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House Budget Committee Chairman Paul Ryan Explains His 2012 Plan In Detail

Thursday, May 12, 2011

HH: Pleased to welcome back Congressman Paul Ryan of Wisconsin, chairman of the House Budget Committee. Congressman, it’s always a pleasure, thank you for joining me.

PR: Hey, how are you doing, Hugh?

HH: I’m great. I’m great.

PR: Good. Me, too.

HH: We’ve got a lot to talk about, but I want to start, especially about the budget, but I want to start with a tough question about communications, because yesterday on Fox News, you said that the Republicans aren’t losing the communications battle, but “we have a great communications challenge.” Now Congressman, I did some research after I read that, and I talked to my friend, Mark Levin. You’ve been on this program three times since November. You’ve been on Mark Levin’s program twice. Together, we cover afternoon drive in every major market in America, either back to back, or concurrently. We compete, but we’re buddies. So that’s five appearances. Kevin McCarthy’s been on this show twice, never been on Mark’s show. The Speaker has never been on either show. The Leader’s never been on either show.

PR: Really?

HH: So of the four guys who are carrying the burden up the hill on the budget, there have been a total, a total of seven appearances in afternoon drive talking to the conservative base in six months. What’s that tell you?

PR: We’ve got more work to do (laughter). I’ve got to make a few phone calls when I hang up with you, is what it tells me.

HH: But why is it that…

PR: Honestly, that’s what it tells me. Look…

HH: Go ahead.

PR: What I mean when I said that to Martha yesterday on Fox is a lot of folks think that entitlements aren’t the problem, meaning financially, that foreign aid and waste, fraud and abuse is all you need to cut to get spending under control. And a lot of people just don’t know how messed up the federal budget is, and what it’s going to take to get it under control. A lot of people still believe, and the polls show this, they think Obamacare, you know, lowers health care spending. I mean, so we’ve got a challenge on our hands. The good thing we have with this, Hugh, is the facts.

HH: Yup.

PR: We’ve got the facts, and we’ve got the fact that this economy is suffering because of horrible economic and fiscal policy practiced by this government, and what was done over the last two years. And so we have a challenge, but the challenge is completely surmountable, because we have the facts on our side. And so that’s just going to take time and more effort. And yes, I’m kind of surprised what you just told me, to be candid with you, that you don’t have other Congressional leaders talking to you. That makes no sense to me.

HH: Well, and not for…we’ve probably bugged…and they’re all busy. This is the problem.

PR: But no, these are all busy jobs we all have, but it’s also important that we communicate to our constituents in the country what it is we’re doing.

HH: Do you think that the effort to sell the Republican budget that passed the House overwhelmingly has been marked by effective communication strategy?

PR: I think it has, and I’ll tell you why. All of us, every one of us, went back to our districts during the Easter recess and did town hall meetings, and talked directly with our constituents, talked directly with our local media, talked directly…where I come from, we talked to Charlie Sykes and Mark Belling, who are sort of the Hugh Hewitts of Wisconsin. We did that all the time. And so I’m just one example. I did 19 town hall meetings, I talked to all Wisconsin media. We’ve replicated this by 243 members of the House going out and selling our budget, and talking about how we’re cutting $6.2 trillion dollars, how we’re reforming these entitlement programs, and we’re reforming the tax code, getting economic growth and prosperity, and we have a plan which is certified by the CBO to not just balance the budget, to pay off the debt. And that is a contrast to the lack of leadership that we’ve gotten from President Obama. He’s never given us a budget to fix the problem. He gave us a speech which he claims make a difference, but the funny thing is we sent his speech to the Congressional Budget Office, and they told us they couldn’t give us a cost estimate on it, because they can’t score speeches. We’ve gotten rhetoric, but no results, no action. And we think we’re going to win this, and yes, we do believe, because our individual members of Congress, especially the freshmen, are going home and talking to their constituents, talking to their local media on this. You know, I’m personally not a big fan of going on TV a lot, but I seem to do it a lot these days, because we need to. We have an obligation, and so we’re doing that.

