Video: Ryan: I hope to have 'adult' budget conversation

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    >> with us now from the capitol, house budget committee chairman congressman paul ryan .

    >> how are you doing this morning?

    >> how are you doing?

    >> hi, mika . how are you doing? joe, everybody else ?

    >> mr. chairman, they're already attacking your budget plans.

    >> they don't like it.

    >> what's funny is they haven't seen it yet.

    >> they don't like it, paul.

    >> they've seen the basic framework.

    >> they saw my

    >> is it possible in this political environmental to get something as sweeping as your budget plan through?

    >> well, i hope so. and this is a sincere attempt. look. i can't look my kids in the eye, constituents in the eye with a clear conscience and not try to fix this country's problem. look, we have a huge debt problem. we've got a big spending problem. we need the economy to grow, so we're trying to tackle those problems here. under control. i worry that this is nothing but politics up here these days. but we got to get through that. we can't have a bunch of politicians up here yelling at each other pointing fingers. we need leaders to come up and tackle this country's challenges. if we keep kicking this can down our road, our children are going to inherit a diminished country. this is something we know and we have to do something about it.

    >> mr. chairman, when you think about this, some people are calling this plan quite radical. politically and strategically, are you considering this the beginning of a conversation meaning go on a radical side to get people talking and then meet somewhere in the middle or are you considering this the middle?

    >> i don't know if i say -- i don't look at it in those framework in those terms. this is a plan that pays off our national debt . this is a plan that creates millions of new jobs. this is a plan that saves medicare and medicaid from bankruptcy and insolvency.

    >> but it puts an enormous burden on the poorest people in this country.

    >> actually, i would -- no iwould not agree with that. this saves the social safety net from -- the social safety net is tearing apart at the seams. we're patching the safety net , getting people on the lives of self-sufficiency. we're collapsing -- we have dozen of different job training programs that aren't working. we're collapsing them into career scholarships to help people get off well faerks off dependency, on to skooshlgs on to lives of self-sufficiency. if you read this document, what this is an attempt to do is repair the social safety net , make it work for the 21st century . hasn't really been modernized since the 60s and save the entitle programs. if you keep it the same, nobody 55 and above sees a change. we need to reorganize the policies so americans don't have to reorganize their life. as far as compromise, i'm willing to compromise. you can't get to talking about compromise until you start putting ideas on the table.

    >> we commend you for doing that.

    >> yes, we, do don't we? because, mika , for months, we were saying, the republicans aren't going to do anything. so let us just stop right now and commend --

    >> now there's a leadership position. he's come out with a plan which is more than the democrats can say.

    >> i really like him.

    >> thank you, mika .

    >> so -- but you said you're willing to compromise. where would that be?

    >> well, let's see if they even put a counteroffer out there. i mean, alice rivlan and i designed these medicare reforms. she was clinton's o & b director. vice chairman of the federal reserve in the clinton administration . a proud member of the brookings institution . these entitlement reforms are based off those models she and i worked on together. so john breaux , a democrat from louisiana and bob kerrey , those are ideas those guys were putting out there in the 1990s . i took so many ideas from the fiscal commission. we took dozens of proposals and recommendations from the fiscal commission that erskine bowles and allan simpson shared. so we are taking ideas from both political parties and putting them in this budget plan to go forward. i'm trying to get to a consensus on how best to achieve these goals, how best to pay off the debt, get the economy growing and make these entitlement programs work for future generations because you know what? the trustees at medicare and medicaid and social security are telling us these programs are going bankrupt. these programs are bankrupting the country and we can't let that happen.

    >> john?

    >> just for the sake of this discussion, let's put the entitlement stuff aside, although you've obviously taken the most dramatic steps in those areas. there are three things a lot of deficit hawks think you have to do to bring the budget into balance. do something dramatic on the spending side, take on spending and take on social security at some point. all three of those things you've left out of this.

    >> that's not true.

    >> to the xents i'm wrong about that, explain the ways in which you've tackled those three areas.

    >> we take $78 billion out of pentagon spending and apply it to deficit reduction. we agree with bob gates . he's taken $178 billion out of waste and efficiency at the pentagon. $100 billion back into defense capabilities and $78 billion into deficit reduction. on revenues, we believe we should not be doing a big tax increase because you need economic growth . so we're doing revenue neutral tax reform . that's similar to the commission. the commission raise someday revenues for deficit reduction. but if you broaden the tax base , get rid of all the loopholes and deductions which restored economic. you help small businesses and entrep newspapers the heritage foundation ran a good model. nearly a million new jobs created next year alone as a result of this plan. this plan they estimate brings unemployment down to 4% by 2015 . $1,000 per year, on average in extra family income as a result of this plan, according to those estimates. so you got to have economic growth and tax policies a key to that. but on the pentagon spending, we have to get savings in the pentagon.

    >> what was your third thing? i forgot.

    >> social security .

