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Paul Ryan On What The Sequester Really Means

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The chairman of the House Budget committee was a guest of John Campbell Wednesday while Hugh’s away on vacation. What follows is much needed clarity on what the sequester means, what’s ahead in the budgeting process, and what is in store for the country if the Republicans fail to convince a majority of Americans to turn away from the hysteria and grandstanding being offered by the White House and their allies in the Manhattan-Beltway elite media.

JC: We have a special guest. We have Congressman and former Vice Presidential candidate Paul Ryan on the phone. Hello, Paul, welcome to the Hugh Hewitt Show.

PR: John, how are you doing? You said he’s at a spring break in February?

JC: Well, you know, early spring in California. It’s sunny, you know, that kind of thing.

PR: Yeah, it was 11 degrees this morning when I left the house.

JC: Ah, that would be cold. Even in Wisconsin, that’s cold, isn’t it?

PR: Yeah, it’s on the cold side of things. How are you doing?

JC: Well, good to have you on this afternoon. Let’s get now to into the issues and into the budget. Paul, the last two years, we have passed a budget in the House, which many people called the Paul Ryan budget. I know you prefer it be called the House Republican budget.

PR: That’s right.

JC: But we’re working on a budget again for this year, which hopefully, we will pass in March. What can you tell the listeners of the Hugh Hewitt Show about what you think that budget will be, and how it will be different from the budgets that were passed in the last two years?

PR: Well, we’re going to build on the success we had before. In this case, we’re going to balance the budget sooner than we did in the past. This will balance the budget within ten years. We’re in the middle of writing it. You are on the committee, so you know all of the micro details that go into that. We’re going to propose the same kinds of entitlement reforms, how do you save Medicare, how do you prevent bankruptcy in this country. We’re going to propose to undergo fundamental tax reform. We’re going to show the country exactly how we think the military ought to be funded and at what levels. We’re going to put all the details out there to show here’s how you cut spending, here’s how you grow the economy, here’s how you reform programs like Medicare and Medicaid and get rid of and replace Obamacare, and here is how you balance the budget and pay off the debt. That’s exactly the kind of budget we’re going to put out there. As you know, the Senate hasn’t passed a budget in four years. The President, who the law requires, is supposed to submit his budget the first Monday in February. We’re still waiting. Unfortunately, there’s no other leadership on the other side of the aisle on this issue. Absent that, we are going to lead. We’re going to put our plans out there. We’re going to show the country how to prevent a debt crisis, and how to get government to live within its means. That’s…and what’s new is it will balance the budget within the decade.

JC: And how is that going to be accomplished? And I know it’s not done yet, and I’m on the committee as you pointed out. But the listeners to the show are not on the Budget committee along with you and I. So how are we going to, because last time, I think it didn’t balance for 20-plus, or something like that, years. So now, we’re going to balance within ten. What sort of things are going to happen to make that occur?

PR: Well, you and I, and along with our other colleagues on the committee, are going to have to make a number of choices on government funding of various programs. That’s point number one. Those choices, we haven’t made yet. And what I am doing this week is building options, a menu of options on how to cut spending more than we did last year, more reforms than we’ve been able to show before. And we’re getting what we call a new baseline from the Congressional Budget Office. And this new baseline from the Congressional Budget Office shows that our revenues are higher, and that are spending is a little bit lower given that we don’t have as much spending in certain areas as before, like those commerce cyclical programs, meaning they believe we’re getting closer toward balance organically because of the economy, because of revenues. And that, combined with the additional reforms that we’re going to have to add to this budget, is how we’re going to get to balancing the budget.

JC: Okay, now all the talk this week, the President had his speech yesterday with a lot of firefighters and so forth behind him…

PR: Right.

JC: And all the talk right now this week is about the sequester. And so everyone is talking about that, and it goes into effect March 1st, etc. etc. How does the sequester, explain to people how the sequester impacts, or doesn’t impact the budget, and what the interplay and interaction between those two is, Paul Ryan.

