For months, while most of Washington was focused on this year’s budgetfight and the prospect of a government shutdown, Budget Committeechairman Rep. Paul Ryan’s office was working quietly on a Republicanplan to address the nation’s long-term fiscal crisis.Though Ryan had already offered ambitious entitlement reform proposalsof his own, it wasn’t clear whether he’d be a lot less bold when heactually had to put together a budget with Republicans in themajority. One school of thought was that there was no reason forRepublicans to propose major changes to the nation’s entitlements thatwould hand Democrats an easy target when those proposals have nochance of becoming law given Democratic control of the Senate andWhite House.This morning, Ryan has revealed his budget for 2012 and beyond, andI’m happy to report that it acknowledges the magnitude of the moment.It is a serious proposal to put our nation on a path to some semblanceof fiscal solvency.Ryan’s plan would cut spending by $5.8 trillion relative to what itwould otherwise be under current projections by the CongressionalBudget Office, and by $6.2 trillion compared to what Obama proposed inhis budget. To put that in context, in the past week, Republicans andDemocrats have been at war over whether to cut spending by $33 billionor $61 billion. Ryan’s proposal would reduce it by about 100 timesthat higher number.Were we to adopt Obama’s budget, according to CBO projections, we’dstill be running a deficit of $1.2 trillion in 2021 alone. But underRyan’s plan, that year’s deficit would be $344 billion.In total, over the next decade, Ryan’s spending cuts would translateinto $1.6 trillion in deficit reduction relative to the CBO baselineand $4.4 trillion relative to Obama’s budget.So how does Ryan achieve these numbers? To start with, it isn’t withtax hikes. In fact, revenues would actually decline significantlyunder his plan, something that we’ll no doubt be hearing more of amongliberal critics.Instead, Ryan focuses primarily on the spending side of the ledger.Specifically, Ryan’s proposal would:-- Repeal the national health care law in its entirety.
-- Change Medicare for those 55 and younger to give them the abilityto choose among different types of health care plans that would besubsidized by the government. The value of the subsidies would vary sothat poorer and sicker beneficiaries would receive more than richerand wealthier ones.
-- Reform Medicaid so that it is block-granted to the states, puttingit on a predictable fiscal course and giving governors’ moreflexibility.
--Take Defense Secretary Robert Gates’ suggestions of $178 billion incuts to the Pentagon budget, but use $100 billion of that to reinvestin other, higher priority, defense programs.
--Reduce domestic (non-entitlement spending) back to below 2008 levels,and then freeze that for five years, and cap the overall budget at alevel below 20 percent of the economy, its historic average.
--Simplify the corporate and individual tax code, ending deductionsand loopholes while lowering the corporate tax and the top individualtax bracket to 25 percent.Though Ryan cites a Heritage Foundation study finding that his reformswould boost the economy, his fiscal projections are based on moreconservative CBO estimates of economic growth. By contrast, when Obamareleased his budget, it relied on rosy White House economicprojections.To be sure, Ryan doesn’t get all of the way there. While his planmentions Social Security, it does not make specific proposals to fixit. The budget does not include comprehensive health care reform,something that will ultimately be required to fully deal with thelong-term fiscal challenges. And when all is said and done, thenational debt would still be $16 trillion by 2021 under Ryan’s plan.What this reminds us is that the fiscal crisis facing this nation isso severe, that even with major reforms that are typically seen asoutside the boundary of what’s politically possible, we still have along way to go. This isn’t a problem that’s going to be resolved in asingle budget document. It will take a concerted effort over thecoming years and decades. Yet that long and arduous process has got tostart somewhere. And this budget is not just a baby step, but a giantleap, in the right direction.