(Bloomberg) — House Republicans are proposing to cut $5.5 trillion in federal spending and balance the budget in nine years by cutting Medicaid and food stamps and partially privatizing Medicare.
The House plan released Tuesday, straight from Representative Paul Ryan's budgets of the past, is sure to run into opposition among Republicans who control the Senate. Almost half the Senate Republicans are up for re-election next year, and few senators are eager to run on a budget that would cut benefits for senior citizens.
The Senate won't make specific cuts to Medicare in its proposal due Wednesday, said an aide familiar with the plan — evidence of the deep splits inside the Republican Party over how to govern in budget-strapped times.
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"What you're asking me is, yeah, hey, Republicans, why don't you go on a kamikaze mission here and why don't you lead and give your political opponents all this ammunition to just slaughter you in the next election?" Senator Ron Johnson, a Wisconsin Republican whose seat is up in 2016, told Bloomberg reporters and editors last week.
The stakes of the budget negotiations — which pit Tea Party House Republicans seeking deep entitlement cuts against many of their fellow Republicans — aren't merely financial.
The proposal by House Budget Committee Tom Price of Georgia assumes $2 trillion in savings from a full repeal of President Barack Obama's health-care law. A budget agreement between the two chambers would permit the Senate to pass revisions to Obamacare later this year with a simple majority and no need for Democratic votes.
Obamacare ruling
The Supreme Court is set to rule by late June on a challenge to Obamacare's health-care subsidies in states that didn't create their own insurance exchanges. If the court bars the subsidies, Republicans want to change the law by using the simple-majority tool.
Tuesday's proposal by Price is similar to a previous Medicare proposal by his predecessor, Ryan of Wisconsin, that sought to turn the health-care program for the elderly into a voucher system.
Price's budget would cut Medicare by $148 billion through 2025. Starting in 2024, Medicare beneficiaries would choose from a range of options, including traditional Medicare and private coverage. The government would issue fixed payments directly to the plan.
Medicaid cuts
The budget would cut $913 billion from Medicaid, the health-care system for the poor, over the same time period by issuing block grants to states. They would manage their own programs, either by cutting benefits or generating their own revenue to fund any shortfalls.
Food stamps, the federal nutrition program, would be turned over to states to administer beginning in 2021.
"These reductions are hardly Draconian," said Price's budget proposal. "It protects key priorities while eliminating waste."
"Washington cannot keep spending money it does not have," according to the budget proposal.
While many Senate Republicans don't want to cut entitlement programs such as Medicare and Medicaid, about 60 Tea Party- aligned House Republicans insist on addressing such programs, which are the main sources of the federal deficit.
'Still furious'
"This group is still furious with their leadership over what they consider to be a sell-out" by Republicans on funding for the Department of Homeland Security, said Stan Collender, executive vice president of Qorvis MSL Group, a communications strategy firm in Washington.
Republican leaders this month abandoned an attempt to use the agency's spending bill to roll back Obama's orders easing deportations for undocumented immigrants.
The House plan would use an accounting maneuver in an attempt to satisfy defense hawks who want to ease military spending cuts scheduled to take effect in October.
Senators such as John McCain of Arizona won't support deep cuts in military spending, which Senate Budget Committee Chairman Mike Enzi, a Wyoming Republican, said he plans to keep.
Price's proposal would budget about $94 billion for a special war-funding account that isn't subject to the spending limit — the Overseas Contingency Operations account, which funds military activities in Iraq and Afghanistan.
No offsets
Ed Lorenzen, senior adviser at the Committee for a Responsible Federal Budget, said in an e-mail that such a provision "pretends to comply with caps and doesn't require offsets for increased spending."
In February 2012, the website of the Senate Budget Committee — also led at the time by Enzi — called a similar idea by Democrats a "gimmick."
Obama has proposed reducing the war-funding account to $58 billion for the 2016 fiscal year, compared with $73 billion this year. His budget, released in February, was designed to pressure Congress into boosting annual defense and domestic spending in tandem, in part by cutting the war-funding account.
The stage is also set for a clash over automatic spending cuts set to take effect in October.
The limits were enacted as part of the 2011 Budget Control Act, intended to cut $1.2 trillion in spending through 2021. Congress voted to ease the spending reductions for the past two fiscal years, and the question is whether lawmakers will do the same for 2016.
Ending cuts
Obama has called for an end to the automatic cuts. His budget offered a $38 billion increase for national security programs over current budget caps, and $37 billion more for domestic programs.
Many Republicans consider the 2011 law one of their most significant achievements and they will fight hard to preserve it.
Outside groups that are pressuring Republicans to cut back on Medicare and Social Security are preparing for a letdown.
"They certainly have the opportunity to put forward a bold document" that reduces entitlements, said Dan Holler, a spokesman for Heritage Action for America, a small-government group. "It would be surprising to see them approach it from that perspective."
With assistance from Erik Wasson and Roxana Tiron in Washington.
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