05/25/2011 12:59 pm ET | Updated Jul 25, 2011

Paul Ryan, Republicans On Defense Over Medicare Plan Following New York Special Election

WASHINGTON (Reuters) - Republicans on Wednesday rushed to defend their drive to cut government health spending amid signs it may spur a backlash from voters and weaken their hand in talks to tame the national debt.

As Democrats celebrated a surprise victory in a contest to fill an open congressional seat in New York, Republican Representative Paul Ryan said they had mischaracterized his plan to scale back the Medicare health program for future retirees in order to win votes.

"If you are going to scare seniors into thinking that their current benefits are being affected, that's going to have an effect and that's exactly what took place here. So, yes it's demagoguery, it's scaring seniors," Ryan said on MSNBC.

Ryan's Medicare plan has emerged as a political hot potato since it passed the Republican-controlled House of Representatives in April as the centerpiece of a budget that would slash government spending by $6 trillion over the coming 10 years.

As the 2012 election season heats up, the divide over Medicare could complicate efforts to reach a deal that would stabilize the U.S. debt and give lawmakers political cover to back an increase in the $14.3 trillion debt limit before an August 2 deadline.

Ryan argued that his plan to privatize Medicare for those now under 55 would tame galloping health care costs and ensure that the popular health program does not run out of money in the decades to come.

Polls show his plan is unpopular with the public, and Democrats see a chance to seize political momentum after a year of setbacks.

The Democratic victory in a Republican-leaning district in New York "sent an unmistakable sign that the American people will not stand for the Republicans' reckless and extreme agenda to end Medicare," House Democratic leader Nancy Pelosi wrote in a fund-raising message on Tuesday.

Democrats in the Senate plan to bring up the Ryan plan for a vote, likely on Thursday, to force their Republican colleagues to take a stand on the issue. Several Republicans have already said they will vote against it.

Despite the heightened political rhetoric, negotiators say their deficit-reduction talks are yielding fruit. Vice President Joe Biden and Representative Eric Cantor, the No. 2 Republican in the House, said they could agree on more than $1 trillion in savings with further cuts in coming years.

Negotiators have not said where those cuts would fall, but both sides have backed a freeze on annual spending for several years, as well as cuts to farm subsidies and student loans.

The Committee for a Responsible Budget, a nonpartisan policy group, estimates nearly $2 trillion in overlaps between the Ryan budget and proposals backed by President Barack Obama.

But negotiators have yet to bridge a stark divide over taxes. Republicans want to tame the debt through spending cuts alone, while Democrats say tax increases are needed as well.

With the politics of Medicare playing in Democrats' favor at the moment, they will be reluctant to consider cuts to benefit programs until Republicans consider tax increases, according to a Democratic aide.

The Treasury Department warns that Congress will have to raise the debt ceiling by August 2 to avoid a default that would push the country back into recession and roil world markets.

Treasury does not have a contingency plan in place if Congress does not act by then, Treasury Secretary Timothy Geithner said.

"Congress will do what it has always done, which is to pass the debt limit. So, our plan is for Congress to pass the debt limit. Our fallback plan is for Congress to pass the debt limit, and our fallback to the fallback plan is for Congress to pass the debt limit," Geithner said at a breakfast event.

(Additional reporting by Alistair Bell and Doug Palmer; Editing by Vicki Allen)

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