–House Republican Leaders Have Been Cool To Ryan’s Bold Fiscal Plans
–Rep. Ryan Backs Sweeping Overhaul of Soc Sec, Medicare and Tax Code
–Unclear If Hill GOP Wants Fiscal Deal With Obama-Or Fights

By John Shaw

WASHINGTON (MNI) – The many unknowns about the direction of U.S.
fiscal policy next year include this one: are congressional Republicans
looking for some kind of fiscal agreement with the Obama administration
or are they primarily focused on developing a clear alternative and
fighting it out with the president?

After listening to GOP briefings and parsing the words of the
Republican leadership during the first week of the Lame Duck session,
most budget analysts see far more indications of a coming White
House-Republican fiscal brawl in 2011 than accommodation.

Republican leaders seem more interested in presenting competing
ideas with President Obama than finding a middle ground.

And incoming House Budget Committee Chairman Paul Ryan is likely to
be at the epicenter of Republican efforts to develop a coherent
alternative to Obama’s fiscal agenda.

But Ryan, widely seen as one of the leading Republican fiscal
thinkers in Congress, faces a formidable early challenge: getting House
Republican leaders to fully back his fiscal ideas.

In May of 2008, Ryan released his plan, “A Roadmap for America’s
Future,” and has revised it slightly since then.

Ryan’s plan is based on the fear that the U.S. is racing for the
fiscal precipice and the only way to avert a catastrophe is for a major
restructuring of Social Security, Medicare and other spending programs
coupled with bold tax reform.

On the tax front, his plan calls for creating two individual tax
rates, 10% on income up to $100,000 for joint filers, and 25% on income
above this amount. His plan would levy no taxes on interest, capital
gains or dividends. It would remove most deductions, exemptions and
credits from the tax code and replace the current income tax with a 8.5%
consumption tax on goods and services.

“The federal government’s current fiscal path is unsustainable: it
leads to unprecedented levels of spending, deficits and debt that will
overwhelm the budget, smother the economy, weaken America’s
competitiveness in the global 21st century economy and threaten the
survival of government’s major benefit programs,” Ryan declares in an
explanatory document.

But Ryan’s plan has generated substantial controversy, especially
on Social Security and Medicare restructuring. Only about a dozen House
Republicans have joined his plan as co-sponsors.

When incoming House Speaker John Boehner unveiled the House
Republican fiscal agenda this fall, Ryan did not attend the event at a
Virginia lumberyard and many of his boldest ideas on Social Security and
Medicare were nowhere to be found.

Boehner said that a permanent extension of the Bush tax cuts is
needed. (Renewing all the Bush era tax cuts and making adjustments to
the alternative minimum tax would cost about $4 trillion over a decade.)

The House GOP leadership plan also called for repealing the health
care law signed by Obama this spring. It would place a cap on most
federal spending at 2008 levels, except for the budgets of the Defense
and Homeland Security departments. Boehner said this would save $100
billion a year over a decade.

But the House GOP plan was careful to avoid any discussion of
specific programs that need to be cut, eliminated or reorganized.

Bill Frenzel, a former Republican congressman who is now a guest
scholar at the Brookings Institution, says the House GOP leadership will
tap Ryan as a key fiscal spokesman, but might try to scale back his
ambitions on the more controversial parts of his agenda.

“I think Ryan is going to be critical this year. He is clearly the
Republican thought leader on fiscal issues. He put out a plan a few
years ago that offers a clear direction. It’s quite controversial in
some areas, but there is meat on the bones,” says Frenzel.

“Especially early in the new year, Ryan is going to be the fiscal
face of the Republican majority in the House. He has ideas and wants to
move forward,” he said.

As chairman of the House Budget Committee, Ryan will have an
excellent bully pulpit, but more limited real power. The Budget
Committee is charged to draft a multiyear non-binding fiscal blueprint
that outlines spending and revenue goals and makes deficit estimates.

The Budget panel can recommend changes to spending and revenue
programs, but separate legislation is needed to enact these changes.

Bob Bixby, executive director of the Concord Coalition, says Ryan’s
strength is offering a clear vision of a more limited government.

“Ryan’s ideas are coherent. I also think large parts of his agenda
are political non-starters. Some of his policies are very controversial.
It was telling that more Democrats than Republicans were eager to talk
about Ryan’s budget plans in the run-up to the elections,” he said.

** Market News International Washington Bureau: (202) 371-2121 **

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