Republican leaders hope Ryan's 2012 proposal can reduce pressure from members of the conservative Tea Party movement who are forcing the party to adopt a hardline stance in current negotiations over the 2011 budget.
MEDICARE, MEDICAID PROPOSALS
Under the Republican proposal, which could be approved by the House Budget Committee soon, Medicare would be replaced with a voucher system giving recipients a fixed amount of money to buy private insurance plans. People now 55 and older would stay in the current plan.
Medicaid healthcare for the poor would be turned over to the states under a block grant system.
On the tax side, top rates for individuals and businesses would be cut to 25 percent from 35 percent under the Ryan proposal.
The Wisconsin Republican said his plan would balance the U.S. budget by 2015, but that does not include the effect of interest payments on debt. His plan also makes economic assumptions that some critics call rosy.
The proposal fails to address another major problem -- keeping the Social Security retirement system solvent. Instead, it urges Congress to work on a bipartisan solution to reforming this popular program.
The sniping between Republicans and Democrats over tax and spending priorities will extend well into next year and the 2012 presidential and congressional elections.
Democrats hope the Ryan budget proposal and Tea Party demands for deeper, faster spending cuts on popular domestic programs like Medicare will prompt a voter backlash against Republicans. [ID:nN05129523]
Some corporate groups praised the Ryan budget plan.
The proposal "focuses the policy discussion on the importance of entitlement reform in putting America's budget in order for the long term," said the Business Roundtable. (Additional reporting by Thomas Ferraro, Kim Dixon, Donna Smith and David Morgan; Editing by Eric Walsh and Paul Simao)
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