PR: So the sequester occurs on March 1st. Our budget comes out the second week of March, is when we’re planning on it this time. And the way it interplays is the sequester cuts current year fiscal year spending. So our budget does not affect this current fiscal year. It does not propose spending levels until the next fiscal year, which is fiscal year 2014, which starts on October 1st. The sequester kicks in right away automatically in March, and it brings spending down below where it is right now. It takes about an $85 billion dollar cut to spending, approximately 7.9% reduction in Defense spending, and about 5% reductions in domestic government agency spending. Now mind you, these agencies will still have gotten a 17% increase since President Obama took office, even after the sequester, on these domestic government agencies. And right now, we’ll get about a 3% increase…

JC: Wait a minute, you have to say that again. I just want people to hear that again, that since Obama took office, these agencies that were, excepting Defense…

PR: Yeah, they have already gotten, we’re going into this where they’ve gotten a 17% increase already. If the sequester goes into place, doing this off the top of my head, they’ll get about a 10.5% increase in domestic spending. So you’ll still see double digit spending increases on government domestic agencies, even after the sequester with Obama. We’re already at 17%. It might go down to 10.5% if the sequester hits. But the idea that these are deep, deep, deep cuts, on domestic agencies, is one that just doesn’t hold with the math. The Pentagon, on the other hand, gets a bigger cut, but it’s not nearly as much of a cut, even said.

JC: Now let’s get to the Pentagon in a second, but just to rephrase that again, so these disastrous cuts that the President says just are job-killing and recessionary and all this stuff are essentially requiring agencies other than Defense to give back about a third of the increases they saw in the last four years.

PR: Yeah, that’s about, that’s exactly right. That’s exactly right. So we’ll call this the Washington Monument effect. It’s kind of like when your local school board is told that they can’t get a tax increase, so they say well, the first thing we’re going to cut is the band and the football team. The Washington Monument, the first thing that’s going to get shut down if the government has to live with less money. We see that as kind of the political game that the President is playing here. Let’s never forget to remind people, though, that the President is the one who insisted on the sequester in the first place. The President is the one who designed the sequester as it’s currently designed. And the President is the one who has yet to put a plan on the table to actually replace the sequester. And it is the House Republicans who twice passed legislation replacing the sequester with other cuts. So I think it’s important to know this history when you’re listening to all this rhetoric that’s coming, these protestations about cutting spending. We would like to cut spending in a smarter way than sequester does. We’ve proposed specifically how we will do this. On March 1st, I believe that you and I will probably give these government agencies a scalpel and discretion on how to cut spending so that they can cut lower priority spending and not higher priority spending, and enable to make sure that sequester doesn’t actually damage certain priorities.

JC: Okay, so now let’s assume for the moment that the sequester goes through. In the budget, then, are those the numbers…as you’ve said, that’s about this year, and the budget is about next year and beyond. Are those the numbers that we begin next year with then?

PR: Yes, that’s right. So what we will do, I believe, is we will have a continuing resolution saying keep the government funded at current law levels. Current law levels, in the post-sequester moment, is the sequester levels. And so our budget will reflect what the law of the land is, what reality is, what actual spending is, because that’s what budgets ought to do – reflect what actual spending is. And that’s what the sequester shows us. We have shown how and where we can cut spending in other areas to make up for the sequester. That’s what budgets do. That’s what we’ve passed twice. Unfortunately, the President, absent any other leadership, you know, is going to bring sequester about. And our budget will clearly reflect that, because if you don’t, then we’re not, we can’t turn off the sequester without replacing those spending cuts with other spending cuts. We believe that you need to go beyond just what the sequester achieves, $1.2 trillion dollars in savings over ten years. You need four or five times that amount if you’re going to get America on a good path, to stabilize our debt, to prevent a debt crisis. Independent fiscal experts agree, but the President, unfortunately, has chosen partisan politics, he’s chosen campaigning, he’s chosen press conferences to actually getting out there and governing, and showing how he would do things differently.

