House passes $6 trillion spending cut plan for 2012

WASHINGTON — The U.S. House of Representatives has passed a Republican budget blueprint that proposes a fundamental overhaul of the main U.S. medical program while combating out-of-control budget deficits. It would impose sharp spending cuts on social safety net programs.

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The Republican proposal passed 235-193, with every Democrat voting "no." The nonbinding plan lays out a fiscal vision to cut $6.2 trillion over 10 years from the budget submitted by President Barack Obama.

The plan put forward by Rep. Paul Ryan, the House 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 probably would veto the measure, regardless.

The plan is at odds with a spending vision Obama outlined earlier this week, which foresees tax increases for high-income Americans while holding the line on those major social contract programs.

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 first-year class in the House of Representatives that is allied with the ultraconservative Tea Party movement.

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 angered the liberal wing of his Democratic Party deeply.

The U.S. 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.

In an Associated Press interview Friday, Obama said the Republican approach would mean "We would have a fundamentally different society than we have now."

Beyond that, Obama said, "Literally, we couldn't afford to fix the roads in the country under their budget."

The House approved 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 percent of total government outlays.

Dramatic changes to Medicaid, Medicare
The Republican spending outline for the next fiscal year, beginning Oct. 1, calls for 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 does not 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's plan, outlined earlier this weeks calls for cutting the federal deficit by $4 trillion over 12 years by eliminating health care fraud, raising taxes on the wealthy and paring defense 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 defense spending account for about 80 percent of the American federal budget.

Dealing with the debt ceiling
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.