CHRIS WALLACE, ANCHOR: I'm Chris Wallace, and this is "Fox News Sunday."
(BEGIN VIDEO CLIP)
WALLACE (voice-over): House Republicans offer a dramatic new plan to cut spending and reform entitlements. We'll get an exclusive first look at the proposal from its architect, Congressman Paul Ryan.
Then a rising GOP star emerges from the Tea Party ranks and makes his mark in Congress. In his first Sunday show interview, Senator Marco Rubio talks about the debt crisis and his political future. Ryan and Rubio, only on "Fox News Sunday."
Also the CIA puts covert operatives on the ground in Libya. We'll get the latest on the conflict and ask our Sunday panel just how deeply involved the U.S. should get.
And our power player of the week. An old Washington hand goes Hollywood. All right now on "Fox News Sunday."
(END VIDEO CLIP)
WALLACE: And hello again from Fox News in Washington. On Capitol Hill, Republicans and Democrats are battling over a few billion dollars in government spending, while facing the deadline for a partial government shutdown next Friday.
But this week, the House GOP will unveil a new budget for next year that would cut trillions of dollars. Here with a first look at his plan is Congressman Paul Ryan, chairman of the House Budget Committee.
Congressman, welcome back to "Fox News Sunday."
REP. PAUL RYAN, R-WIS.: Thank you for having me back. Good to be with you.
WALLACE: Let's start with the big picture, President Obama's budget for 2012, for the next fiscal year that starts next October, calls for a five-year freeze on nondefense discretionary spending he says would save $400 billion. No addressing of entitlements. How is your budget different?
RYAN: His freeze locks in very high spending levels. It's really more of a floor to gain (ph) -- with 24 percent increase in discretionary spending. If we go to 2008 levels, we'd get another $400 billion on top of that over the next 10 years.
Nothing on entitlements. He does nothing to address the drivers of our debt. The public debt will double in his first term and triple by the end of his budget. He adds $13 trillion more to our debt.
He's punting on the budget and not doing a thing to prevent a debt crisis, which every single economist tells us is coming sooner rather than later in this country. We will address these issues.
WALLACE: All right, let's talk about your budget. Widely reported that your budget will cut spending by $2 trillion over the next decade. True?
RYAN: Well, it's more than that, quite a bit more than that.
WALLACE: Three trillion?
RYAN: More than that.
WALLACE: Four trillion?
RYAN: We're looking at more than that right now. We're fine- tuning our numbers with the Congressional Budget Office literally today, over the weekend. But we're going to be cutting a lot more than that.
WALLACE: So more than $4 trillion, which is a significant number, because that was the president's debt commission cut the deficit by $4 trillion.
RYAN: Yes, we will be exceeding the goals that were put out in the president's debt commission.
WALLACE: How do you do that?
RYAN: By cutting spending, reforming entitlements and growing our economy. Look, we intend to not only cut discretionary spending and put caps on spending, you have to address the drivers of our debt. We need to engage with the American people on a fact-based budget, on stopping politicians from making empty promises to people and talk to the country about what is necessary to fix these problems.
Now the good thing we have going for us is we have time to fix this problem. So the kinds of reform we're going to be putting out there won't make changes to people who are already in or near retirement. If you're 55 or older, you won't see changes. You won't have to reorient your lives around these things.
But if we keep kicking the can down the road and keep making more empty promises to people, then we'll have the European kind of pain and austerity. Then you have cuts to current seniors, tax increases that slow down your economy.
By addressing the drivers of the debt now, we do it in a gradual way. We can guarantee the mission of health and retirement security, not just for current generations, but for future generations. And we are going to put out a plan that gets our debt on downward trajectory and gets us to a point of giving our next generation a debt-free nation. That in and of itself will help us grow the economy today and create jobs.
WALLACE: All right, we're going to get to the entitlements in a moment. But first of all, you as I understand it, would set a cap on discretionary spending as percentage of economy. How would that work?
