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REP. PAUL RYAN, HOUSE BUDGET CHAIRMAN: Thanks for having me back.
WALLACE: We want to drill down into the numbers with you and let's start with taxes. You would create just two tax rates -- 10 percent and 25 percent. And you've just heard David Plouffe say that would give the richest Americans a tax break of $150,000 a year or more. Your response, sir.
RYAN: We are taking away the shelters that people in the top brackets use. So, what we're saying is, clean up the past (INAUDIBLE), flatter, simpler, more competitive tax system.
And you have to remember, Chris, that eight out of 10 businesses in America, they file their taxes as individuals. The president saying the wants their top rate to go to high as 44.8 percent in January. You can't compete like that. Canada just lowered their business tax to 15 percent.
So, we're saying get rid of all the special interest, loopholes and tax shelters that are disproportionately used by those higher income earners, get rid of those tax shelters, so you can lower tax rates for everybody, and make us better wired for economic growth and job creation.
WALLACE: OK. I just want to make sure that we are clear on this. But what you're saying is lower the tax rates --
RYAN: And broaden the base.
WALLACE: -- and broaden the base by eliminating a lot the tax --
RYAN: Loopholes and deductions, which are disproportionately used by those taxpayers.
WALLACE: Because you don't say in the budget, which ones?
RYAN: That's right. So, that's what the Ways and Means Committee is supposed to do. That's not the job of the Budget Committee. What we're saying is we want to do this in the light of day. Not in some backroom deal. We want to have hearings in the Ways and Means Committee that Chairman Dave Camp has already started this work, to say what tax benefits should go, which ones are the ones where Washington is picking winners and losers, so we get to a cleaner flatter tax code.
The point I would make, Chris, the president is proposing higher tax rates and more loopholes, more complexities of the tax code, which is contrary to this bipartisan consensus that we are seeing evolve in this country. There are Democrats who agree with us. Lower the tax rates. Broaden the base for economic growth and that's what we're proposing.
WALLACE: But if you can't tell me and I'm going to get in to these specific tax breaks in a moment, how much -- and you would know this, I would think, as the budget, because according to the CBO estimate -- lowering the rates --
WALLACE: -- is going to -- from current policy, would cost $10 trillion.
RYAN: So --
WALLACE: Let me just finish, over the next 10 years. So, the question is -- how much are you going to need to bring in in closing tax loopholes, tax expenditures per year?
RYAN: So, we can bring in the same amount of revenue the government raises today with this kind of a tax system. There's $1 trillion of these kind of loopholes that are built in the tax system.
RYAN: You don't have to get rid of all of them for this kind of tax structure, you don't have to get rid of all them. You do have to get rid of a lot of them in order to get this kind of tax structure.
WALLACE: Can you give me a number?
RYAN: I can't because we -- those decisions haven't been made because you have to decide where those tax rates apply. The point I'm trying to make is, Bowles-Simpson commission proposed a top rate of 23 percent. We are saying 25 percent.
And we're saying you can still keep some of those middle income tax write-offs for people in this kind of a tax structure. And what we want to do is have a dialogue with the country, with the American people through hearings and an open process to find out what kind of a tax system we want to have while we simplify the code and get better us prepared for growth.
WALLACE: OK. I just want to get on this one more time because the Congressional Research Service looked into what are the major tax breaks and how much they are currently costing the Treasury. And let's put them up on the screen, exclusion of employer provided health insurance from taxable income, $164 billion. Exclusion of employer provided pension from taxable income, $163 billion. Home mortgage deduction, $100 billion. Lower tax rate on capital gains, $71 billion.
All right. I understand, this is not your committee, it's the Ways and Means Committee, can you tell me any one of those four that you're willing to say, do away with it?
RYAN: What I would say is doing away, who we do it for. And what we're saying is the people who disproportionately use those, it's the top two tax rate payers use almost of those tax expenditures.
We would limit these things to those higher income earners.
WALLACE: Even things like the deduction for health insurance and pensions and home mortgage?