HH: I had Secretary Rumsfeld on for five hours over the last couple of months, and he gave the Bush administration a D minus in selling the war. And as a result, the war failed, because it didn’t get explained properly, or the popularity for the war declined. I’m curious about sort of central command. Congressman Camp, chairman of Ways And Means, goes back to Washington, talks to Politico, and out comes a message that makes it look like Medicare reform’s been trash canned.

PR: Yeah.

HH: How does that happen?

PR: Well, what he was doing was explaining a process/inside baseball thing, which is if you’re going to…to pass entitlement reform bills, you need a process called reconciliation, which goes to the Senate, and the Senate has to pass a budget in order to do that. The Senate’s apparently not passing a budget. Therefore, the process is broken and ends because the Democrats in the Senate aren’t even passing a budget. And so what he’s simply saying is, and using inside baseball rhetoric, we can’t, we’re not going to move this, because the process just died because the Senate didn’t pass a budget. Now that took me, what, four sentences to explain?

HH: Yup.

PR: That’s the problem. And so what Dave Camp was not saying was retracting from an issue statement. No. He was simply commenting on the fact that the budget process was cut short because of the Democrats in the Senate. And so there is an attempt by the DCCC, that’s the Democrats, and some of the media, to suggest that backtracking is occurring. That’s just far from the case. All that has occurred was a committee chairman basically stated the obvious. It’s kind of like saying the Sun rises in the east, and sets in the west. If there’s no budget from the Senate, then the budget process stops. It’s all he was saying, but it’s being replayed as if we’re ducking down or backing away from our commitments. We’re doing…it’s far from that. And you’ll see us in the next few days and weeks pushing this even further.

HH: Is the House caucus still on your side?

PR: Oh, yeah. It is great. No, it really is. I sincerely mean this. I mean, we came back from our town halls energized, pumped, talking to our constituents. The freshmen especially are jazzed about this. And so yes, we are. We feel we’re unified, we’re strong. This is the best budget vote we’ve gotten in decades out of the House on a budget. We only lost four votes among our caucus on the biggest spending cut ever produced in Congress, ever proposed, and on a budget that really grabs all of the third rails. And I do believe that the country’s ready for this. I really do believe, from having just doing 19 town hall meetings with people in my district in Wisconsin, which Barack Obama carried, that people want to be talked to like adults, they know America is headed in the wrong direction, and they’re ready for real leadership that is not concerned about the next election, but is more concerned about the next generation to get this thing back on track, to get this country growing again.

HH: Now the most misinformation from the left has been about Medicare reform as proposed in your budget.

PR: Right.

HH: I want to start there and have you summarize it. I want to start by the fact that I know, I’m 55, just turned 55, I know your proposal has nothing to do with me, and everyone in America who is 55 and older should know that, that the Paul Ryan budget has nothing to do with them.

PR: That’s right.

HH: Medicare, I guess, is staying the same for me as it is right now.

PR: That’s right, and our whole point about this is we don’t want European austerity. We don’t want to have a debt crisis where we have to just indiscriminately cut people across the board who have already retired, and crank up taxes and slow down the economy. That’s what’s going to happen if we keep kicking the can down the road. So we’ve got to put these reforms in now, and make them phased in so we can do this on our terms. And I always ask in my town hall meeting, raise your hand if you’re 55 or above. You know, half the hands go up. This budget doesn’t affect your Medicare benefits. More importantly, contrary to the Obamacare plan, contrary to what the President is now proposing, we say if you’ve already retired, or if you’re ten years away from retiring, we don’t want to mess with your benefits. We want to be able to cash flow these commitments that the government’s made to you, that you’re organized your retirement around. But in order to do that, you’ve got to reform this program for the next generation. For those of us who are under 54, it’s going bankrupt in 9 years. The program won’t be there for my generation when we retire. So you have to reform this program so A) that it’s there for us when we retire, and B) so that we can keep the commitment to the current seniors. What the President is proposing, it’s the one actual idea he’s put out there, is he wants his new commission, called the IPAD, fifteen people he will appoint next year, it’s part of his health care law, and he will put them in charge of Medicare. He will put them in charge of setting Medicare prices, reimbursements and rationing, care to current seniors. They’re first supposed to get half a trillion dollars in spending cuts out of Medicare to pay for Obamacare. The other day, he gave us a speech saying do another half a trillion dollars. So he’s basically saying to his board of fifteen bureaucrats, go cut Medicare to current seniors as part of deficit reduction and funding Obamacare. We’re saying get rid of the rationing board, and then give us a system for those of us who are under 54, so we can choose, so we have a personalized Medicare system, where we pick among competing plans for our Medicare benefit, just like members of Congress and federal employees pick their health care benefit, just like the prescription drug benefit works for today’s seniors. It will work similar and look like the Medicare Advantage plan that about 12 million seniors get today, where you would buy it basically like your Medicare supplemental insurance. We have lots of experience of having a number of plans competing against each other for a person’s business. That act of choice and competition helps bring down prices, improves quality, and we want to harness that. We want the person, the beneficiary to be the driver of the system, to be in charge. We don’t want to delegate such things as our health care to fifteen bureaucrats that are unelected, unaccountable, and don’t even have to go to the Congress for approval before they put their price controls in, and rationing board ideas in place.