RYAN: A cap on all spending as a percentage of the economy. We would put statutory caps on actual discretionary spending going over the next five years and beyond that. The president proposes the same kind of thing, but it's at a much higher level.
WALLACE: And so how does it work, a cap?
RYAN: So we'd put it in law. We are calling for statutory spending caps. We've had them in the past. They worked before, and Republicans turned them off in the 1990s.
WALLACE: But what percentage of--
RYAN: You don't do discretionary caps as percentage of the economy. You put discretionary caps at the levels of the discretionary spending you set. And then you put them in the law, and if Congress spends above that amount, an automatic spending cut comes and brings it back into the cap, or Congress passes spending bills to keep spending within the cap.
That's what we proposed in discretionary spending. The global caps you're talking about as a percentage of GDP occur on all of government spending.
WALLACE: What would your cap be?
RYAN: Well, we're going to set it at the levels we call for spending in our budget. We want to get spending back toward the historic levels of spending that our government--
WALLACE: Are we talking 20 percent?
RYAN: Our numbers are moving around right now, so we're basically trying to get government back toward its historic size.
WALLACE: Which is what?
RYAN: Right now we're at about 25 percent of GDP. The president's budget keeps us on a huge trajectory where we are at, about 23, 24 percent of GDP. He never gets even close to balancing the budget. He never even gets close to doing what he calls primary balance. So the metrics that he put out for the fiscal commission are not even being met.
We're going to exceed the goals in the fiscal commission. We're going to put out a budget that gets us on a path to not only balancing the budget, but gets us on a path of paying off the debt.
WALLACE: Now you talk about the president's debt commission. They got $1 trillion from closing a lot of tax loopholes, ending a lot of tax deductions. Do you do that?
RYAN: Well, the president's commission, which I was a member of, first and foremost said to have economic growth in America, you need to lower tax rates for corporations and individuals and broaden the tax base. We will be recommending those kinds of things.
We will put all these details out on Tuesday, but we will be calling for fundamental tax reform. Not only do we want to cut spending, not only do we want to reform government spending, we want economic growth. We want job creation.
Pro-growth tax reform is a key ingredient to getting this economy working again, getting this economy growing again. The way to do that, and we agree with the direction of the fiscal commission, lower tax rates, broaden the tax base, and those are the kinds of things we're going to be proposing.
WALLACE: But do you -- and the reason I ask this is because a lot of Democrats are already saying even before they have seen your budget, that you do all of this balancing of the budget on the spending side, and unlike the president's debt commission, you don't do it on the revenue side. Do you eliminate tax breaks? Do you bring in new revenue by eliminating, for instance, tax breaks for oil companies?
RYAN: We don't have a tax problem. The problem with our deficit is not because Americans are taxed too little. The problem with the deficit is because Washington spends too much money. We have got to stop spending money we don't have.
So we're not going to go down the path of raising taxes on people and raising taxes on the economy. We want to go after the source of the problem, and that is spending. So yes, we want pro-growth job reform for job creation, for economic growth, not for tax increasing. We'll go after spending --
WALLACE: -- you will not eliminate tax breaks for big oil and gas?
RYAN: Those are the kinds of details that we'll come out later with, that the Ways and Means Committee will work on. We're not going to go into the little details of which tax expenditure goes and which tax expenditure stays. We're going to lower tax rates, broaden the base. You'll see more of these details on Tuesday.
And then, as the year goes on, that is the job of Chairman Dave Camp and the Ways and Means Committee to fill in all those little specifics.
WALLACE: OK, let's talk about entitlements. You would cut spending for Medicare by turning it into a voucher system after 2021, which means anyone under 55 would not be affected by this. But a voucher system where seniors would get government money to buy private health insurance.
RYAN: That's actually not accurate, and there's been some leaks that are not -- my road map does do a voucher program, which means the money goes to the person and they go out and buy insurance.
WALLACE: Right. You're not--
RYAN: That's not what we're proposing.
Our reforms are along the line of what I proposed with Alice Rivlin, the Democrat from the Clinton administration in the fiscal commission, which is a premium support system. That's very different from a voucher.
