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Paul Ryan on the Debt Negotiations and Medicare

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House Budget Committee Chairman Paul Ryan was my guest today. The transcript:

HH: Joined now by the Chairman of the House Budget Committee, Paul Ryan of Wisconsin. Congressman, always a pleasure, welcome back.

PR: Hey, good afternoon. It’s afternoon there, right?

HH: Yes, it is.

PR: Good afternoon, Hugh.

HH: Let’s start with the big headline of the day, Harry Reid blasting your colleague, Eric Cantor, calling him childish and saying he should be banished from the negotiations, which itself is a little bit more than childish. But what do you make of that?

PR: It makes me appreciate Eric Cantor more. [# More #]

HH: (laughing)

PR: (laughing) …is what it does. No, Eric and I have talked quite a bit today, and throughout the whole time. Liberals want big government, and they don’t want to cut spending. And there are a lot of tantrums surrounding those facts. And Harry Reid just wants us to raise the debt limit. And he doesn’t like the idea of curtailing spending. Just so you know where we are today, or no, more importantly, why we are where we are today, is because of the spending he blew out of Congress over the past two years. And there’s all this talk about getting balance in this package, meaning raising taxes. Let’s never forget the fact that the first two years of the President’s presidency, they passed all these tax increases that kick in, in 2013. So people don’t know this necessarily, yet, but the U.S. economy is going to get hit starting in 2013, you know, a little more than a year from now, with about a $1.5 trillion dollar tax increase. And it’s a tax increase that uniquely hits job creators, small businesses. More than half our jobs come from successful small businesses. They file as individuals. They’re the ones that bear the brunt of this, and we wonder why we’re not creating jobs today, because we’re going to have a huge tax increase that’s already going to hit these businesses, and they’re saying yeah, we spent all this money, now help us raise some more taxes on top of this to pay for it. And we’re just not going to go down that path.

HH: So there’s no way that whatever comes out of this collision of wills, that taxes will go up in the United States this year?

PR: No, I mean, not with us. I mean, that’s the one thing we have, is the House of Representatives. And it’s the one basic card we can play, is making sure bad things don’t pass. Now will we be able to cut as much spending as we want? No. I mean, I put out a bill that cut $6.2 trillion in spending. We passed that from the House. Obviously, that’s going nowhere in the Senate, and the President clearly is not in favor of that. But will we pass tax increases? No, we’re not going to do that, because number one, spending’s the problem. It’s not taxes. Number two, you do that, you’re just going to do more damage to the economy, and it’s already hurting.

HH: So expand then, Congressman Paul Ryan, on what you see as, over the next 20 days, against the backdrop of there must be some resolution relatively soon.

PR: Yeah, so I’m a fan of a thing we call cut, cap and balance. I don’t know if you’ve talked about that on your show or not.

HH: Yeah, Senator DeMint’s been on.

PR: Yeah, okay, so then I don’t go through what that is if Jim’s already discussed it. I personally believe that’s what we should put on the floor next week and pass in the House. And we’re preparing a bill that does that. And I’d like to think we’re going to do that. I don’t all those shots. I’m the chairman of the Budget Committee. I’m not the Speaker of the House. But I think that’s the path we ought to take, because I think we should show the country, or more importantly, the President, here’s what we would do. Here’s how we would fix this problem. And obviously, that’s not what the Democrats want. What we want to get out of this is as much spending cuts as we can. And we’ve always said to the President look, if you don’t want to cut enough spending to overcompensate for your debt limit increase, then we’re not going to raise the debt limit by that much. And so that’s kind of where this is headed right now. And so what I do not know the answer to, because this is still a fairly fluid situation, is how much spending cuts are we going to get out of them, and that will determine how much the increase is.

HH: Is it correct, Congressman Ryan, that thus far, out of the Biden talks, the only cuts to discretionary spending next year amount to $2 billion dollars? Only $2 billion?

PR: I don’t…that moves around. I don’t know the answer to that. That number keeps moving around. It’s going to be more than that, I believe, but I don’t know the answer to that yet, because we don’t have final resolution on that point.