JC: Okay, Paul Ryan, we’ve got about a minute left. You’re going to come back after the break, and we’ll be discussing this some more and including what you think the President and the Senate might do. But talking about the Defense side, the reductions on the Defense side in the sequester are a larger percentage, as you mentioned. How do you see those going into effect? How difficult is that to do?

PR: Well again, this is an area we don’t like. This is an area we would prefer to do things differently. With the sequester, over the President’s tenure, you would see about a 3% increase over the past four years since the President came in office.

JC: Is that after the sequester?

PR: It’s after the sequester, after the sequester.

JC: Okay.

PR: So the problem that we see with the sequester is its sort of across the board approach, how it doesn’t distinguish between what I would call wasteful spending and essential spending, between high priority and low priority spending. This is why we proposed an alternative to the sequester. This is why we said let’s go cut waste and reform programs to replace the sequester. We will also propose, is to give the Pentagon a scalpel, meaning give the Pentagon some discretion to go after the wasteful spending so that they can protect the high priority spending.

— – –

JC: Paul, before the break, you were talking about the Defense cuts in the sequester, and we talked a lot about what was going on in the sequester, what might be in the House budget. Let’s turn for a second, if we can, because as you pointed out, the Senate has not passed a budget in four years. I often like to say, and I didn’t make this up, I think it was Charles Krauthammer who did, that they haven’t passed a budget since the iPad was invented. But if they, because of the bill we passed last year, last month and the President signed into law, they won’t get paid if they don’t pass a budget in the Senate this year. They haven’t even, I believe, proposed a budget in the last couple of years. What is going on over there in the Senate at the moment? What do you expect that they will do?

PR: Well, as you know, we did. We said no budget, no pay. We have a law. It’s called the 1974 Budget Act. It’s the law that dictates how Congress taxes and spends taxpayer dollars. And it requires a budget be passed every single year. Now the problem is they haven’t followed this law for four years, but there’s no consequence to not following the law. We decided to add a consequence, which is if you don’t do your basic job of governing, which is budgeting, you know, families budget, local governments budget, businesses budget, the federal government should budget, your pay is withheld until such time as you do so. It’s a Constitutional way of bringing a consequence to not following the budget law, because as you well know, there wasn’t a consequence. We wanted to add a consequence, and that’s it. Now what do they do? You know, they say, they meaning the Senate Democrats, claim that they will pass a budget. So I expect that they’ll do so. The deadline for this budget is April 15th. It’s tax day for most Americans, and it’s budget day for Congress. And the question is what kind of budget will they pass. Will they pass a budget that shows that they can, they’ll propose to balance the budget? Will they pass a budget that gets this debt under control, that prevents a debt crisis? We don’t know. We’ll see. I’ll see it when I believe it, and it remains to be seen what kind of budget they’ll offer. All they’ve offered so far are more platitudes – claims of closing tax loopholes in order to fuel more spending. All that does is fuel more spending. If you just add all the President’s tax increases that he’s ever proposed, it doesn’t even pay for a fifth of the proposed deficit spending he’s been calling for. So I’m curious to see how they will propose to get this deficit and debt under control, given that they will have to do something they’ve never done before, which is to actually propose how and where to cut spending.

JC: Now Paul Ryan, I often tell people on this that we have a budget deficit this year of nearly a trillion dollars, that they go down for a little bit and then back up, but sort of the norm right now, in the Obama era, is about a trillion dollar a year annual budget. And if you want to do something with that, you’ve got various choices. You can cut spending, well, and let’s take the discretionary spending, the sequester stuff, let’s assume that that’s where it is. Take that off the table. You can either reform or reduce the cost of entitlements, you can raise taxes, or you can decide to just leave those trillion dollar deficits going forward. The only other option is to play with the numbers, gimmick with the numbers somehow…

PR: Right.

JC: And in my days in the California legislature, man, that was the way we did it in California. We just fudged the numbers, and we made all kinds of assumptions that weren’t true, and would never happen, and it all looked great until six months later when none of that was the case, and then you had to do it all over again. Do they really have any other…I mean, they either have to raise taxes a bunch, they have to show that they’re really willing to reduce entitlements, or they have to come in and accept that okay, we’re going to live with trillion dollar deficits, and we really don’t think it’s a problem. Can they fudge the numbers? Or do they have to make one of those choices, or a combination of those choices?