    >> this is an area i believe we still have a shot at really bipartisan agreement. now look. on health care , we know where the president and the democrats have gone. we totally disagree with that. we put all these specific alternatives out there. but we chose to do this, which is a trigger on social security . if a trustees certify that social security is going bankrupt, which they, do then that requires the presidents to bring a plan to congress and the house and senate to bring plans for fast track consideration. what we're trying to do is set the table to get all parties to come together to fix and save social security . social security is not the big driver of our debt. it's a contributor, not a big driver of the debt in our future. in my personal opinion, this is the room we have the best chance of a bipartisan agreement with this congress, this president and this house and get this done. i think symbolically it would be huge for the credit markets . i think it would be a confidence booster for our country. so we put a social security trigger as our sincere attempt to get bipartisan talks going on that.

    >> willy.

    >> congressman, it's willy. i want to ask you about the politics of this because the american people have watched john boehner and harry reid bicker in public over how to create a budget . just for the next six months in this country. it's not clear they'll be able to get that done by friday and the government may shut down. what can you tell the american people right now? how can you reassure us that you're going to be able to tackle much, much big questions , the ones you put in your budget ?

    >> that's a fair question. the reason we're in this little skirmish is because a budget didn't pass last year at all. the house did not pass a budget last year. that's why we had this funding lapse. we'll now have passed three bills preventing a government shutdown and get something spending cuts. nothing has been passed the senate. we need movement in the senate to prevent the shutdown. on the big issues of the day, we're going from talking about billions to trillions. we have trillions of dollars of problems in this country. and, look, the key deal is this. the sooner we tackle these fiscal problems in america, the better off everybody is. if we don't tackle them soon, then it is bitter european-like austerity. cuts to currency, tax increases that slow down your economy. we want to preempt that. nobody 55 and above sees a change in anything that they are experiencing in their lives. we can do it if we go now. and that's what we're proposing to do.

    >> paul ryan . chris lick just said in my ear, i'm in love. i'm sorry. seriously.

    >> give the man credit for putting out a plan when nobody else would.

    >> and mickey you can't say there's a party you know anymore.

    >> well played.

    >> he's not playing anything.

    >> no, well done. look.

    >> the heart of a wisconsin patriot.

    >> okay. over the top always.

    >> she's trying to compliment him.

    >> i am being nice.

    >> as nice as she can to be a republican.

    >> i think you've done a great job. good luck.

    >> nice see you, too.

    >> paul, thank you. good luck.

    >> thanks, joe.

    >>> more with "the new york times" --

    >> that's impressive. is that just me? that's impressive. nobody is talking. all right.

    >> color me skeptical.

    >> okay.

    >> willy.

    >> thinking you can get anything

By Tom Curry National affairs writer
updated 4/5/2011 11:46:25 AM ET 2011-04-05T15:46:25

Over age 54? You needn’t worry about the proposal House Budget Committee chairman Paul Ryan, R-Wisc., unveiled Tuesday for a redesign of Medicare.

Under age 54? You’ll need to pay a bigger share of the cost of your medical care once you’re retired.

Ryan’s remake of Medicare would save as much as $285 billion a year by 2030, and would mean less federal spending on medical care in future decades for today’s workers and their children.

Ryan’s Medicare redesign is at the heart of a long-term budget plan he released Tuesday. He said the plan would cut $6.2 trillion in spending from President Barack Obama’s proposed spending plans over the next 10 years. That works out to about a 13 percent reduction over the ten-year period.

Under Obama’s blueprint, federal outlays would be nearly 23 percent of gross domestic product over the next ten years; Ryan says his plan would keep federal outlays under 20 percent of GDP. But the bigger savings would come after that initial ten-year period.

The Medicare redesign Ryan is proposing resembles one he offered with Alice Rivlin, a Democrat, an Obama supporter, and former budget director in the Clinton administration.

Replacing open-ended Medicare payments
The plan would replace the current open-ended system of Medicare payments with one in which the federal government would subsidize people to purchase insurance. In health insurance jargon, this is called “premium support.”

Ryan would set up a system called “the Medicare exchange” in which beneficiaries would choose an insurance plan they preferred.

His summary of the Medicare proposal said, “Health plans that choose to participate in the Medicare exchange must agree to offer insurance to all Medicare beneficiaries, to avoid cherry-picking and ensure that Medicare’s sickest and highest-cost beneficiaries receive coverage.”

Under his plan, poorer and sicker people in Medicare in future decades would be more heavily subsidized by the taxpayers than would wealthier and healthier retirees.

The premium support payments would grow annually at the GDP growth rate, plus one percent. This would mean that Medicare spending would grow much more slowly than under the current system.

Ryan would apply his plan only to those who turn age 65 in 2022.

Here are the important themes to keep in mind when assessing Ryan’s plan:

  • Laying down a marker
    Ryan will include his Medicare proposals in the budget resolution for fiscal year 2012, which begins in October.