HH: If, as I would expect, it would be possible for the Republicans to pass cut, cap and balance, and send it over to the Senate, do you then expect the Senate to pass something else, and then a committee, a conference committee to sit and iron out the final deals?

PR: I don’t, my guess, this is just me off the top of my head, I don’t think Reid would do anything. I don’t think they’ll send something back to us.

HH: Well, something’s got to be on the table before the markets…

PR: Yeah.

HH: I mean, are you concerned about what some people talk about, a thousand point drop, a fifteen hundred point drop in the markets?

PR: Well, if you look at the cash flow in August, there are some certain days that are real problem days where you’ve got interest payments, bond payments, Social Security payments going out, where we won’t have enough cash flow for that day to cover those things. And those are the problem days. And so there are clearly some problems in August. I’m not going to ignore that. I don’t believe…I believe we should pass cut, cap and balance, because we should show that that’s what we would do, that’s what we believe, and that’s how we would fix this problem. Having said that, do I think we’ll get Harry Reid to give us, you know, twenty votes in the Senate for our version of the BBA? I don’t think that that’s going to happen. So then what we want to do is get as much spending cuts as we can out of the President. And the level of those spending cuts, this is me speaking, I can’t speak for everybody, should determine the duration of the debt limit increase. And then, we’ll have to figure out what you do after that.

HH: Now Congressman, I have been urging for weeks that the conference adopt the message that you send us a list of cuts, Mr. President, we’ll increase the debt ceiling dollar for dollar. Is that what you’re saying?

PR: I think what we should do is get as much cuts as we can agree on right now, pass those, raise the debt limit by that amount, and then what you’re saying.

HH: Do you agree, do you think that you have the votes in the House Conference to follow that? If he said I’ll cut $100 billion, then we’ll raise the debt limit $100 billion?

PR: Yeah, I think so.

HH: Now in terms of McConnell’s plan, earlier today, you talked with my colleague, Guy Benson.

PR: Yeah.

HH: And he’s quoted you as saying you’re not a fan of the McConnell plan. Why not?

PR: Yeah, because I don’t want to leave money on the table. I think we can cut some spending now. The McConnell plan, there are a lot of conservatives around here who like it, so I’m not going to…and there are good people who we just have differences of opinions. I’m not a big fan of it, because I think we can get real spending cuts. And I want to get some real spending cuts. Now you can put the McConnell plan on after we get real spending cuts, but to walk away from the ability to cut spending, to do this plan, I just don’t think works, personally.

HH: Where are the actual cuts that would occur next year, in your opinion, going to come from, Paul Ryan?

PR: Discretionary and mandatory. Discretionary are government agency budgets. You’ve got to cut those. And the only way that those cuts last after a year is if you have real caps in law on spending. This is why we say cut and cap. You can’t bank on getting the savings unless you really cap. And that means a legal, statutory cap. And then mandatory, okay, I’m sounding as if I’m in all these meetings, so I was talking in budget nomenclature. That’s entitlement spending. Autopilot spending. There’s two kinds of spending in Congress. There is what we call discretionary, which is every year’s government agency budgets, and Congress sets that every year. The only way to get savings from that is to cut next year’s spending, and then put a cap on years after that to make sure you get that savings. The other side of the ledger here, the other 60% of government, is on autopilot. That’s called mandatory spending. It’s a bad term, but it’s what is defined in law. That’s autopilot spending. If you change the law, meaning who qualifies for food stamps and who doesn’t, things like that, then you get real savings. And we’re going to get some from there as well. We have to, in my opinion.

– – – –

HH: Congressman, a senior Republican in the Senate told me yesterday look, we do not want to be going over the cliff and have this terrible economy assigned to us. And then I saw Minority Leader Pelosi’s remarks today saying you know, the Republicans are going to be responsible for a thousand point drop.

PR: Yeah.

HH: And in the back of my mind is this concern, that they actually want that to happen as a path back.