PR: Well, if the President’s past budgets are any predictor of that, then they’ll just fudge the numbers. The President’s budgets use what we commonly call the war gimmick. The President’s budget says well, we are assuming that we would be at war in Afghanistan for the rest of the decade, through 2023. Oh, but if we have a drawdown of troops in 2014, which everybody is planning on doing and we know that’s going to happen, that magically saves $800 billion dollars, because they say well, we were otherwise going to be in war except for the drawdown now is bringing us home early, so that’s $800 billion dollars that we’re saving that we would have spent. But claiming to cut spending that was never, ever going to be spent in the first place is not a spending cut. Unfortunately, when they throw all their numbers together, they try to say here’s the kind of spending we’re cutting, but cutting mythical spending is not the same as cutting spending. And the resulting deficit is the same. And so I do think you’re going to see lots of these budget gimmicks, lots of these smoke and mirrors. You’re going to see some higher tax revenues. But math is such that you can’t come close to fixing this problem by taxing your way out of it. You know, unfortunately for, in California’s instance, or in the case of the Greeks, you can cook the books for only so long before the bond markets catch up with you, before they see what you’re doing and they know it’s not credible. And we can’t afford to keep trying to fool the bond markets into thinking that America has got real fiscal discipline when our leaders are not. That’s why the House Republicans have always shown specifically here’s how you reform entitlements, here’s where you cut spending, here are our plans to grow the economy through tax reform and energy production and all of the rest. Those are specific plans. We’ll pass it again now for the third year. The question is, will they follow suit with specific proposals that add up? Or will they resort to tired tactics and smoke and mirrors? I don’t know the answer to that.

JC: Okay, Paul Ryan, what do you think the President will do? As you mentioned before the break, his budget was due by law on February 1st. He did not submit a budget. He broke the law, but there’s no consequence to that as you also mentioned. But I believe they’ve indicated they may propose, the President may propose a budget sometime in March. What are you hearing about the President’s budget, because there would be a House budget, a Senate budget, and the President’s budget, so this would be the third leg of this stool?

PR: Well, I’m hearing very little, and I think the decisions they’re making are political decisions. I think what we’ve come to learn is that we’re experiencing a permanent campaign. The President is in a permanent campaign mode, seems to be more comfortable with that in what I would call a governing mode, because if you were truly governing, you would be making decisions. You would be leading. You would be putting policy proposals on the table. But by not bringing a budget to Congress as he’s required, waiting for others to go first, and withholding your budget, that strikes me as more of a campaign/political-like decision than a real leadership or governing decision. And so I expect a campaign kind of document if and when he does propose a budget.

JC: And what do you mean by a campaign type document? One that doesn’t add up again, or…

PR: One that doesn’t add up, and one that fuels political rhetoric. One that gives or fuels the talking points that they would like to use in more of a campaign than actually showing here’s how our numbers add up, here’s how you balance the budget, here’s where you grow the economy, here’s how you reform entitlement programs, here’s where we cut spending. I don’t think their budget will do that. None of them have so far. And so I just don’t think, if past is prologue, I don’t think we’ll see anything different.

JC: So it’ll just be to try and wedge and make it difficult for us, for Republicans, to do what we need to do, which is responsible budgeting?

PR: I think that’s right.

— – – –

JC: Our guest right now and today is Paul Ryan, chairman of the House Budget committee, and former vice presidential candidate, and we’ve been talking about all the things that would not have happened had you been vice president, Paul. But unfortunately, there are a lot of things in the 57 years of my life I wished had happened that didn’t come out the way I’d hoped. But we talked before the break about the House Republican budget, and what you are doing and what we are doing, since I’m on the Budget committee with you, and that the Senate probably will propose a budget, may or may not pass one, and that the President will put up some document, political or otherwise, that will be a budget. Okay, what then? Explain to the listeners of the Hugh Hewitt Show, we have our budget, maybe the Senate passes one, maybe they don’t, the President proposes one. What then? Where does it go from here?

