US House approves spending cuts

2011-04-16 13:15

Washington - The Republican-controlled US House of Representatives has adopted a dramatic 2012 budget plan that would cut the country's debt by revamping the decades-old system that guarantees medical insurance for Americans over 65 and to the poor and disabled.

The plan put forward by Republican Rep. Paul Ryan, the budget committee chairperson, is at odds with a spending vision President Barack Obama outlined earlier this week, which foresees tax increases for high-income Americans while holding the line on those major social contract programmes.

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.

Debt

The US 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 $38.5bn out of the national budget for the remaining 4 1/2 months of 2011. That money was cut from spending for US government agencies and amounts to only about 12% of total government outlays.

The White House said Friday that Obama had signed the short-term spending extension.

The Republican spending outline for the next fiscal year beginning October 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 programme 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 week's calls for cutting the federal deficit by $4 trillion over 12 years by eliminating health care fraud, raising taxes on the wealthy and paring defence spending.

- AP