HH: I want to come back to the nightmare board in just a moment, but I want to start by focusing on what your proposal was. Long ago and far away, I ran the Federal Employee Health Benefits program for the OPM during Reagan.

PR: You did?

HH: I did.

PR: I didn’t know that.

HH: And so I administered FEHB. It’s not a voucher program.

PR: No.

HH: And that’s, they came back with the V word to brand the Ryan proposal. But would you explain to people how FEHB works, and how you would have Medicare work if you could?

PR: It would work the same way. A voucher is money gets sent to you as a person. You know, you get a check in the mail. And then you would take that and you go buy something. That’s not what this is. Premium support, which is the Federal Employee Health Benefit plan, is the government selects a list of plans that are pre-approved, regulated, approved by the government. You get these plans, meaning a book of plans comparing your health care. And the health care for members of Congress and federal employees, you have Kaiser, which I think is big out there on the West Coast, you have Blue Cross, Humana, Aetna, what not. You pick your plan, and then Medicare will subsidize the plan, so the plan gets subsidized by Medicare. And under our proposal, the average subsidy will equal the average Medicare benefit on a per person basis, when this program is up and running. We adjust that subsidy three ways. If you’re a wealthy person, you don’t get as much. If you’re a poor person, you get much more help to cover all of your out of pocket costs, and you get more help if you’re a middle income person. And as you get sicker, because when you get sick, premiums go up, you get more money to stabilize your premiums, so you don’t get sticker shock.

HH: Yup.

PR: More for the poor, more for the sick, less for the wealthy, and more choices. And that is how it works for us as members of Congress and federal employees. We get to choose among a list of competing plans. But more importantly, Hugh, the goal here is to have these health care providers compete against each other for our business, and so that that choice and competition drives down prices, increases quality. That’s completely different than the President’s plan of having a government monopoly give us our health care, and then having a government board of fifteen people he appoints deciding when, where, how and if we get our health care. Very, very different.

HH: Now the FEHB, the Federal Employee Health Benefits program, has an open season every year…

PR: Yes.

HH: …where people can adjust their plans based upon changing life circumstances, pregnancy, all sorts of things. That’s very expensive. It causes something called adverse selection. But nevertheless, it’s one of the great attractions.

PR: Correct.

HH: And in fact, no federal employee that I have ever met in 20 years did not want to be covered by FEHB.

PR: That’s right.

HH: I think that your plan would have incredible attraction to the American people if they only knew how it worked.

PR: So we had this debate in 2003, and there’s lots of reasons to complain about the prescription drug bill not being paid for, and things like this. But let’s put that aside for a moment. It had health savings accounts, which is an amendment I put in that bill back in those days. But there was a big debate, and the Democrats wanted a government monopoly prescription drug benefit, only provided by Medicare/the government. That’s not what happened. The law said we will have private providers for prescription drug benefits, offering seniors different plans. And what ended up happening was this benefit came in 41% below cost projections. Premiums were lower, costs to seniors for drugs, costs to taxpayers, was 41% lower than what was projected to occur. Name me another government program that came in 41% below cost. And the reason is, is because people had choices. They had competition. And seniors, if they don’t like their drug benefit, they can fire it, that plan, and then get another one the next year. And the plan knows that if they don’t perform, if they don’t give good quality and good price, they’re going to lose. And that’s the dynamic we want to harness on behalf of al Medicare beneficiaries going forward in the future. And that is the way we propose to save Medicare, and make it solvent to people who are 54 and below.

