Video: GOP unveils budget alternative

updated 4/1/2009 3:24:53 PM ET 2009-04-01T19:24:53

Republicans in the House Wednesday pressed a budget plan that would cut taxes and radically overhaul Medicare, offering a stark alternative to blueprints offered by President Barack Obama and his Democratic allies.

The plan, drafted by Wisconsin Rep. Paul Ryan, the top Republican on the Budget Committee, also freezes overall spending on domestic programs passed by Congress each year and repeals most of the spending in Obama's recently passed economic stimulus bill.

Despite spending reductions, the plan projects permanent deficits exceeding $500 billion into the future, fueled largely by big tax cuts.

The GOP plan would offer a dramatically simplified tax code in which couples would have the option of a 10 percent rate on the first $100,000 of income, with a 25 percent rate thereafter, with the first $25,000 of income exempt from taxation. Single could get a $12,500 exemption and a 10 percent rate on income up to $50,000.

Taxpayers could also opt to remain in the current system.

On Medicare, workers under the age of 55 would enroll in private plans and receive premium subsidies equal to the average Medicare benefit when they retire. Benefits would not be changed for people in the program or people 55 or older. Democrats warned that the GOP plan would force draconian cuts to the program.

Senate Majority Leader Harry Reid said in a statement, "If you like this recession, you'll love the Republican budget. And if their plan sounds familiar, it's because it merely repeats the same mistakes of the past eight years — mistakes that have cost millions of Americans their jobs and plunged our nation into the worst economic crisis since the Great Depression."

The Republican plan has no chance of becoming law, but it offers voters a contrast between the rival parties. Republicans have been on the attack, saying Obama's $3.6 trillion budget taxes, borrows, and spends way too much. And the GOP has appeared sensitive to criticisms by Obama and Democrats that they are the "party of 'no,'" rushing out a detail-free version of the plan last week.

Ryan said Obama's budget "is little more than a thinly veiled attempt by Washington to spend its way into prosperity, tax its way into tax relief, and borrow its way into debt reduction."

The GOP alternative emerged as the House began debate on a Democratic budget measure that largely tracks Obama's plans, though not exact assumptions, like limiting wealthier taxpayers' ability to deduct mortgage interest, charitable contributions and other deductions.

Meanwhile, debate continued in the Senate.

Under Congress' arcane budget process, the first step in enacting major legislation such as Obama's plans to dramatically overhaul the U.S. health care system is to pass a nonbinding blueprint called a budget resolution.

Given the recession and the financial crisis, the budget outlook has become truly bleak, with the deficit for the current budget year expected in the $1.7 trillion range and the deficit for 2010 seen at between $1.2 trillion to $1.4 trillion, depending on whether additional financial bailout funds are approved.

Obama's budget, according to the Congressional Budget Office, would produce unsustainable deficits that never go below 4 percent of the size of the economy. The alternatives offered by House and Senate Democrats would do somewhat better.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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