Romney’s $500 Billion Tea Party Pledge
Policy + Politics

Romney’s $500 Billion Tea Party Pledge

In a bid to win Tea Party backing, Republican presidential hopeful Mitt Romney offered a fiscal plan Friday that would slash federal spending by $500 billion during his first term as president, including cuts to the lightning rod issue of Medicare. But the proposed cuts may not be deep enough for Tea Party activists, who support more radical spending cuts to curb the ballooning federal debt. 

During a speech in Washington to the Tea Party-allied Americans for Prosperity, the former Massachusetts governor promised to privatize parts of Medicare, the health-insurance program for the elderly, and gradually raise the retirement eligibility age on Social Security. Calls to make significant changes to Medicare and Social Security are likely to be among the most highly contentious issues of the 2012 presidential campaign.

Romney said he would bring federal spending as a share of gross domestic product down from last year’s “staggering” 24.3 percent to 20 percent or below, which would require approximately $500 billion in spending cuts by 2016.  “We cannot with moral conscience borrow trillions of dollars that can only be repaid by our children,” Romney said. “We cannot so weaken our economic foundation that we jeopardize our ability to preserve freedom.”

Romney’s Medicare proposal is similar to House Budget Committee Chairman Rep. Paul Ryan’s, R-Wis., budget plan announced last spring. It would give seniors limited cash grants to buy private insurance plans.  Romney’s “goal is for Medicare to offer every senior affordable options that provide coverage and service at least as good as what today’s seniors receive,” a campaign fact sheet said.

In an interview with The Washington Post, Ryan said he was pleased with Romney’s spending and entitlement reform plan. “This is a great development. It shows that the elusive adult conversation is taking place, but all on one side,” he said.

Ryan also praised Romney’s plan to turn Medicaid into a block grant, cut the federal workforce, and enact far-reaching entitlement reforms.  “This tracks perfectly with the House budget,” Ryan said.

Earlier this year Ryan released a controversial budget plan that would eliminate nearly $6 trillion in spending, cut $4 trillion from revenue yet keeping all the Bush-era tax cuts for the next 10 years. Overhauling Medicare and Medicaid were key features to the plan.

The Center for American Progress (CAP), a progressive public policy think tank, said Romney’s plan is more damaging to the middle class than Ryan’s proposal and would add about $6.5 trillion to the federal deficit over 10 years.

“For a speech that’s billed as a plan to reduce the deficit, Romney’s numbers sure do add a lot to the national debt and deficit,” says Michael Linden, director for tax and budget policy at CAP. Linden said Romney didn’t outline enough cuts to get to the 20 percent of GDP. And by extending the Bush-era tax cuts while cutting corporate taxes and eliminating the estate tax, the plan would add about $6.5 trillion to the deficit.

Romney has focused almost exclusively on jobs and the economy since launching his second bid for the GOP presidential nomination. Less than two months ago he unveiled his 59-point economic recovery plan that included deep cut in corporate taxes and far-ranging reductions in government red tape. He pledged to create 11.5 million new jobs over four years.

“The big challenge in the Romney plan as he outlined it today is that it does not in any way address the important role that fiscal spending plays in maintaining and creating the conditions for job creation in the U.S. and for creating the demand businesses,” said Heather Boushey, a senior economist at CAP.  “I think that is quite frankly a shame.” Job growth remains weak.  Employers added a disappointing 80,000 new jobs in October while the unemployment rate dipped to 9 percent, the Labor Department said on Friday. 

Twenty-four percent of Republicans favor Romney for president according to the latest Washington Post/ABC News poll, while rival businessman Herman Cain grabbed 23 percent of support, essentially a dead heat. Cain’s popularity rose despite being embroiled in a sexual harassment scandal in the last week.

Romney’s plan comes several weeks after GOP presidential hopeful Rep. Ron Paul, R-Texas., unveiled his radical $1 trillion budget plan. Paul would cut defense spending by 15 percent and wipe out the Departments of Energy, Interior, Commerce, Education, and Housing & Urban Development.