RYAN: Yes, right. Instead of giving these write-offs, the people in the top tax bracket, take those tax shelters away. For every dollar that's parked in the tax shelter is taxed at zero. Take away the tax shelter, subject all of their income to taxation, you get more revenue and we can lower everybody's tax rate in return. So, we're saying let's limit these kinds of deductions to the higher income earners so that everybody can enjoy lower, flatter tax rate.
WALLACE: Are you willing to say that it would not only be revenue neutral, but also distributionally neutral, which means that the wealthy aren't going to benefit and the middle class isn't going to suffer.
RYAN: I don't know. There is no way to know the answer to that question. But we do believe in a progressive taxes and that's why we have two rates: 10 percent tax rate for low and middle income earners, 25 percent tax rate for higher earners, whether it's distributionally the same as the current code, it's impossible to answer that question.
WALLACE: OK. Let's turn to spending. You would cut Medicaid and other health programs by $770 billion more than the president's budget over 10 years. You would cult entitlements like welfare, food stamps and agriculture subsidies by $2 trillion over the next 10 years.
The White House says you look at that, and you are putting the burden for balancing the budget on the backs of the poor.
RYAN: Couple of things. Number one, these programs still grow. Number two, right now, they are growing at an unsustainable rate. So, we've seen a 400 percent increase in food stamp program, and that doesn't even account for the recession.
The other point I would make is this: is your job or goal to treat the symptoms of poverty, to make it easier to live with, or is the goal to eradicate poverty by treating the root causes?
What we want to do is have welfare reform that gets people off of lives of deficiency and onto to lives of self sufficiency. That's why we couple this with job training programs and work requirements. We think we ought to make sure that we get people out of the cycle of poverty and, unfortunately, I think the plan that we have in place, the president's agenda creates more of a dependent culture, creates people that are stuck in poverty because it denies the idea of upward mobility.
So, to me, this is a critical difference about repairing the safety net and making it a system that gets people back on their feet. And that's why --
WALLACE: I can understand that when it comes to welfare and food stamps, that you are saying you don't want to continue the cycle of poverty. What about something like Medicaid? People get sick.
RYAN: People get sick, but Medicaid is already going bankrupt. Medicaid is already a program that so many doctors won't even take anymore because of its federal rules and regulations and mandates. So, we're saying let's block grant Medicaid back to the states, allow the states to customize this benefit, to meet the particular needs of their populations. And yes, it will still grow under the program that we are talking about. But we will free the states to experiment and make sure that they can customize this benefit to the needs of their population.
WALLACE: I want to pick up on that because you and all of the presidential candidates are saying, let's take Medicaid. And a lot of these programs, and turn them into block grants and give them to a state.
But there was a new study that just came out and I want to put it up on the screen. This was a study of the way that state governments do business. Nineteen of the states got a C; 18 got a D; eight got a F. And there was not a single A.
And, look -- I mean, I've have been around. I've covered state politics. What do makes you think that states are going to be any better, anymore efficient, any less corrupt in doing this than the federal government?
RYAN: All the answers don't lie in Washington. The genius of America does not lie in our bureaucracy in Washington.
WALLACE: They don't lie in the state's capital either.
RYAN: The government closer to you is government more responsive to you. We believe in the principle of government by consent of the governed. And we believe that innovative reforms, like welfare reform in the '90s. Tommy Thompson was trailer blazer of this in Wisconsin and we made it very successful.
So, we think we should return with the 10th Amendment, responsibility to the states with these issues so that state government which is closer to the people who are involved in these programs can be held accountable and can cause solutions.
It's a diverse country. You know, the problems they have in New York state aren't exactly the problems we have in Wisconsin. So, we shouldn't have all these federal rules and regulations that treat us the same with cookie cutter mandates.
WALLACE: Then there's Medicare. And as you predicted when you announced your budget, Democrats, and you heard it again today from David Plouffe, are hammering you, saying you're going to destroy Medicare?
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VICE PRESIDENT JOE BIDEN: We'd be so much better off as a country if we spend a lot less time and energy fighting off these efforts to dismantle Medicare. And I mean dismantle it.