PR: Well, I think we need to have this kind of debate. And like we’ve done in the past, and I feel like we’re on a broken record here, but we need to show the country how we would do things differently if we don’t like the direction that we’re headed. We don’t like the idea of consigning our children and grandchildren to a mountain of debt that they can’t survive, where they have a lower standard of living. We don’t like the idea of courting a recession, which is what a debt crisis would bring us. We want opportunity. We want people to get on with their lives by having opportunities, by having economic growth. We want to have a strong national defense. We want to have entitlement programs that people retire on and keep the benefits that were promised to them, like Medicare and Social Security. We want a health care system that’s vibrant, that works for patients who are in charge of their health care. We want to have the American dream in reach for every single person in this country. This is what you…you need a budget in order to do that. You need to show the country your policies and how they all add up in order to achieve these goals that we have. We can’t simply stand up and give lofty speeches. We have to show specifically what reforms and policies that we’re calling for to get these goals accomplished. And unfortunately, far more people are falling behind. We have the highest poverty rates in a generation. We have people who are about to enter retirement who may very well have the promises that were made to them reneged upon, just like what’s happening in Europe. We have young people who can’t get good jobs coming out of college. We’ve got opportunities denied left and right in this country in this stagnant economy. And the primary reason why is because of our government, and because of its lack of foresight in tackling the problems we have before us. And we want to have this debate. We want to show the country that if you get ahead of these problems and tackle them before they tackle us, we’ll all be better off, that if you reform programs like Medicare, you can guarantee its promise for the people who are in and near retirement, and there for my generation and my kids’ generation when we retire. It’s smarter to do it that way, because in a debt crisis, everyone gets hurt, especially people who need government the most. They’re the ones who get hurt the first and the worst in a debt crisis, which is where we are headed if we stick with the status quo. And unfortunately, because of the President’s lack of leadership, because of the political games he’s playing, because of the Senate’s refusal to even try to govern by budgeting, that’s where we’re headed. We need to go in a different direction, and we’re not going to stop showing the country a better way to go. That’s what budgeting is all about. That’s what we’re going to do in March, and that’s the kind of debate this country so richly deserves.

JC: Sometime after May 19th, we will hit the debt limit again. I tell people sometime in the summer. We don’t know exactly when it will hit, depending upon when Treasury uses their borrowing, so called extraordinary measures.

PR: Right.

JC: But is this the debate we’ll be having? Will it really be about the budget, because even under the Republican budget, we’re going to balance under ten years. We’re not going to balance in one. So there’ll be a deficit next year and the year after that. And what that deficit is, is how much we’ll have to borrow. Is that what the debate will be about through May and June as we lead up to the debt limit, or April? Will it be about the budget rather than just the debt limit? Or how do you see that interplay?

PR: Yes, I believe so. I believe the crescendo of all these things you and I are talking about right now – the sequester, the continuing resolution, the budget, the debt limit, these are all budget terms which basically mean we’re running out of money, and we have no plan. We need a plan. And out of this, if the House Republican majority has any value to the country whatsoever, must come a plan to deal with this, a down payment on deficits and debt, a down payment to prevent a debt crisis to buy the country time. This is what we think our value is. We want to have reforms that if repeated over and over get us on the path to balancing the budget within the decade. We understand the President may not want or take our budget in full. But our job in these negotiations, with these moments that we’re reaching, is to secure for the country a plan that gets us on a path to balancing, that buys the country time to delay or forestall a debt crisis if we’re not going to put in place the kinds of plans that we will put out there, which would permanently remove a debt crisis from our future. Let’s at least delay it at best.

JC: Paul Ryan, I am sorry you’re not vice president, but I tell you, I am very thankful that you are chairman of the House Budget committee, on which I serve. Very well said, very well spoken. I believe you will be in Orange County, California tomorrow, and I will see you then. Thank you for being on the Hugh Hewitt Show.

End of interview.

 

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