Paul Ryan's Budget vs. President Obama's: Detailing the Differences

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Republican vice presidential candidate Paul Ryan and his family. (Getty Images)

When Republican presidential hopeful Mitt Romney ended months of speculation and rumor by choosing U.S. Rep Paul Ryan of Wisconsin to fill out the ticket, he got more than just a vice presidential candidate. He hitched his wagon to a Tea Party star, a fiscal-policy super-wonk and author of a budget proposal that Democrats hold up as an example of the economic evils the GOP would visit on America if they were in charge.

While many running mates fade into irrelevance and obscurity either during the election or soon thereafter, Paul Ryan may turn out to be a political horse of a different color.

He's no shrinking violet, for starters, and can masterfully and forcefully present his free-market, fiscal-policy beliefs. As such, he seems to be on the Romney ticket for a reason: to bring serious economic firepower to the GOP presidential ticket and, if Romney is elected president, possibly play a prominent role in shaping U.S. economic policy.

Here's a look at some of the ways Ryan's budget proposals contrast with President Obama's, using figures from The Wall Street Journal:

1. Individual income taxes: Ryan's plan would do away with the arcane tax code we've all come to know and loathe, replacing it with two simple rates: 10% and 25%. To compensate for the revenue that would cost, he would limit and eliminate tax credits and tax deductions. This, as he put it, would help clear out the "burdensome tangle of loopholes that distort economic activity."

Obama's plan calls for raising the top-tier individual tax rate from 36% to 39.6%, and for limiting deductions for the wealthy.

2. Corporate income taxes: Ryan's plan calls for corporate taxes to be lowered to 25%; they're now 35%, the highest in the world -- before the tax breaks begin. Obama's plan calls for lowering them to 28%, but eliminating the tax breaks and loopholes many businesses now take advantage of.

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Ryan's plan would also make it easier for U.S. multinationals to reduce their tax liability on foreign profits. Currently, many corporations, like Microsoft (MSFT) and Apple (AAPL), keep money that's made overseas in foreign bank accounts in order to defer paying U.S. tax. Ryan has previously proposed replacing the corporate income tax entirely with an 8.5% business consumption tax, but in more recent budget proposals, he took out that provision.

3. Medicare: Medicare is the government-run health-care system for those age 65 and over. Ryan's plan calls for the gradual raising of the eligibility age to 67 and giving those younger than 55 the chance to opt out of Medicare in exchange for participation in a federally supervised private voucher system.

Obama would keep the current system essentially unchanged, but raise premiums or copays for the wealthy. Ryan's plan calls for no changes for anyone currently over the age of 55.

4. Medicaid: Medicaid is government-run health care for the poor and other groups. Ryan's plan calls for it to be turned into a block-grant program, essentially letting each state administer the federal dollars as they see fit, which Ryan argues will allow for substantial savings in appropriations for the program.

Obama's plan would keep Medicaid pretty much as is, as his hoped-for expansion was struck down in the recent Supreme Court ruling on the Patient Protection and Affordable Care Act, aka Obamacare. The ruling gives states flexibility in how much coverage they offer their residents, and whom they cover.

5. Defense spending: Ryan's plan calls for reversing the president's planned defense cuts and would appropriate $554 billion for defense in fiscal 2013. Ryan, like most Republicans, is hawkish on defense spending.

6. Deficit: The budget deficit -- the difference between what the federal government currently spends and what it raises in tax revenue -- currently stands at about 7.8% of gross domestic product, or GDP.

Ryan's plan calls for the federal deficit to be reduced to 4% of GDP by 2014 and 0.9% by 2017. Obama's plan is slightly less aggressive, and calls for a reduction to 3.9% of GDP by 2014 and 3% by 2017.

Picking Ryan as a running mate is a bold move on Romney's part, so long as he doesn't do what so many other presidential candidates have done and immediately shove his running mate to the sidelines, or completely ignore him if they win the election. Let's hope his choice will help elevate the presidential debate from a mud-slinging match to a real debate on issues of import to voters and the country.



John Grgurich is a regular contributor to The Motley Fool. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services have recommended buying shares of Apple and creating a bull call spread position on Microsoft and Apple.

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