HH: Are you satisfied that not only the leadership of the House and the Senate are committed to Medicare reform, but that the presidential candidates who have emerged understand and will embrace this, if not this specific approach, then something very close to it?

PR: I mean, I don’t know if you’re a conservative how else you would do it. We have looked into all these different ideas. It’s either have a government price control/rationing monopoly system, or a system where you have a patient-centered consumer-directed system, or you have a powerful consumer. It’s just really one way or the other. So I don’t know the answer to your question as far as the presidential candidates. I’ve spoken to most of them about this, and they’re familiar with the concept, and they seem pretty supportive of it. So I believe most of these presidential candidates, at least the ones I’ve spoken to, and I’ve spoken to T-Paw, I’ve spoken to Romney, I’ve spoken to Newt, they all understand the concept, and they seem to me pretty supportive of the idea.

HH: Now let me ask you about the national news media. And I’ll put Jake Tapper in one category, and then everyone else in another one.

PR: Yeah.

HH: Do they not understand, or are they genuinely, just purposefully dishonest about the representation of the plan that you proposed?

PR: I think by now, it’s more a dishonest representation, because we’ve gone to great lengths to explain how this is not a voucher, it’s premium support. There’s a difference. By the way, this was recommended by President Clinton’s national bipartisan commission to save Medicare in 1999. And I think that they still like to use the V word, and I think they still like to misrepresent it. There’s just a compliance among the media. For instance, this narrative that we’re backing away from Medicare reform…

HH: Yup.

PR: That’s really just a creation of the media. And it’s really, I mean, I’ve talked to the individuals who made these quotes. All they were simply doing was repeating the process that works around here. It’s really a creation in the media. And I think that’s what we’re mostly getting. This is a bit of a bias I think we’re seeing manifest itself in how the media portrays these issues. And so that is, those things that lead me to make the comments I made last night on Fox, which was we do have a communications challenge, because we can’t be expected to be treated and fairly and objectively by the media for the most part.

HH: And that’s why guys like Jake Tapper are few and far between, and my friends at Politico, they just love to gig you guys on this stuff. It’s like every day they gig you on this. How frustrating is that?

PR: You know, I had a reporter from Politico track me for a day when I did four town hall meetings. And the article read like everybody hated me. I sent Politico the video of the town hall meetings that she was at, where I got a standing ovation by 80% of the crowd when I walked in and walked out at every one of my meetings, and asked them if they thought the article was a fair representation of our town hall meetings. And to their credit, Jim VandeHei is the guy’s name, to the guy’s credit, they changed the article, because they realized they had a very biased article.

HH: That is fascinating. And I’m not going to beat a dead horse. I want to move to specifics. But our over-communications gap, if we don’t get the leadership out talking to the conservative base every single week, we can’t win. Now Congressman, the President called you to the White House.

PR: Yeah.

HH: And he put you in the front row, or pretty close to the front row, and he proceeded to flay you. It was so graceless.

PR: It was, yeah, I was in the front row. I was about ten yards away from him.

HH: What were you thinking when that happened?

