Rep. Ryan Discusses Budget Plan

Robert Siegel talks with Rep. Paul Ryan, chair of the House Budget Committee, about his budget plan for 2012 — and about President Obama's plan for debt reduction.

ROBERT SIEGEL, host:

Joining us now from Capitol Hill is Representative Paul Ryan. Welcome to the program.

Representative PAUL RYAN (Republican, Wisconsin): Thanks for having me.

SIEGEL: First, taxes. A big difference between you and President Obama is what you say about taxes. Just to be clear, are you proposing that with lower individual tax rates, about the elimination of loopholes, the IRS would collect just as much money as it does now from (unintelligible).

Rep. RYAN: That's exactly right - that's exactly what we're proposing, which is we're not talking about cutting revenues. We're talking about keeping revenues where they are, but having a better tax system to collect those revenues with an eye on economic growth and job creation. You have to remember, the people in the top tax brackets are the ones who enjoy most of the loopholes and deductions.

So we're saying, let's clear out the clutter of lots of different deductions and loopholes and lower tax rates in exchange. What we have learned with just a lot of economic evidence is that's a good way to job creation, economic growth. It helps successful small businesses thrive and survive in the global economy.

SIEGEL: But for individuals, does the clutter include the deductions for mortgage interest and charitable deductions?

Rep. RYAN: It doesn't have to. There's room for those kinds of deductions. That is going to be up to the Ways and Means Committee. It's among the kinds of ideas that the Fiscal Commission recommended. The Fiscal Commission said for economic growth, the best way to go is lower tax rates and broaden the tax base by closing tax loopholes and we agree with that consensus.

SIEGEL: Let me ask you about the, it seems, ever-contentious Bush tax cuts. If tax rates were to return to where they were in the 1990s, the top brackets, at least for individuals, would rise by either three or in some cases almost five percent. When we remember the 1990s, it wasn't the Great Depression. Things were a lot better then than they've been in the past couple of years.

Why isn't that a reasonable price for Americans who are better off and who have higher incomes to contribute more to the country's fiscal health?

Rep. RYAN: Well, actually, that's not what the president's proposing. He's proposing on exceeding quite a bit above that. He wants the top rate to be 44.8 percent in his budget proposal.

SIEGEL: That would include the health care surcharge.

Rep. RYAN: Yes. That's the resulting income tax rate. You have to remember a couple of things. Number one, this isn't the 1990s anymore. It's 20 years later and we have global competition. Number two, small businesses pay their taxes as individuals. The majority of our jobs come from small businesses and two-thirds of small business income is taxed at the individual level. And so, when our foreign competitors are taxing their businesses at much lower tax rates than we tax ours, we lose, they win in global competition.

SIEGEL: I want to get on to your ideas about Medicare and I want to put to you what Henry Aaron of the Brookings Institution said about your proposal to link the government's share of health insurance premiums for seniors to the growth of the overall economy, as opposed to the rise in health care costs.

Rep. RYAN: Right.

SIEGEL: Aaron said this. He said, we're looking at linking to an index that grows less rapidly than health care costs by three to four percentage points a year. Piled up over 10 years, that is a huge erosion of coverage. Isn't the savings element in your proposal the fact that the government would hop off that fast-moving train of health care costs and leave the seniors to ride that fast train by themselves?

Rep. RYAN: That's not our goal and that's not our intention. I understand the criticism. I would just simply say the greatest threat to Medicare is the status quo. And what we're trying to do with these kinds of reforms and other reforms we're calling for is to not accept the fact that health care costs go up six or seven percent a year, twice the speed of inflation or economic growth.

So what we're trying to do here is attack the root cause of health inflation. Medicare is one of the drivers of health inflation. We don't believe price controlling works to reduce health care cost.

SIEGEL: But, you know, critics of your idea...

Rep. RYAN: So, I do disagree. And the reason I disagree is by injecting more choice and competition into the Medicare, into the future Medicare system, we believe we are going to stretch that Medicare dollar farther.

SIEGEL: Congressman Ryan, critics of your idea say that the cost of insurance for members of Congress has actually gone up faster with the element of choice than the cost of Medicare has. Well, why would you - if it turned out that indeed the government-run program was more cost-efficient, would you favor it, or is it in fact an ideological preference for the market even if the market is less efficient?

Rep. RYAN: The point I'm trying to make - and there is a difference of just, I think, philosophy here or of what works best - we don't believe surrendering more of the health care system over to government is an effective solution to lowering health care costs. It simply results in rationing, in price controlling. So, we do believe that the current health care system is broken and needs to be fixed.

SIEGEL: So, even - but you're saying, even if the Medicare system were to be comparably more efficient in controlling cost, the way in which it's arriving at that, you say the...

Rep. RYAN: It's competition.

SIEGEL: ...the government way - if it's not competitive, you'd prefer what might be conceivably a more expensive system if it involves free market competition.

Rep. RYAN: Actually, no, we don't believe that at all. We believe that it will be a less expensive system. But believe you me, we need to do more in the health care system to get the consumer more power in the health care system so that the patient and their doctor have the real power in the health care system so that all providers - health insurance companies, doctors, hospitals - have to compete against each other for the health insurance beneficiary's business.

SIEGEL: But unlike younger Americans, 65-year-olds - not that I would know, I'm only pushing 64 right now - but 65-year-olds typically don't anticipate increases in their income over the next 20 years the way, say, 35-year-olds do.

Rep. RYAN: Right.

SIEGEL: They're on fixed incomes. I mean, wouldn't your plan make health insurance possibly least affordable for the oldest seniors who are very often the very people who need the most medical attention and who are in the worst position to start paying more each year for their premiums?

Rep. RYAN: Actually, no. And here's why. This is one of the details that keeps getting missed in the media. For instance, our plan doesn't affect anybody 55 and above. They stay in the exact same Medicare system as it's known today.

SIEGEL: No, I'm thinking of (unintelligible) people who are at 75 in 20 years.

Rep. RYAN: Right. So what we propose is to subsidize more low-income care and people as they get sicker. So as a person gets older, obviously their health condition deteriorates, so their subsidies will increase. If a person is low income, they get complete out-of-pocket coverage. We subsidize all of their out-of-pocket costs, their co-pays and deductibles. And what we do is we means test Medicare.

If you're a wealthy senior in the future, we're proposing that you don't get as much subsidy so that we can put more subsidy to people who have higher health care risks and who are lower income. And so we're proposing a future system for 54 and below-year-olds that's actually sustainable, that gives more to the poor, more to the sick, less to the rich and gives more choices to everybody so that they can have a solvent and sustainable health care system. And it's a Medicare system of guaranteed coverage options that are offered and approved by and regulated by Medicare in the future.

SIEGEL: Congressman Paul Ryan, a Republican of Wisconsin, chairman of the House Budget Committee. Thanks so much for talking with us.

Rep. RYAN: Hey, you bet. Nice to be with you. Thanks for having me.

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