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House Budget Committee Chairman Paul Ryan holds a news conference to unveil the Republicans' budget resolution in Washington March 12, 2013. (GARY CAMERON/Reuters)
House Budget Committee Chairman Paul Ryan holds a news conference to unveil the Republicans' budget resolution in Washington March 12, 2013. (GARY CAMERON/Reuters)

U.S. lawmakers unveil duelling budget plans Add to ...

U.S. Republicans and Democrats on Tuesday unveiled vastly different plans to slash long-term budget deficits that highlight the wide gulf separating the parties and the difficulty of reaching a bipartisan compromise any time soon.

Republicans would balance the budget in 10 years with $4.6-trillion (U.S.) in spending cuts, building on earlier proposals for deep reductions to social programs.

Democrats say their plan shrinks deficits by $1.85-trillion over 10 years, imposes tax hikes on the wealthy and adds $100-billion in infrastructure spending to boost job growth.

Neither plan has any real chance of becoming law, with Democrats against big cuts in social programs and Republicans adamantly opposed to tax increases.

“It shows the gulf we have to bridge is just as big as it ever was,” said Representative Chris Van Hollen of Maryland, the top Democrat on the House of Representatives Budget Committee.

Representative Paul Ryan of Wisconsin, the panel’s Republican chairman, unveiled his latest instalment of his “Path to Prosperity” proposal, which will likely be approved this month by the Republican-controlled House of Representatives.

This version would balance the budget by 2023 compared to 2040 in the previous plan. The task would be made easier by $620-billion in tax hikes approved in January on wealthy Americans, and an assumption very unlikely to occur – the repeal of President Barack Obama’s health care reforms, which would save another $1.8-trillion.

At a news conference, Mr. Ryan repeatedly said that his plan will balance the budget and the Democratic alternative won’t.

“You can’t start really paying this debt down in a serious way until you balance the budget,” he said. “The current high levels of debt we have today are a threat to our economy.”

He defended keeping the January tax hikes by saying their damage would be corrected by tax reform that would drastically reduce rates.

The Ryan plan’s cuts to social programs including Medicaid, which provides health care for the poor and some people with disabilities, make it unacceptable to Democrats, who control the U.S. Senate.

More reductions, totaling $931-billion over 10 years, would come from counting savings from ending the wars in Iraq and Afghanistan, which is money that critics argue would not have been spent anyway, and from changing accounting methods for the cost of domestic emergencies, such as hurricane rebuilding.

Mr. Ryan’s plan leaves savings in place from automatic spending cuts that began on March 1 and shaves another $249-billion from the discretionary spending category that funds the military and programs ranging from education to national parks.

The Democrats’ response to Mr. Ryan’s budget was biting.

Senate Majority Leader Harry Reid said the plan would shower new tax breaks on the rich and hit the middle class with higher taxes, all the while cutting essential government services such as food inspections and law enforcement, and weakening Medicare.

That budget, Mr. Reid added in a speech on the Senate floor, “relies on accounting that’s creative at best and fraudulent at worst.”

Despite the severe differences, budget optimists hope that the House Republican and Senate Democratic plans will be the opening salvos in a serious deficit-reduction effort this year.

Mr. Ryan, a Wisconsin lawmaker who was the Republican vice-presidential nominee in 2012, relies again on major cutbacks to Medicaid by giving states more flexibility to run the program.

A total of $756-billion in savings would be achieved over 10 years on Medicaid, according to a summary of the House Republican budget outline.

Medicare, the federally backed health care program for the elderly and disabled, would see savings of $129-billion over a decade. Eventually, the program would be converted into a voucher-like plan with the elderly receiving subsidies to purchase private insurance or traditional Medicare.

Those Americans now aged 55 or older would maintain their current benefits, however.

Democrats have complained that Mr. Ryan’s approach would cost older Americans thousands of dollars a year in added health care costs while letting the rich keep tax breaks that cost the Treasury Department tens of billions of dollars.

Ironically, Mr. Ryan’s drive to balance the budget in 10 years is aided by new tax revenues on the rich that Democrats won at the beginning of this year – the very ones that Republicans fought to stop.

Over the past four years, U.S. budget deficits have surpassed $1-trillion annually, contributing to a rapidly escalating national debt that now stands at nearly $16.7-trillion.

Mr. Ryan’s proposal comes as Republicans and Democrats have been considering the possibility of finding a long-term budget compromise following more than two years of bitter disputes.

Over the past week, Mr. Obama has met privately with Republican lawmakers to feel out their willingness to cut a deal. This week the Democratic president is holding four separate meetings with members of Congress to explore possibilities.

Even so, some Republican lawmakers in recent days have noted “an impasse” over tax policy, as Democrats continue to insist on additional tax increases on the wealthy and some corporations.

And Mr. Ryan’s budget does not shy away from new taunts at Mr. Obama as it proposes repealing the President’s landmark health care law that is gradually being implemented after several failed attempts by Republicans to kill it and a U.S. Supreme Court ruling that rejected key challenges to the law.

The House Republican plan envisions U.S. budget deficits falling sharply to $528-billion next year, $125-billion in 2015 and $69-billion in 2016.

While the nation’s finances would be strengthened through $4.6-trillion in lower deficits over 10 years, not all of the savings would come through spending cuts.

The Republican budget foresees $700-billion less in interest payments over the next decade, compared to current policy, because of the slowdown in government borrowing.

Debt held by the public would fall from 77.2 per cent of GDP next year to 54.8 per cent by the end of the 10-year budget window, according to the House Budget Committee.

Besides tackling spending, the Ryan budget calls for reforming the nation’s outdated tax code and creating just two income tax brackets of 10 per cent and 25 per cent.

With Mr. Obama and lawmakers trying to reach a budget deal by late July or early August, there is widespread skepticism that an overhaul of tax laws can be accomplished in such little time.

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