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Republican Ryan's budget sets political course for party in 2014

U.S. Rep. Paul Ryan (R-WI) makes remarks to the Conservative Political Action Conference (CPAC) in Oxon Hill, Maryland, March 6, 2014. REUTE
U.S. Rep. Paul Ryan (R-WI) makes remarks to the Conservative Political Action Conference (CPAC) in Oxon Hill, Maryland, March 6, 2014. REUTE

By David Lawder

WASHINGTON (Reuters) - U.S. Representative Paul Ryan, the leading Republican voice on budget policy, rolled out a fiscal blueprint on Tuesday that calls for deep cuts in domestic programs, increased defense spending and a goal of erasing annual deficits within a decade.

Ryan's budget has no chance of passing the Democratic-controlled Senate. But for the November congressional elections, it will serve as a manifesto of Republican priorities - a plan the party will use to draw contrasts with Democratic President Barack Obama's push to trim federal spending more gradually, boost taxes on the wealthy and increase protections for lower- and middle-class Americans.

Ryan, the chairman of the House of Representatives Budget Committee, is calling for spending cuts totaling $5.1 trillion over a decade to reach a balanced budget by 2024 with no new tax revenue. He would cut social programs such as food stamps and Medicare, the national insurance program for older Americans.

"This is a plan to balance the budget and create jobs, and it builds off a simple fact: We can't keep spending money we don't have," Ryan said.

A chunk of the savings in Ryan's budget stems from the presumption that Republicans will be able to kill Obama's 2010 healthcare overhaul. That would require Republicans to be in control of both houses of Congress and the White House, an optimistic scenario for Ryan's party that could happen in 2017 at the earliest.

The budget envisions nearly $2.1 trillion in savings over a decade from the repeal of Obamacare, a problematic proposal at a time when enrollment in the program has solidified after a shaky start.

Obama announced on Tuesday that 7.1 million people had signed up for coverage and that millions more were benefiting from various provisions of the Affordable Care Act, which is designed to help millions of uninsured and under-insured Americans. Democrats said Obamacare's enrollment figures are making Republican efforts to kill the program increasingly difficult.

"It is going to be impossible for Republicans to maintain a repeal message when that would steal healthcare away from 7 million people," Connecticut Senator Christopher Murphy told reporters on Capitol Hill.

Republicans have complained that Obamacare costs too much and limits coverage choices for consumers. Ryan proposes replacing it with "patient centered reforms that will help increase access, improve quality and lower costs." However, his plan contains few specifics about this alternative.

Taking a fiscally conservative stance helped Republicans make big gains in the last midterm elections in 2010. Ryan's plan signals that Republicans want to repeat this formula as they seek to tighten their control of the House and gain the six Senate seats they need to take control of that chamber.

But annual deficits have shrunk since 2010, making the clamor to trim spending seem less urgent. And Ryan's deep cuts to social safety net programs already are subjecting Republicans to fresh attacks from Democrats, who are calling for steps to reduce economic inequities that broaden the gaps between rich and poor Americans.

'A DECLARATION OF CLASS WARFARE'

Ryan's budget shows "what House Republicans would do if they could impose their will," said Maryland Representative Chris Van Hollen, the top Democrat on the House Budget Committee. "This is a declaration of class warfare."

Van Hollen also accused Ryan of promoting a "fake" deficit-reduction plan because Ryan's plan envisions killing Obamacare and yet counts an estimated $700 billion in Medicare savings that will result from the healthcare law over 10 years.

His work on previous budget plans helped Ryan become the Republicans' 2012 vice presidential candidate, and he is still viewed as a possible White House contender in 2016.

His status as the Republicans' leading voice on fiscal and tax matters is likely to be enhanced by the departure of Michigan Representative Dave Camp, the chairman of the tax-writing House Ways and Means Committee who announced this week that he will retire when his term ends in January.

Ryan has expressed a desire to take over the tax-writing panel, which would give him a major platform to push for an overhaul of U.S. tax policy next year.

NO SURE THING, EVEN AMONG REPUBLICANS

Ryan's budget is not guaranteed to win approval even by House Republicans. It would take only about 16 "no" votes from Republicans sink the plan in the 435-seat House, assuming that all Democrats will vote against it.

His proposed cuts may not be deep enough for the most conservative, Tea Party-backed Republicans. And they may be too steep for some moderate Republicans in suburban areas of typically Democratic states on the east and west coasts.

Many mainstream Republicans are clamoring for more defense spending after the crisis in Ukraine raised concern about a new Cold War with Russia.

Ryan's budget complies, calling for a boost in defense spending by $43 billion in 2016 and a total of $483 billion over 10 years. But it adheres to fiscal 2015 military and domestic discretionary spending limits set forth in a short-term budget deal negotiated last year by Ryan and Democrats.

Ryan would largely wipe out the automatic "sequester" defense cuts that went into effect last year, but the additional money for defense would come out of domestic discretionary spending, which would fall by $791 billion over 10 years, hitting programs such as education and Amtrak rail subsidies.

The budget proposes to save $732 billion in the Medicaid health care program for the poor by changing its structure to one in which states receive a lump sum payment known as a "block grant" to pay for health coverage. Currently, states and the U.S. government share the costs of the Washington-run Medicaid, which has been expanded significantly by Obamacare.

Other social programs such as food stamps, housing subsidies and income assistance to needy families also would face cuts and new work requirements under Ryan's plan, reducing federal spending by an additional $966 billion over 10 years.

Ryan's plan to overhaul Medicare is a slight revision from a proposal he made last year, with phased-in changes that would apply to workers aged 55 and younger, rather than 54 and younger.

The plan converts the fee-for-service healthcare program to a voucher-like system in which seniors would be given subsidies to purchase private insurance or traditional Medicare coverage, reducing costs.

(Editing by Alistair Bell, David Lindsey and Eric Walsh)

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