WASHINGTON - The Republican-controlled U.S. House of Representatives votes Friday on a dramatic 2012 budget plan that would cut the country's debt by revamping the decades-old system that guarantees medical insurance for Americans over 65 and to the poor and disabled.
The plan put forward by Rep. Paul Ryan, the budget committee chairman, stands little chance as written of even reaching a vote in the Senate, where Democrats still hold the majority. President Barack Obama would likely veto the measure, regardless.
With the 2012 presidential election campaign already under way, Obama and his Democrats are locked in an ideological confrontation with Republicans, especially a nearly 90-strong freshman class in the House of Representatives that is allied with the ultraconservative tea party. Their victory in November -- under the flag of cutting government spending and intrusion into the lives of Americans -- gave Republicans control of the House. That set in place a divided government that has forced Obama to accept compromises on spending and taxation that have deeply angered the liberal wing of his Democratic Party.
The debt, in relation to the size of the American economy, has reached alarming proportions. Republicans in particular are pounding the issue, which they say endangers the country's domestic well-being and its ability to influence world affairs. Most Democrats also accept the need to cut spending, but cannot swallow what they see as the draconian Republican approach.
The House will be voting on the Ryan plan just a day after Congress adopted legislation that cut $38.5 billion out of the national budget for the remaining 4 1/2 months of 2011. That money was cut from spending for U.S. government agencies and amounts to only about 12 per cent of total government outlays.
The Republican spending outline for the next fiscal year, beginning Oct. 1, foresees cuts of $5.8 trillion over 10 years. It would reduce tax rates for corporations and the wealthy, and eliminate various tax loopholes.
The measure, a nonbinding blueprint that sets a theoretical framework for future legislation, also would dramatically cut Medicaid, the medical insurance program for the poor and disabled, and transform it into a grant program run by the states. It doesn't touch Social Security, the national pension system, or immediately cut Medicare.
It does, however, call for transforming Medicare into a system under which the government provides future retirees with vouchers to buy private insurance plans. People now 55 and over would stay in the current system, but younger people would receive the insurance subsidies. Economists say those vouchers would lose value over time because they would not keep pace with fast-rising medical costs.
Obama countered, in a major speech earlier this week, with a 2012 budget proposal, which would cut the federal deficit by $4 trillion over 12 years by eliminating health care fraud, raising taxes on the wealthy and paring defence spending.
He said Ryan's proposal would slash health care coverage to 50 million Americans, including grandparents needing nursing home care, children with autism and kids "with disabilities so severe that they require 24-hour care. These are the Americans we'd be telling to fend for themselves."
Medicare, Medicaid, Social Security and defence spending account for about 80 per cent of the American federal budget.
Another huge spending fight awaits this summer after the United States Treasury hits its $14.3 trillion borrowing cap on May 16. That upper limit on borrowing has been increased with little fanfare 10 times in the past decade. But House Republicans, under heavy tea party pressure, now are threatening to vote no unless the debt limit increases also includes further and deep spending cuts.
The Treasury Department has warned that failure to raise it by midsummer would drive up the cost of borrowing and destroy the economic recovery. Some economists predict even a limited U.S. default on its debt could produce global economic chaos.
In the current year, the U.S. is forecast to incur a $1.5 trillion deficit, raising total national debt to nearly $15 trillion.
