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In new U.S. budget talks, Republican proposal has flipped the script

Rep. Paul Ryan (R-WI) departs after a news conference by U.S. Speaker of the House John Boehner (R-OH) and other Republican House members in
Rep. Paul Ryan (R-WI) departs after a news conference by U.S. Speaker of the House John Boehner (R-OH) and other Republican House members in

By Andy Sullivan

WASHINGTON (Reuters) - Republicans in the Congress are taking a new tack in the budget wars that have convulsed Washington for the past three years: They want to soak the rich, or at least get them a little damp.

As Democrats and Republicans kick off another round of budget talks on Wednesday, a proposal by House of Representatives Budget Committee Chairman Paul Ryan appears to have flipped the usual script.

Republicans have fiercely resisted tax increases on the wealthy for decades, but their fiscal standard-bearer suggested a few weeks back that the two sides might find common ground by getting affluent retirees to pay more for their Medicare health coverage.

President Barack Obama also floated the idea last spring. But his Democrats, who generally support measures that would close the gap between rich and poor, are cool to the idea.

Coming off a bruising standoff that shuttered the government for 16 days and brought the world's largest economy to the brink of default, congressional negotiators hope to reach an agreement that will avoid further disruptions next year.

Neither side is holding out much hope that they can resolve starkly different visions of how much the government should spend, how it should be spent, and who should foot the bill. Instead, they hope to agree on a spending level for the current fiscal year and perhaps find a way to offset the automatic "sequester" cuts that kicked in last March.

Writing in the Wall Street Journal on October 8 during the height of the shutdown, Ryan said the two sides could find common ground by making relatively modest changes to Medicare, which is projected to drive deficits in the coming decades as the population ages and medical costs climb.

"If Mr. Obama decides to talk, he'll find that we actually agree on some things," Ryan wrote.

At first blush, the plan could allow both sides to declare victory.

Republicans could say they have managed to lower the cost of a program that is projected to widen U.S. budget deficits in the decades to come. Democrats who want to narrow inequality could say that they are getting the wealthiest Americans to shoulder a greater share of the burden - if not through tax increases, then in higher fees.

The savings - $50 billion over 10 years, according to the White House - could also allow lawmakers to ramp up spending in other areas that have been squeezed by the automatic spending cuts known sequestration, from national security to scientific research.

Ryan's proposal is eminently achievable, said Joseph Antos, a health-policy expert with the conservative American Enterprise Institute.

"It's really not a reform at all - it's just taking money out of somebody's pocket, and it's the people (Democrats) would like to take money from," Antos said.

CONFLICTING LIBERAL IDEALS

So far, Democrats and liberal interest groups who have spent the past two years beating back more dramatic Republican proposals to overhaul Medicare are wary of the idea.

"Unlike our Republican colleagues, we don't think the first place to go (for budget savings) is beneficiaries," Maryland Representative Chris Van Hollen told the Reuters Washington Summit last week.

While higher payments for the wealthy would square with the progressive notion that the wealthy should cover a greater share of government's costs, it cuts against another core principle on the left - the idea that safety-net programs like Medicare and Social Security are most effective when they cover the broadest number of Americans.

Van Hollen, the top Democrat on the House Budget Committee, says Obama included the idea in his budget this spring as part of a package designed to appeal to both parties. Cherry-picking some ideas and ignoring others isn't an option, he said.

Van Hollen and others also worry that increased costs could prompt wealthy retirees to opt out of the program entirely, undermining its fiscal soundness and political popularity.

"One of the best things about having people in these programs is that they include their support for it as well," said David Certner, legislative policy director at the senior group, AARP. "If you're talking about higher income (retirees), they tend to be more influential people."

Wealthy Americans already pay more for Medicare coverage.

Couples with income up to $170,000 per year pay $105 per month for Medicare's Part B coverage, which includes hospital visits. Those who take home more than $428,000 a year pay more than three times that amount, and they pay $67 more for prescription-drug coverage. Wealthier Americans also pay more to support the program through payroll taxes.

Obama proposed raising these amounts in his budget plan this spring. His Affordable Care Act, popularly known as Obamacare, also requires couples who earn more than $250,000 per year to pay an additional 1 percent for doctor visits under Medicare's Part A program.

Obama may have gotten out ahead of his allies, who worry that he has given away too much to Republicans in prior budget deals.

Congressional Democrats and liberal interest groups say that other relatively modest entitlement curbs, such as the "chained CPI" measure that would slow the growth of Social Security, can only be on the table in the context of a broad budget deal that would include tax increases and spending hikes as well.

"Monkeying with Medicare and Social Security without a robust comprehensive plan to get this country back to work and an economic revival that's more comprehensive and systemic is a nonstarter for me," Mary Kay Henry, president of the Service Employees International Union, told the Reuters Washington Summit last week.

But a so-called "grand bargain" that would resolve Washington's budget wars has proven elusive over the past three years, and negotiators don't appear inclined to try this time around.

"If we focused on doing some big grand bargain, like those prior efforts ... then I don't think we'll be successful because we'll focus on our differences," Ryan told Reuters last week.

(Editing by Sandra Maler)

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