PR: Basically what you just said. I’d never seen that kind of demagoguery from a president before. What I was thinking, literally, is he is bigger than this. This speech is beneath his office, it’s beneath him. He should be above this. When you hear that kind of rank demagoguery, you know, we don’t want to help kids with autism and Down Syndrome, and we’re out to hurt people’s grandparents, maybe your grandparents, or something to that effect, that kind of demagoguery tells me he’s in campaign mode. He is not in governing mode. He is turning on the demagoguery. And the message that he’s going to give is basically a caricature description of his political adversaries, almost kind of like a cartoon-like description of your political adversaries. And it’s the laziest intellectual argument I’ve ever seen, which is it’s beyond a straw man argument, to affix motives and ideas to your political adversary that are just outlandish, and then just knock them down and win the argument by default. We’ve seen this a lot from the President, but I’ve never seen this kind of a level. And what I really think we got out of that speech was more of a vision of what I would call shared scarcity. I’m doing a speech at the Economic Club of Chicago spelling this out in great detail on Monday. But what I would basically say is the President, I think, is going to go to the country and say if you want any security in your life, you’re going to have to stick with me. I will give you full security. That’s more or less the progressive sort of idea. But if you go with Republicans, they’re going to feed you to the wolves. It’s going to be a Hobbesian, dog eat dog society, and it’s going to be miserable. And so I think he’s going to try and give sort of that caricatured argument, whereas what we’re actually talking about, and the choice we have an obligation to show the country in 2012, is an opportunity society with a safety net, which is the historic American idea, reclaiming American exceptionalism. We want that opportunity society with a safety net, which means a welfare system not geared to keeping people on welfare, but to getting them back on their feet. We want this country to be defined by its traditional characteristics of equal opportunity, upward mobility and prosperity, and really what I think he’s peddling is an agenda that will lead us down sort of a European social democracy route, of basically a cradle to grave social welfare state where we end up managing our decline, where the goal and role of government is not to promote equal opportunity, but equal outcomes, you know, shared scarcity. And I think that that’s what this is shaping up to being the discussion in 2012, and that was what was running through my mind when I heard that speech.

HH: Every time, in fact, he did it in El Paso on the border speech yesterday.

PR: Yeah, I saw that, too.

HH: Every time he gives one of these, it’s like the Macy’s parade of straw men, or the million straw man march.

PR: Yeah, well, I think, well, Churchill used to say he’s a pyromaniac in a field of straw men.

HH: (laughing) I hadn’t heard that. So in terms of arguing that kind of rhetoric, I saw yesterday you had a conversation where the guy brought up the President saying that you would charge people like $6,800 bucks or more against a reality that doesn’t exist.

PR: It doesn’t exist.

HH: How do you make that argument to people?

PR: So these straw man arguments again, they’re measuring any Medicare reform plan against a mythical status quo which is not going to happen. The President already cut Medicare. He already is using this rationing board and giving them power to lower Medicare spending growth. We all agree Medicare can’t keep spending the money it is on the path to spend in the future. The difference is, we want to put seniors in charge, and he wants to put fifteen bureaucrats in charge. And so when you see these analyses come out that are just apples to oranges, and sort of false, misleading characterizations, it takes us three or four sentences to explain these things, and that’s the problem. That’s the problem conservatives have, which is we’ve got to use facts and reason, and we can’t just throw emotion out there. And that’s a challenge. That’s why we have communications challenges. It’s easy to prey on a person’s emotion of fear, envy and anxiety. That can motivate people for the time being. Class warfare is effective for the time being. The problem is, it makes for really bad government, bad economics. And so it does take us a little more time to explain these things.

HH: Now playing off people’s fears is bad, but letting them know that something bad is coming isn’t. I call it the nightmare board, because people do not know how this fifteen person board is going to operate, Paul Ryan. Explain to them what happens when you’ve got to take a half trillion or a trillion dollars out immediately via rationing, via this anonymous board.

PR: Well, I don’t even have to explain. I will just tell you what the actuaries of Medicare tell me, which is when this board lowers reimbursements to Medicare providers, what the actuaries are telling us is they will be providing, health care providers, hospitals, insurers and doctors, at rates lower than Medicaid. I don’t know what it’s like in California, but in Wisconsin, you know, more and more doctors won’t even take Medicaid patients, because they lose money every time a person walks in the door. And so what this board gets the authority to do is just cut prices and costs, and reimbursements to providers. And that means more and more providers will just drop taking Medicare patients. So Medicare patients will be subjected to more waiting lines, more lists. You know, that’s what’s going on in Massachusetts right now. And so that means queues and waiting lines, which is a form of rationing. And so this will not make Medicare work better. And what it ends up doing is it actually gets health care costs to getting out of control. So I believe competition works. I believe rewarding providers who are high value, low cost providers, through the power of patient power, of consumer power, is far better than having fifteen people, no matter how smart they are, try to figure out exactly how to run a health care program that is going to be designed to offer health care to 77 million people.

HH: All right, Congressman, we’ve got about seven minutes left. I want to cover some specific areas, including especially transportation, because yesterday, it was announced that the Feds are spending billions more to this train to nowhere, this Scam Tram in California.

PR: Yeah.

