US & Canada

US House passes $6.2tn spending cut plan

House Budget Committee Chairman Paul Ryan
Image caption House Budget Committee chairman Paul Ryan introduced the budget proposal

The US House of Representatives has passed a 2012 budget plan which aims to cut $6.2 trillion (£3.8tn) in spending by the government over the next decade.

The plan, introduced by Republican Paul Ryan, would cut healthcare and social programmes for the poor and require the elderly to pay more for their healthcare than they do currently.

The bill passed the Republican-controlled House in a 235-193 vote.

The proposal is not expected to make it through the Democratic-led Senate.

The bill, which covers the fiscal year that starts on 1 October, would transform Medicare - a programme in which the US government pays medical bills for the elderly - into a voucher system that subsidises purchases of private insurance plans.

It would also lower taxes for the wealthy, a move fiscal conservatives say will boost US economic growth.

No Democrats in the House backed the bill on Friday; four Republicans also rejected the proposal.

On Thursday, the US Congress passed a budget bill that would cut $38.5bn (£23.6bn) in government spending over the rest of the current fiscal year, to 30 September.

President Barack Obama, who in a policy speech on Wednesday called for raising taxes on the wealthy as well as changes to social programmes, signed the bill into law on Friday.

Blocking the plan

Mr Obama has vowed to block major elements of Mr Ryan's $6.2tn spending bill, notably those dealing with healthcare costs for the elderly.

But the president said on Friday that a compromise with Republicans on spending cuts would be needed to get the necessary support in Congress to raise the US debt ceiling and avoid an economic crisis.

"I think he's absolutely right that it's not going to happen without some spending cuts," Mr Obama told the Associated Press news agency, referring to cuts backed by House Speaker John Boehner.

He added that the world could plunge into a new recession if the ceiling on money the US can borrow is not raised in the next few weeks, before the current debt limit of $14.3tn is reached.

Mr Obama urged immediate action, saying that the US should not get close to a deadline that would destabilise financial markets.

He said he was confident Congress would ultimately raise the limit, saying the latest lawmakers could possibly act is by early July.

But fiscal conservatives have said they will not vote to increase the debt cap without a significant move toward a long-term deficit reduction.

More on this story