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Ryan budget crystallizes Romney's economic vision
WASHINGTON (Reuters) - Paul Ryan's controversial budget and economic vision, marked by deep cutbacks to the social safety net coupled with lower tax rates, swiftly became a centerpiece of Mitt Romney's presidential campaign on Saturday.
Republicans are hoping that Ryan, as their vice presidential candidate, will convincingly articulate their vision for a smaller federal government and lower deficits, lifting Romney's flagging poll numbers and drawing a starker contrast with President Barack Obama's Democrats.
But his controversial reforms to Medicare will become a huge target for Democratic attacks and could hurt Romney's chances in some states with large elderly populations, including the key swing states of Florida, Ohio and Pennsylvania.
"This makes Medicare a central issue in the election. It's going to rank just as highly as healthcare reform," said Robert Blendon, a political analyst with the Harvard School of Public Health.
Ryan's budgets, passed by the House of Representatives in each of the past two years, would effectively convert the popular fee-for-service program to a voucher system that gives a subsidy to seniors to purchase traditional Medicare coverage or competing private insurance plans.
Ryan argues that Medicare in its current form is headed for "bankruptcy" and his plan would save the program by reducing Medicare spending by $205 billion over the next decade compared with Obama's budget plan.
Democrats argue Ryan wants to end Medicare as we know it and abandon guaranteed medical coverage for seniors. Ryan disputes this and says his Medicare changes would not affect anyone currently 55 or older.
Still, the nonpartisan Congressional Budget Office said that a 2011 version of Ryan's Medicare reforms would have increased seniors' out of pocket health care costs by about $6,400 a year.
"Because the administration has spent the last two years claiming that Ryan would take away Medicare, his proposal has an uphill climb with moderate voters," said Joseph Antos, a healthcare policy expert at the conservative American Enterprise Institute.
At an upscale shopping district in Winter Park, Florida, several seniors said they needed to know more about Ryan's Medicare plans before making any decisions. But Bill Young, a 68-year-old stockbroker who votes Republican, acknowledged that Romney was taking on a risky strategy.
"I think anybody that fiddles around with Medicare and/or Social Security is definitely going to impact the vote," Young said.
CUTS FOR THE POOR
Ryan's budget contained even deeper cuts to the Medicaid health care program for the poor - $770 billion over 10 years compared to Obama - by turning it into a block grant program for states. It also specified $1.9 trillion in savings from a repeal of Obama's health care reform law.
His budget would undo a Medicaid expansion under that law and roll back coverage subsidies for others.
The poor would also get hit by a $134 billion cut to food stamps. According to the liberal Center on Budget and Policy Priorities, this would cut 8 million to 10 million low-income families off of the nutrition supplement program.
Ryan has also proposed cutting other social services block grants that fund programs such as Meals on Wheels for the elderly. His budget drew criticism from U.S. Catholic bishops for being too harsh on the poor. Ryan, a Catholic himself, shot back that his budget would lead to more job opportunities to reduce poverty.
Meanwhile, the wealthy would fare well under the Ryan budget, just as they would under other Republican tax proposals, which have avoided any revenue increases.
Like those plans, the Wisconsin congressman specified extension of all tax cuts enacted by former president George W. Bush, and he prescribed tax reform that would lower rates to just two brackets - 10 percent and 25 percent - in an bid to unleash stronger economic growth. The current top rate is 35 percent.
People earning over a million dollars a year under the plan would see average annual tax cuts of about $265,000 - in addition to the $129,000 they would receive from the Bush tax cuts, the CBPP said, adding that those making $10,000-20,000 annually would pay about $200 more in taxes.
Ryan's plan proposes to pay for tax reform by eliminating loopholes that cost around $1 trillion a year. But it is short on specifics. To find enough offsets, Democrats charge he would have to turn to some important middle-class tax breaks such as the popular mortgage-interest deduction.
Obama's campaign has built its tax platform around extending tax cuts for the middle class, but raising tax rates on income above $250,000.
The military would also fare well under Ryan's plan, which would slightly increase defense spending above caps agreed upon in a congressional budget deal last year.
He authored a separate, House-passed plan to avoid some $55 billion in automatic spending cuts due to hit the military in January by shifting the costs to food stamps, Medicaid and other social programs.
On Capitol Hill, Ryan is among the loudest voices arguing that the United States is careening toward a European-style debt crisis at current borrowing levels and drastic action must be taken to reduce borrowing.
Unlike the most conservative Republican budget plans, Ryan's budget does not actually achieve balance for decades. But it would shrink U.S. deficits to $3.13 trillion over 10 years, less than half the size of the deficits projected under Obama's own plans.
When the House passed his budget in March - it died in the Democratic controlled Senate - Ryan insisted that voters were ready to hear the difficult truth about necessary cuts.
"People deserve to be spoken to like adults, not pandered to like children," he said.
But history shows the honest conversations come at a price.
"The political graveyards are filled with people who tried to go after entitlements," said Greg Valliere, political analyst with Potomac Research Group. "It's the kind of risk you have to take if you're trailing."
(Additional reporting by David Morgan in Washington; editing by Mary Milliken and Todd Eastham)
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