HH: The President is saying that you want to basically derail everything that moves in America. Response?

PR: Well, yeah, we want to derail high speed rail. So yeah, guilty as charged. We zero that out in our budget. By the way, some of that money is coming from Wisconsin, because our governor, Scott Walker, said no thanks. We don’t want the high speed rail money, it’s a boondoggle, it doesn’t make any sense, and it puts the state on the hook for a lot of funding. I’m not, I don’t know the details of your rail plan over there…

HH: It’s a nightmare.

PR: High speed rail, the math just doesn’t work.

HH: Nope.

PR: The cost benefits don’t add up with one another. And then what it does is it puts the state on the hook for a huge subsidy that no state government that I know of these days can afford. And they’re trying to loop people into this. This stuff is just the pixie dust of transportation policy. It just is a fantasy, and we zero out high speed rail in our budget.

HH: Let’s talk about clean energy. You always declared this is nothing but subsidy. This is a transfer payment to the President’s best friends.

PR: Yeah, and we call that corporate welfare or crony capitalism. And again, we call for zeroing this out in our budget at well. Our budget is pretty clear about getting rid of all this green pork. We have corporate welfare in agribusiness, corporate welfare in energy, corporate welfare in financial services. We want to get rid of all that stuff.

HH: All right, and then last of the discreet issues. The Pell grants, you made an argument which I think every mom and dad who is going to pay for college now or in the next ten years have got to hear, which is Pell grants have an inflationary impact on tuition.

PR: Exactly.

HH: Please explain that.

PR: There’s a direct correlation. When Congress increases Pell grants, colleges increase tuition. And so you’re not helping anybody except for, you know, bureaucratic budgets at university systems. When you give a student an extra buck in his left pocket, the tuition increase goes up a buck and is taken out of his right pocket. And so we’re feeding tuition inflation. And then for the person who doesn’t get the Pell grant, for the person who’s got to go out and get student loans or work a couple of jobs to pay for college, they just get higher tuition. And so we are feeding tuition inflation. There’s a huge correlation that’s very well documented. And so just cranking up Pell grants might make for good sound bytes and press releases in Washington, but it’s one of the greatest contributors to tuition inflation. And that’s what we want to get under control as well.

HH: All right, last three minutes, Congressman Paul Ryan, I want to talk about the debt ceiling debate coming up, and whether or not the Republicans are going to get rolled again. I don’t expect you to agree with me that we got rolled in the budget deal, or we got rolled in the tax deal. But I’ve been to enough Tea Party gatherings, and I’m sure you’ve heard it in conversations in Wisconsin across the country.

PR: Yeah.

HH: The activists think we got rolled. What’s going to happen this time.

PR: Well, look, I think the Speaker gave a good speech on Monday in New York, which said look, you want to raise the debt limit a dollar? We’re going to cut more than a dollar. You want to raise it $2 trillion dollars? We’ve got to cut more than that. And I think that’s a simple message, number one. Number two, I think it’s obvious. It’s easy to do. We proposed $6.2 trillion dollars in spending cuts, so we can show you what to cut. That’s not the problem. The question is, we’ve got to get the Democrats moving in this direction, and we think we are. So we’re serious about this, and I really believe, Hugh, if we just rubber stamp a debt limit increase, or if we just do a debt limit increase with promises to cut spending in a year or two or three, with just nothing but process reforms, which are important, but not complete, then we will hurt ourselves and the economy. We will hurt the credit markets, because the credit markets will say these Americans, they don’t have it figured out. They’re just going to keep spending and spending and spending. There’s no guts. Look, if the conservative party, the Republican Party, cannot show that at least part of our government is serious about getting spending and borrowing under control, then there’s no hope for us. So we really do fundamentally believe that we have got to produce serious spending cuts that are real in size, and then the kinds of controls to bank those cuts accompanying any debt limit so that we can get this spending under control, stave off the bond markets, and get this debt going in the right direction. And at the end of the day, health care’s probably the big issue. And we just disagree. We don’t want government running our health care. We want patient-centered health care, and that’s what we’re going to have to fight over, probably over the election.

HH: Let me ask you about, to close, Bill Gross, one of the world’s most impressive investors.

PR: Yup, talked to him a couple of weeks ago.

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