WASHINGTON (Reuters) - House Republicans placed a major election-year bet Tuesday on a deficit-slashing budget proposal the party hopes will win over voters and quell any concerns about the plan's most controversial element - a sweeping revamp of Medicare.
The plan, authored by Congressman Paul Ryan, seeks to draw a sharp contrast between Republicans' vision of a smaller, less-intrusive federal government with that of President Barack Obama, who often stresses the importance of social safety nets.
In offering a well-defined conservative alternative to the Democratic president's approach to solving the nation's long-term problems, Republicans are hoping to win over voters profoundly worried about huge deficits and Obama's stewardship of the economy.
"We have a choice of two futures," Ryan said at a speech at the conservative American Enterprise Institute.
Ryan, chairman of the House Budget Committee, is often mentioned as a possible Republican vice presidential candidate.
He said Obama's 2013 budget proposal would lead the country down a path of "debt and decline" and "more dependency on government."
After a string of debacles ranging from last summer's debt-limit standoff to a near-revolt over extending a payroll tax cut, Republicans want to exploit what they see as an advantage over Obama on taxes, spending and rising debt levels. They also aim to portray themselves as the party best equipped to govern responsibly and make brave fiscal choices.
Where Obama and many fellow Democrats wants to raise taxes on the wealthy and boost near-term spending on infrastructure and education, the Republicans want to cut taxes and spending on federal pensions and healthcare and social safety net benefits - programs used more by the poor and middle classes.
While the Republican plan has little chance of becoming law due to opposition in the Democratic-controlled Senate, it may have some real-world consequences.
The overhaul of the popular but increasingly expensive Medicare plan sets up Republicans for another round of damaging election-year attacks from Democrats, who have vowed to preserve the fee-for-service program.
The Republican budget also seeks to cap discretionary federal spending on education, transportation and other government programs at $1.029 trillion, roughly $18 billion less than Democrats want. That sets up a battle over spending that could potentially shut down the government just weeks before the November 6 election.
But the Ryan plan would wrestle deficits down to a cumulative $3.13 trillion in the next 10 years - less than half the $6.39 trillion in deficits the Congressional Budget Office says Obama's fiscal 2013 budget plan would rack up.
The Republican plan claims to put debt on a downward path, to 62.3 percent of economic output by 2022, versus Obama's 76.3 percent, which is slightly above current levels.
DISMANTLING HEALTHCARE REFORM
The Republican budget achieves much of its deficit-reduction goals through savings gained by dismantling Obama's 2010 healthcare reform law and by turning social safety net programs like food stamps and the Medicaid program for the poor into block grants for states. It also slashes pension benefits for federal workers.
After proposing last year to convert Medicare into a voucher-like program to allow seniors to purchase private health insurance, Ryan has modified his reforms in a bid to blunt criticism that it would shift too many costs onto the elderly.
The new plan offers so-called premium support to allow beneficiaries to purchase either traditional Medicare or competing plans through a government-run exchange
But political strategists say the party will still struggle to sell it to older voters who worry about their benefits.
The plan also drew a quick rebuke from the Federation of American Hospitals, which said it would "make it difficult for hospitals to meet the healthcare needs of seniors and the most vulnerable in our communities."
Democrats say Ryan's determination to push ahead with the Medicare revamp in an election year is a huge mistake that will prove politically toxic for Republicans in congressional races. They are targeting Medicare-focused campaigns against some 41 House Republicans that they see as vulnerable in November.
House Democrats labeled it a "vicious plot to destroy our nation's promise to our seniors."
BRASH REFORMER, VP CANDIDATE?
But the political risk on Medicare has not daunted Ryan, the 42-year-old House Budget Committee chairman who fashions himself as a brash young reformer determined to shrink government. The budget gives him a huge platform to influence his party's direction and influence the campaign debate.
Known for his slick YouTube videos to illustrate his dire predictions of the debt trajectory and for slipping in iPod earbuds sometimes when reporters are around, Ryan has kept the debt debate on the boil since Republicans took control of the House two years ago.
But for some House conservatives, the Ryan budget, which seeks to reduce fiscal 2013 discretionary caps agreed with Democrats last year by $18.4 billion, may not go far enough. Democrats warn that the cut breaks last year's debt-limit agreement meant to keep fiscal peace and risks a government shutdown by causing conflict over spending bills.
Some Tea Party Republicans who wanted deeper cuts may balk at the plan, but it does offer them some comfort by shielding defense and security spending from automatic spending cuts that are scheduled to kick in next January.
The Ryan plan contains another element popular with Republicans across the board: tax reform. It proposes to cut top rates for individuals, paring back the number of tax brackets to two - 25 percent and 10 percent - from six now.
The current top rate is 35 percent, but it is set to rise to 39.6 percent at the beginning of next year if the tax cuts enacted during President George W. Bush's presidency are allowed to expire.
(Additional reporting by Donna Smith and Richard Cowan; Editing by Ross Colvin and Philip Barbara)
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