* Ryan plan fails as five Republicans vote against it
* Democrats press advantage after surprise electoral win
* Ryan warns political maneuvering could hurt debt talks
(Adds background, details)
By Andy Sullivan and Thomas Ferraro
WASHINGTON, May 25 U.S. Senate Democrats on
Wednesday defeated a Republican plan to scale back health
benefits for future retirees and forced their opponents to take
a stand on the unpopular proposal.
Pressing their advantage after winning an election to fill
an open congressional seat in New York state, Democrats in the
Senate staged a vote on the Republican budget plan, which would
save trillions of dollars in coming decades by privatizing the
Medicare health program for the elderly.
The measure failed, as expected, by a vote of 40 to 57 as
five Republicans broke ranks to oppose it.
Democrats say voter opposition to the Republican plan
helped them win Tuesday's election in a conservative district
and boosted their prospects in the 2012 presidential and
congressional elections. [ID:nN25154148]
The architect of the Republican plan, Representative Paul
Ryan, warned that political maneuvering could scuttle efforts
to tame the national debt and increase the country's borrowing
authority before an early August deadline.
Full coverage of budget, debt issues [ID:nUSBUDGET]
Factbox on U.S. debt talks [ID:nN19242177]
"Trying to scare seniors and turning these things into
political weapons, what that ends up doing is inflicting
political paralysis," Ryan said at conference that drew
together some of the main players in the U.S. deficit debate.
Ryan's comments underscored the political risks inherent in
efforts to bring the spiraling national debt under control.
Polls show widespread public concern about the debt, which
has more than doubled in the past 10 years. At the same time,
specific proposals to scale back spending or raise taxes risk a
public backlash. [ID:nN25211062]
Congress must raise the $14.3 trillion debt ceiling by Aug.
2 to avoid a potentially catastrophic default. Lawmakers from
both parties say any increase must be paired with steps to
bring stubborn trillion-dollar deficits under control.
The United Nations warned of a possible crisis of
confidence in the U.S. dollar if debt concerns continue to
drive down its value. [ID:nN25112236]
The Senate defeated several other budget proposals along
with the Ryan plan, including President Barack Obama's February
budget request. Obama unveiled a more ambitious
deficit-reduction plan after his initial effort was panned.
Republicans said Democrats were not taking the country's
fiscal situation seriously.
"They're so focused on an election that's nearly two years
away that they can't see the crisis in front of us," Senate
Republican Leader Mitch McConnell said in a statement.
Negotiators led by Vice President Joe Biden say they can
probably get more than $1 trillion in savings, measured over 10
years. Combined with a commitment to trim deficits further in
coming years through yet-to-be-determined measures, that could
get close to the $4 trillion in savings that experts say is
needed to keep the debt from overwhelming the economy.
Their efforts are being closely watched by Wall Street and
members of the business community.
"I am optimistic that something will happen. It drives me
nuts to see how painful everybody makes it," Honeywell CEO
David Cote told Reuters Insider. Cote sat on a
deficit-reduction panel set up by Obama last year.
The negotiators, who next meet on Thursday, have yet to
bridge a stark divide over taxes and healthcare. Democrats will
not consider healthcare changes unless Republicans stop ruling
out tax increases, aides from both parties said.
Republicans worry that the details of their plan are being
lost in the debate -- specifically, that it would not apply to
the current retirees who make up a powerful voting bloc.
In an Internet video released, Ryan said his plan would
tame galloping healthcare costs and ensure that the program
does not run out of money in the decades to come.
Speaking in London, Obama told British lawmakers that both
countries will have to balance painful budget cutting with the
need to take care of the unfortunate.
"We have faced such challenges before, and have always been
able to balance the need for fiscal responsibility with the
responsibilities we have to one another," Obama said.
(Additional reporting by Caren Bohan, Alister Bull, David
Morgan, Richard Cowan, Donna Smith, Emily Stephenson, John
McGowan and Doug Palmer; Editing by John O'Callaghan and