PR: I know. I know. I actually, I’ve heard the same kind of comments, and the same kind of conclusion leapt in my mind. Look, if we do have an actual default, I don’t want to get into scaring people or things like that. Not good things happen, okay? Bad things happen. Here’s the other things, is if we just sort of roll over, and just raise the debt limit because we say you know what, we just can’t cut, we can’t agree, so let’s just raise it? I also think that that will hurt us in the bond markets as well. I also think that that will raise interest rates, because what it sends a signal to the markets is even having Republicans in the majority in the House doesn’t make a difference, the Americans, they’re not going to cut spending, they’re not going to get their fiscal house in order, so we’re less likely to get our money back as bond buyers, so we’re going to raise the price. So I really believe doing nothing, and just raising the debt limit is bad, just like defaulting is bad. And so that means we’ve got to cut spending. And so what we need to do is get spending cuts. And the President honestly, really doesn’t like to cut spending. I mean, look at what he did in the first two years of his presidency. He not only increased the budgets of every run of the mill, garden variety government agency by 24% over two years, you throw a stimulus on it, he increased it by 84%. I mean, the EPA under the Pelosi majority, with the Obama presidency, got 124% increase in their budget. So he likes to spend money a lot, and he wants to keep those higher levels going. We want to wipe that back, and we want to get a down payment on all of these entitlements that are running on autopilot, which are the biggest drivers of our debt. And so you can’t just rubber stamp a debt limit increase, because I think that would hurt us in the bond markets, just like you can’t have a default.

HH: But Mr. Congressman, what if, in fact, you know, yesterday’s performance, the whole storming out of the meeting by the President…

PR: Yeah.

HH: It’s right out of Rules For Radicals.

PR: Yeah.

HH: It’s so Alinskyite. And now, they’re focusing all their attention on Eric Cantor.

PR: Right.

HH: It’s isolate and ridicule.

PR: I’ve been the focus of it myself. I’m familiar with these tactics.

HH: And so what if they don’t really care?

PR: I know.

HH: This is the concern. Have you talked about with the leadership that they really think to get the House back, we have to turn this into the Class of ’94-95, and we have to make…

PR: That you scare the country, and these people are crazy, and yeah, that’s right. That’s right. There’s a theory to that. Look, what matters to us, what matters to me, I don’t represent the Republican Party. I represent the 1st district of Wisconsin. I represent a district that is in a really bad employment situation. We lost four auto factories since 2008. There’s a lot of people not working. Now they won’t get jobs if we have a crash, if we have a stock market crash or a bond market crash. More importantly, if interest rates go up because of mismanagement, because we don’t cut spending, or we have a default, and for one reason or another, people lead us to a default, that just means people don’t go back to work. And you don’t fix this problem in our country if you don’t get people back to work. And you don’t get people back to work if you raise taxes, either. That means there’s only one thing left to do. That is to cut spending.

HH: Well, I believe that, and I think probably most people listening to this believe that. But have you and your colleagues been effective in communicating what is the real divide in Washington? I mean, until the last couple of days, I haven’t seen the Speaker anywhere.

PR: That’s a good point.

HH: I still don’t see the leader.

PR: You know, the bully pulpit’s a powerful weapon. It’s a very powerful tool. The President gets to out to a press conference, and you break away to listen to it. You know, TV, radio…

HH: You bet.

PR: John Boehner and Eric Cantor were downstairs this morning, or about an hour ago, doing a press conference in the basement of the Capitol. And my guess is you didn’t even know about it.

HH: No.

PR: It’s just because it’s almost impossible to compete with this bully pulpit. So in real time, it’s impossible to compete with the bully pulpit. But over time, over the next year and a half, I believe we can get our message out. You know why? Because people like Hugh Hewitt exist. It’s because people like Rush Limbaugh exist. It’s because the internet exists. It’s because facts get out. And we have to make a concerted effort to get the facts out. And it’s easier to get the facts out if we actually have clear and consistent principles we’re fighting for and advocating that we can communicate. And I believe we do. And therefore, I’m optimistic that we will get our side of the story out at the end of the day.

– – – –

HH: Chairman Ryan, the Medicare hearings that you held, what have you got as a prediction on whether or not this panel will actually meet and slash reimbursements next year?