(END VIDEO CLIP)
WALLACE: The Congressional Budget Office says under your plan, by 2030, average government spending on each new Medicare enrollee would be $2,000 less than status quo. Wouldn't you just -- factually, wouldn't you make seniors pay more for Medicare and their health care than they do now?
RYAN: Those same numbers apply to President Obama's healthcare law. Medicare grows at the same -- under our budget as it does under Obamacare. Here is the key critical difference: the president's health care puts 15 bureaucrats in charge of Medicare. We put 50 million seniors in charge of their Medicare. He is putting these bureaucrats, unelected, unaccountable, in charge of price controlling, which leads to denied care for seniors. We are saying get rid of the health care law, stop putting this rationing board in charge of current seniors health care, give them the guaranteed benefits that they organize their lives around. Don't change their benefits for anyone in and near retirement.
But in order to make good on that promise, which is becoming a broken promise on the status quo, you have to reform for the next generation. And there's a bipartisan consensus on how best to reform it. And that's what we include in our bill. We save and strengthen the program.
The current law makes it go bankrupt and puts this board of 15 bureaucrats in charge of price controlling which will lead to denied care for current seniors.
WALLACE: Mitt Romney was on Capitol Hill this week, and you and other Republican leaders met with him. First of all, does he have the nomination wrapped up? And is it time for the party to unite around Romney, stop fighting amongst themselves and take the fight to Barack Obama?
RYAN: I don't know if he has it wrapped up now. I don't -- we're pretty relevant in Wisconsin. Now, we haven't had a relevance in Republican primary since I think Bush and Reagan.
WALLACE: Yes. Of course, you're not going to say that before April 3rd.
RYAN: Yes. Right. I don't know if I'd say he has it wrapped up. He's clearly on his way. I this he is becoming the prohibitive front runner.
And I think the sooner we coalesce around the nominee, the better off we're going to be, because, you know, the prize is November, not this summer. And I think that it's coming together. But, you know, I'll let the people of this country decide and these primaries --
WALLACE: Do you think some of these candidates, Santorum, Gingrich should consider --
RYAN: I'm not going to get into telling these guys what to do.
WALLACE: All right. One last question, one last try, you made it clear early on, you were very straight, you not running for president. I never hear you saying on this show. I want you to be just as straight now. If the nominee of the party, whoever it turns out to be, comes to you next August and says, "Paul, your budget is the budget; I want you to be the point man for getting this through; will you be my running mate?"
RYAN: Well, I'm already the point guy for doing this in the House.
WALLACE: Well, you'd be more powerful as the vice president.
RYAN: Well, who knows about that? I just don't know the answer to your question, Chris. It's not a bridge that I've even come close to crossing. It's a decision that somebody else makes and a long time from now.
And quite honestly, I'm focused on doing my job in Congress, which I think is important, which is to give the country an alternative choice of two futures on how we save and strengthen America, how we save the American dream from what I think is this path that the president's put us on to debt and decline.
So I don't -- I can't answer that question because I haven't given enough thought to that. I don't know if I'll even have the opportunity.
WALLACE: You're leaving the door open? You're saying, if I were asked, I would have to consider it?
RYAN: I would have to consider it, but it's not something I'm even thinking about right now because right -- I think our job in Congress is pretty important. And what we believe we owe the country is, if we don't like the direction the president is taking us, which we don't, we owe them a specific sharp contrast and a different path that they can select in November. And doing this in Congress is really important.
RYAN: And that's why I think I have a good job right now that helps contribute to this effort.
WALLACE: Real quickly, the White House sounds like they've already made the ticket. You heard David Plouffe talking about the Romney-Ryan budget.
RYAN: We're going to give the country a choice. Now, we're going to show the country, here's how you balance the budget, pay off the debt, grow the economy and stop all the cronyism in Washington, picking winners and losers. Here's how you get an upward-mobile society; here's how you get people back to work instead of being on government dependency.
These are the decisions we're going to have to make this fall, and that's why I think this job in Congress that I have right now is pretty important in doing that.
WALLACE: Congressman Ryan, we want to thank you so much for making time for us. Please come back, sir.
RYAN: Thanks, Chris.
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