But no budget resolution that incorporates these ideas is going to be adopted; the Democratic-controlled Senate would not agree to it.

So the Ryan proposals are significant mostly for setting down a marker of what Republicans would do if they had the power to do it.

These ideas would be enacted only in the ideal scenario for Republicans: they keep control of the House of Representatives in 2012, gain control of the Senate and the Republican candidate wins the presidency. Then in 2013 these proposals are enacted.

Of course, events may not unfold in that way.

And as Ryan acknowledged Tuesday at his press conference at the Capitol, calling for a fundamental redesign of Medicare exposes him and his party to Democratic charges they are bent on destroying Medicare and are indifferent to the suffering of old people.

“Look at these new people who just got here,” he said, referring to several freshmen Republican House members standing at his side. “They didn’t come here for a career; they came here for a cause. This is not a budget, this is a cause…. We cannot keep going down the path of fearing what the other political party would do to us if we try to solve a problem”

But given the danger of damaging Democratic ads in 2012, why is Ryan proceeding?

One reason is he has already committed himself to fundamental Medicare reform over his years in Congress, carving out his identity as a numbers cruncher and fiscal hawk.

And he has support from House Speaker John Boehner who said last week, “For 20 years, I've watched leaders around here look up at the size of the problem of growing entitlement spending. It's like looking up at the mountain; they see how steep it is” and decide to put off action for another day, or another decade.

But, he said, “We are imprisoning the future for our kids and our grandkids if we do not act, and it's time to act.”

  • It’s a bet on the debt. Ryan and his fellow Republicans seem to be convinced that today’s voters — especially those under age 54 — are more alarmed about the national debt than they are about cuts in future benefits.

Gross federal debt is now about 100 percent of gross domestic product, the highest level since immediately after World War II, and will grow as more Baby Boomers retire and start collecting Medicare and Social Security benefits.

Ryan and other Republicans fear a Greek-style sovereign debt crisis in which investors dump their Treasury bonds and force interest rates sharply higher.

“This is the most predictable economic crisis in our history,” Ryan said Tuesday. Referring to the president and members of Congress, he asked, “What if they knew what could done to prevent it from happening, and if they had time to prevent it, but they decided not to, because it wasn’t good politics?”

Ryan mentioned last month that investment fund giant PIMCO “dumped their Treasury bills in their major bond fund the other day. I'm very worried this thing is starting to accelerate.”

PIMCO managing director Bill Gross writes in his Investment Outlook for this month that his fund “has been selling Treasuries because they have little value within the context of a $75 trillion total debt burden.”

He added, “Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers,” that is, by means of “inflation, currency devaluation and low to negative real interest rates.”

  • Ryan’s savings target is higher than Obama’s. 

According to the chief actuary of the Medicare system, Obama’s health care overhaul will reduce the government’s outlays on Medicare by about $500 billion between now and 2021. In 2019, that would mean a savings for that year of about $127 billion, or about 0.7 percent of GDP. Obama's plan does that by reducing future payments to hospitals and hospices and by nudging doctors toward more standardized cost-effective treatments.

Ryan is aiming for far higher savings. According to the Congressional Budget Office’s preliminary analysis of the Ryan-Rivlin plan, it would cut health care spending by as much as 1.25 percent of GDP in 2030, with increasing savings in subsequent years. If one uses the Goldman Sachs forecast for U.S. GDP in 2030, a cut of 1.25 percent would equal $285 billion just for that one year.

Former CBO director Rudolph Penner said if the growth in spending for Ryan’s redesigned Medicare is limited to GDP growth plus one percentage point, “then it would certainly save money compared to a continuation of current law.”

The premium support system “would clearly be designed to reduce Medicare spending by adjusting the support level for something other than automatic health care cost increases,” said former Senate Budget Committee staff director Bill Hoagland. Pegging the premium support payments to GDP growth plus one percentage point means that spending will “clearly be less than what would be projected under current law. This is bound to show savings.”

  • Would you be better off under Ryan’s Medicare plan or under the Obama-reformed Medicare?

From the the details Ryan released on Tuesday, it seems that today’s over-65 voters — who overwhelmingly favored the Republicans in the 2010 elections, according to exit polls — would not stand to lose under a Ryan-ized Medicare.

But today’s middle-aged workers, when they retire in, say, 2025, would not get the same level of benefits that Medicare beneficiaries do today.

Stephen Zuckerman, a health care economist and Medicare expert at the non-partisan Urban Institute said, “The most serious flaw is that the focus of this approach is on limiting federal spending on Medicare, without being concerned about the potential of this change to shift costs to Medicare beneficiaries.”

And the Congressional Budget Office said in its analysis of the version of Ryan’s plan that he offered with Rivlin last year that if it were enacted “future beneficiaries would probably face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare.”

On the other hand, while Ryan increases the cost burden on Medicare beneficiaries in 2030, he'll be reducing the burden on workers in 2030 of having to pay for future Medicare payments.

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