Premium support is exactly the system I as a member of Congress and all federal employees have. It works like the Medicare prescription drug benefit, similar to Medicare Advantage today, which means Medicare puts a list of plans out there that compete against each other for your business, and seniors pick the plan of their choosing, and then Medicare subsidizes that plan. It doesn't go to the person, into the marketplace. It goes to the plan. More for the poor, more for people who get sick, and we don't give as much money to people who are wealthy.
Doing that saves Medicare. It doesn't apply to anybody. Those who are 55 or above keep their Medicare exactly as is it today, but the problem is the biggest driver of our debt is Medicare. It has trillions, tens of trillions of dollars of unpaid promises.
We want to keep these promises. Meaning, we want to fulfill the mission of health retirement security for future seniors, and so we will be proposing a premium support system like the Rivlin-Ryan plan, which is identical to the system I as a member of Congress and all federal employees have.
WALLACE: Obviously, I am at a disadvantage, because I haven't seen the plan, but the CBO did an analysis of the Ryan-Rivlin plan, and it said that it would -- the effect of the plan would be to shift more of the burden of health care costs out of their own pockets to seniors.
RYAN: Right, so for wealthy seniors especially. It also did not say these are vouchers. These are premium support, and there's a big difference here with that. It said that we're going to protect people who are low-income. We are going to protect people as their health condition gets worse. If you get sicker, you'll have more so that you can have -- your rates stabilize. No more premium increases.
The key is this. There is nobody saying that Medicare can stay in its current path. Even Obamacare acknowledges that. So we should not be measuring ourselves against some mythical future of Medicare that isn't sustainable.
Medicare itself, literally, crowds out all other government spending at the end of the day. We can't sustain that. We have got to get Medicare solvent.
Rick Foster, the chief actuary, came to the Budget Committee just the other day and said, one of the best things we can do to save Medicare, one of the best things we can do to bend that cost curve and help inflation is to go to the kind of system we are proposing.
WALLACE: Now, Medicaid -- and I'd better ask because I'm only -- I'm basing this on the reports, the reports are that you're going to save $1 trillion over 10 years on Medicaid. True?
RYAN: No. Those numbers are different as well. You'll see our specific numbers --
WALLACE: Block grants for the states?
RYAN: You will -- we propose block grants to the states.
We've had so much testimony from so many different governors saying give us the freedom to customize our Medicaid programs, to tailor for our unique populations in our states. We want to get governors freedom to do that --
WALLACE: But critics say --
RYAN: -- and we will be proposing block grants --
WALLACE: But critics say you're not reforming, that you're cutting. That's you're actually going to be cutting. By giving these block grants, you're going to be cutting health care services to the poor and the disabled.
RYAN: Let me say this one thing, Medicare and Medicaid spending will go up every single year under our budget. They don't just go up as much as they're going right now, because they're growing at unsustainable rates.
Free programs alone, Medicare, Medicaid especially, and social security, take over all government revenues by the time my children are my age. When my kids are my age, who are six, seven and nine years old, at that time when they're raising their children, three programs crowd out every other federal priority. They can't keep growing at the pace that they're growing at.
So, yes, we do increase and grow Medicare, Medicaid spending but albeit not at -- at the pace they're growing at because they're completely unsustainable. And that's why we're (INAUDIBLE) them with key reforms that are proven to stretch that Medicare, Medicaid dollar farther.
WALLACE: OK, let's talk about the current situation, because there's a -- a budget battle now before we get to your new budget this week. Congress is deadlocked right now over the last six months of this fiscal year, 2011. Democrats are willing to agree to $33 billion in cuts, which is more than you originally proposed.
Should the House make a deal -- House Republicans make a deal, accept this budget, which, as I say, is more in cuts than you originally proposed, not shut down the government over a few billion dollars and move on to -- to your budget, which is -- involves not billions but trillions?