PR: Well, we had a hearing this week with Kathleen Sebelius, the HHS secretary, had one yesterday with the trustees of Medicare, the actual actuary, and next year is when they get their budget. They’ve already pre-funded this, as you probably know, in the lame duck. And so they have $15 million dollars to start their new panel. It’s fifteen people. It is assembled next year. The President appoints these people. And then starting in 2013, they start making their rationing, their price controls. It’s called the Independent Payment Advisory Board. It’s a board that has gotten this power from the President’s health care law, that has to hit annual artificial targets to cut Medicare, starting in 2013. And what they do is they put a cap on Medicare, they give the targets to the board, and they say to providers, all the people who provide Medicare services to beneficiaries, you know, here’s how we’re cutting your payments, or not funding this procedure, in order to hit their artificial targets. Now it’s about a half a trillion dollars now, we estimate. The President, in April, doubled their target by saying here’s his plan for working on the deficit. And these fifteen people that will be appointed by the President get to make these recommendations, and they occur without Congressional consent. And so if Congress doesn’t like it, Congress has to cut Medicare payments somewhere else by an equal amount. And if they don’t do that, then this board just does it, and it goes into law. And so what this really is, is it was an attempt to put price controls on Medicare. But since price controls are politically unsustainable, take the control away from Congress, your elected representatives, and give it to these fifteen unelected, unaccountable bureaucrats to put in place. And so what they’re going to do, according to Medicare’s own actuary, is to start dramatically underpaying providers for procedures. And what’s going to happen when your hospital the doctor, starting in a couple of years, get 66 cents on the dollars to provide you a service? At the end of the day, they project they go to getting about 33 cents on the dollar. They’re not going to provide the service. Why would a hospital or a doctor or a nursing facility give you, a Medicare beneficiary, a service, if every time they give you that service, they lose money? And so that’s what this board is in charge of doing, and that is rationing just under a different word.

HH: Now Congressman, did your witnesses, the secretary or the chief actuary, did they dispute your description of what you just put out there?

PR: No. No, the numbers and the charts I threw up on the screen, I got from Medicare, from the Medicare’s actuaries. And so the Medicare actuaries that work for Kathleen Sebelius are telling us under this plan, Medicare, right now, doctors are getting about 80 cents on the dollar. They go down to 66 cents on the dollar, then it goes down from there. Same with hospitals and other providers. They can’t dispute these numbers, because they’re their numbers. And so what she basically says, Kathleen Sebelius says, well, it’s a backstop. These are just a fallback plan, meaning Congress has to do this cutting to Medicare. And if they don’t, then the IPAB will. I’ve got to tell you. I know politicians. I work with them every day. What a politician’s going to do, in this kind of a day, with this kind of a law, is going to say you mean I don’t have to cut benefits to seniors, if I just do nothing, this board just does it anyway and I don’t have to vote on it? Well, heck, let the board do it, because the law requires they do it. That’s what’s going to happen. So it’s really not, they’re trying to downplay it as if oh, it’s not, it’s only there if Congress doesn’t act. There’s no way Congress is going to vote to ration health care seniors. The board’s going to do it. Now in 1997 was a budget agreement that put price controls on Medicare. It was a Republican and Democrat. It was Gingrich and Clinton that did this. The lesson Republicans learned from those price controls on Medicare is that price controls don’t work. You had nursing homes going out of business all over the country, and seniors literally couldn’t find a place to go for nursing homes. And so what we did, in law, was to basically give the money back to keep these business going to offer their services. The lesson Democrats got out of that was not that price controls don’t work, is that they’re politically unsustainable, so you need to give the power to unelected bureaucrats to do it, and take it away from elected representatives, so they stick. And that’s what the IPAB is all about.

HH: Now let me ask you then, Congressman Ryan, given the allegation that the President is involved in a big deal, that he wants to do a big fix, did he put this particular issue on the table as part of the big fix?

PR: No. You mean, getting rid of IPAB?

HH: right.

PR: No, it’s a centerpiece of Obamacare.

HH: So did he put any kind of Medicare reform that would be represented as a compromise between the Republicans and Obamacare on the table?

PR: He did put Medicare reforms on the table, but not that, not anything that would have taken out any substantial Obamacare features or plans.

HH: So this will be a central part of the 2012 elections.

PR: Oh, gosh, yes. Yeah, they do not want to get rid of IPAB. They believe IPAB is the secret to it. I’ll tell you this. We had a witness that came, we had two Republican witnesses and one Democrat witness after Kathleen Sebelius. The Democrats picked this woman to come as their representative, as their witness, Chris Van Hollen is my counterpart on the Democrats. And she said not only do we like IPAB, but we think we should have IPAB regulate the rest of health care. IPAB should apply not just to Medicare, but to private health insurance as well.

HH: Can you get any of your Democratic colleagues to say that out loud, to go on the record?

PR: No, they brought their witness to the committee who said that, and I just dropped my jaw and said well thank you for your candor.

HH: I’m astonished by that, because that is so anti-basic governance principles of America.

PR: Well, it’s a progressive principle, though. If you look at, you know, go back and you read your Hegel, you’ll know that the progressive theory is Congress passes vague laws, and then they empower permanent, professional bureaucrats, this is “experts”, to fill in the details and write the laws, and get it away from sort of elective scrutiny, so that they can manage these sectors of our economy, or these aspects of society.

HH: Yeah, Jonah Goldberg’s popular Liberal Fascism’s all about that.

PR: Yeah, I’ve read the book. It’s a great book.

HH: In this last minute, and then we’ll come back after this, do the Republicans have a messaging plan to present and explain what it is the brave new world in 2013 looks like?

PR: Yes, we do.

HH: When does it roll out, because I haven’t seen it yet (laughing)?

PR: I don’t know exactly the question on that, but we have put a lot of time and effort into just that.

– – – –

HH: Congressman, I said before the break the next two weeks are so critical. What is going to be, what do you want people in America to watch for over the next especially 72 hours or into next week?

PR: Look at the difference between our two parties. Look at what we’re fighting for, and look at what they’re fighting for. We want to limit government, and we want to cut spending. We don’t want to raise taxes in this economy or at any time on people, because that’s not the problem. What are the folks on the other side of the aisle, our friends on the other side of the aisle, want to increase spending, want to increase taxes. I haven’t seen a time where the contrast and the difference between two philosophies has been more clear. That’s what I would look at over the next two weeks. We will hopefully, next week, show you how we would fix this problem with our cut, cap and balance plan. It’s a plan to fix this mess, this fiscal mess, to deal with this debt limit. You’re seeing what the other side wants, just let’s just borrow more money, okay, we maxed out this credit card? Let’s go get another credit card. And that’s the basic two positions. So what does that tell you? We have divided government. Are we going to get everything we want? No. We have the House. We don’t control the Senate or the White House. Will the Democrats get everything they want? No, because they don’t have the House. So you’re going to see a product of divided government come in the next two weeks. But let’s not lose the forest for the trees, and that is where do we stand on the issues, and how would we fix it if we had our druthers, and where would they go if they had their way.

HH: So Congressman, do you believe, even though compromise is not blinking, many people expect the Republicans to fold and to blink. Is that going to happen?

PR: Well, folding and blinking means just giving them an increase in the debt limit without anything in exchange. And no, I mean…or raising taxes. We’re not going to do that.

HH: So if the President simply sits there and says I must have taxes, like he seemed to imply yesterday, don’t cross me, Eric…

PR: Oh, believe me, I’m familiar with it, yeah. Look, to raise taxes is to hurt the economy. We don’t want to hurt the economy. Look, and all the loopholes, by the way, we’re for clearing out all these loopholes, but we want to do that in tax reform, not to fund government. We don’t want to feed government. We want to limit government. And we want to lower tax rates so people can grow, so the economy can grow, so businesses can hire.

HH: So are you going to call the President’s bluff as he warned not doing yesterday?

PR: You mean on taxes?

HH: Yeah.

PR: Yeah. Look, loopholes go to tax reform, not to feeding government. That’s been our position from day one. It will be our position at the end of the day.

HH: So there’s no way in Paul Ryan’s view that any tax hike will ever get through the House?

PR: Yeah, look. I honestly don’t think we could pass…even if I, like, said okay, let’s raise taxes, I don’t think we could even pass it if we wanted to.

HH: I hope that is the case. Congressman Paul Ryan, I appreciate all the time. Good luck this week and next.

End of interview.

.

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