RYAN: Well, I don't want to undercut our chief negotiator, John Boehner, on what number we should accept or what number we shouldn't accept. But let's also look at why we're in this position. We are here because the Democrats didn't even pass a budget last year.
The good news is we're now talking about how much spending to cut. You think if we got elected in the majority, we'd be talking about this right now? A year ago, they're talking about how much more spending to increase. This Congress, already this year, has gotten into law more spending cuts in law than any past Congress.
WALLACE: But does it make sense?
RYAN: So --
WALLACE: But -- all right --
RYAN: So we don't want to shut the government down. We've already passed our bills to keep the government spending -- running, albeit in lower levels than President Obama wants.
Just last Friday, 42 days ago, we passed our legislation to prevent a government shutdown and cut spending. The Senate has never done anything. They haven't passed a single bill to keep the government running.
WALLACE: So it doesn't make (ph) sense to shut down the government over this when you've already gotten all these big cuts?
RYAN: And, by the way, we -- so I do want to get off to talking about tens of billions of dollars, shaving two to four percent off our budget deficit and get down to the debate about trillions of dollars and paying off those debt. That is where we're going to go with our discussion this week.
But let's put the emphasis where it ought to be. The Senate Democrats have not even passed a bill to prevent a government shutdown. We passed out -- we've passed two.
WALLACE: Congressman, on the -- on the other hand, if the two parties are having so much trouble as they are right now over a couple of billion dollars, one or two percent, you're talking about cutting you say more than $4 trillion. Revamping Medicare, Medicaid -- how is that going to happen when you can't even get an agreement on a couple -- ?
RYAN: You know, it's a good question, and I find it kind of ironic that the week we're trying to engage the president, the Democrats and the country with an honest debate about our budget, with real solutions to fix this country's problems and prevent a debt crisis, the president is launching his re-election campaign.
Look, these are tough times for America. We don't need a good politician. We need a strong leader. We need to engage this country on the issues that are necessary to secure out prosperity, to get this debt paid off, to get our economy growing right now.
We know for a fact that we're giving our children and our grandchildren a lower standard of living --
WALLACE: But -- but do we start --
RYAN: -- and we need to have -- we don't need good politics. We don't need to keep making empty promises to people. We need to engage and fix these problems while they're still in our control.
WALLACE: But my question, though, is isn't your plan dead on arrival? If they can't agree on $3 billion, how are they going to agree on $4 trillion?
RYAN: You know, I don't know the answer to that, but I -- I know this. I want to look my kids in the -- in the face, I want to sleep soundly, and I want to put out a plan that tries to fix this country's problems.
So whether it's dead on arrival, I don't know. But where the president has failed to lead, we are going to lead, and we're going to put out ideas to fix this problem.
WALLACE: Last question, as you look ahead, and a lot of people would say look, the answer is you're not going to get this budget passed. It's really setting up an issue and -- and a sensible debate for 2012.
As you look ahead to the next election, aren't Democrats going to be able to say, look at Paul Ryan, look at the House Republicans. They want to kill Medicare, they want to kill Medicaid, they want to gut the programs that you depend on. Aren't you playing into the Democrats' hands?
RYAN: We are. We are giving them a political weapon to go against us, but they will have to lie and demagogue to make that a political weapon.
Look, we don't change benefits for anybody over the age of 55. We save Medicare, save Medicaid. We save these entitlement programs. We repair our social safety net, and we get our country a debt-free country for our children and grandchildren's generation. And we get jobs. We get economic growth.
They are going to demagogue us, and -- and it's that demagoguery that has always prevented political leaders in the past from actually trying to fix the problem. We can't keep kicking this can down the road.
The president has punted. We're not going to follow suit. And, yes, we will be giving our political adversaries things to use against us in the next election, and shame on them if they do that.
WALLACE: Congressman Ryan, we want to thank you so much for coming in today, giving us a first look at your new budget. We'll stay on top of what promises to be a fierce debate. Thank you, Sir.
RYAN: All right. Thanks, Chris. Appreciate it.
WALLACE: It was a pleasure to talk to you.
RYAN: Thank you.
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