Cliff Hanger

After 88 days as Mitt Romney’s vice-presidential candidate, Paul Ryan is back in his natural habitat: the offices of the House Budget Committee on Capitol Hill. But things are not the same. Instead of poring over spreadsheets and growth projections this early-December evening, he’s practicing the opening joke of his keynote speech to the Jack Kemp Foundation annual dinner, which will take place later that night. Florida Republican Senator Marco Rubio will receive an award for leadership at the event, an award Ryan won when it was first given last year. Because both men are potential presidential candidates in 2016, the dinner is being touted as the start of the next GOP primary campaign. Projecting his voice across the small office, Ryan says to an imaginary Rubio, “You’re joining an elite group of past recipients–so far, it’s just me and you. I’ll see you at the reunion dinner–table for two. Know any good diners in Iowa or New Hampshire?”

If Ryan’s one-month break from presidential politics seems brief, it’s not entirely his fault. GOP bigs and moneymen are looking to him as a kind of young, Catholic Moses who can lead the party out of the wilderness of its 2012 defeat by standing up for conservative values while appealing, at least in theory, to the poor, minorities and women. But Ryan is facing an early test as he tries to reboot: how to find a politically safe route down the fiscal cliff. If a deal takes shape to avoid tax hikes and spending cuts before the end of this month, Ryan will face a hard choice: side with a compromise or reject a deal on principle. Because of his budget expertise and his reputation as a fiscal hawk, one adviser says, Ryan carries at least 65 votes with him whichever way he goes, making him possibly the most powerful man in the GOP after House Speaker John Boehner.

Both paths present risks for Ryan–and the party. If he accepts the tax hikes Democrats demand, he could alienate his longtime fans on the resolutely antitax right. But if he stands firm and takes the party over the fiscal cliff, he could not only damage his qualifications as a problem solver but also start a war within the GOP. In an effort to keep him on board for a deal, Boehner tapped Ryan to be part of the team that is planning the strategy for talks with the White House.

Which way will Ryan go? “I believe, in this budget fight, that you can get to common ground without compromising principles,” he says after his speech practice. But moments later he declares that common ground is possible only “so long as the [tax] rates are not going up.” The White House calls higher tax rates on the wealthy a precondition for a deal, not least because the President campaigned and won on that very issue. Even some conservatives have said Republicans should accept them as inevitable.

If Ryan sounds as if he’s having trouble reconciling himself to his new hybrid role as budget chief and party leader, he is. Rather than moderating his positions after November’s election, he has returned to an earlier, hard-line version of his controversial fiscal plan, including turning the guaranteed benefits of programs like Medicare and Medicaid into limited government checks, and even revisiting big changes to Social Security. That, he believes, is the only way to end the dependency responsible for entrenched poverty in America and save the social safety net from bankruptcy. Election defeat just means those reforms have to be made one step at a time, he says. The fiscal-cliff talks are the first test of whether that post-2012 incremental strategy can fly. So far, it’s not going well.

A Cliff of His Own Making

Ryan didn’t have to put himself in this spot. The last advice his campaign aides gave him after the election was to leave Congress, write a book and gear up for a run at the White House in 2016. But at 11 a.m. on Nov. 7, he got a call from Boehner. “He said, ‘We need you back in the House. We need you to stay as budget chair. We want your help,'” Ryan recalls. It didn’t take long for Ryan to make up his mind. Goodbye, private jet, Secret Service detail and adoring crowds. Hello, stuffy committee rooms, quarrelsome colleagues and lousy cafeteria food.

The first order of business has been to distance himself from the ill-fated Romney-Ryan campaign. To do so, he is trying to show that conservatives care about poor people too. Ryan has only warm things to say about Romney, but he says he wanted more events during the campaign to showcase his ideas to help the poor. Romney’s aides thought it would complicate the message of fiscal discipline to talk about strengthening the social safety net, campaign staffers say. Ryan did eventually appear at an event at a Detroit charter school, and he gave a speech on poverty at Cleveland State University.

Capitol Hill presents Ryan with a different kind of challenge. It’s where big ideas like his are brought down to earth–and sometimes buried alive. Particularly painful for Ryan now is that he helped dig the hole. In July 2011, Ryan locked his veteran Budget Committee staff director, Austin Smythe, in a room for 48 hours with his aides and had them rewrite the 1985 Budget Control Act that first created the across-the-board cuts known as the sequester. That modified bill became the $1.2 trillion end-of-the-year spending-cut threat that is causing the GOP so much grief as the nation heads toward the fiscal cliff. “We basically turned the sequester back on,” Ryan now says ruefully.

Every morning Ryan meets with Boehner, the Speaker’s hawkish deputy Eric Cantor and Dave Camp, head of the tax-writing Ways and Means Committee, and he says so far there have been no disagreements about how to engage the White House. On Dec. 3 they all agreed to propose a compromise that would raise $800 billion in revenue over the next 10 years by cutting loopholes and deductions. It would cut $1.4 trillion in spending, half of it in health programs, on top of the $1 trillion in spending cuts already passed in 2011.

How does that square with Ryan’s stated mission of helping the poor, the main beneficiaries of the programs likely to be cut? Ryan argues that those programs hurt the poor by cultivating a dependency on handouts that saps their personal initiative. “Government needs to have a safety net,” he says, “to pick people up who slip through the cracks. But government also has to make sure that it’s not creating a social-assistance state, a welfare state, a permanent underclass.” Reducing dependency on the state is a mission Ryan says is born of his Catholic faith, which he says encourages a balance between government aid and individual responsibility. That is a message some think he can sell to a broader audience than was able to hear it this year. “Ryan is a younger Catholic,” says Leonard Leo, a director of the Catholic Association, “who knows the language, the principles and how to communicate to that demographic.”

Some in the Catholic Church see it differently. The U.S. Conference of Catholic Bishops has written letters in response to Ryan’s budget urging House members to protect programs providing food, shelter, health care and education. “The moral measure of this budget debate is not which party wins or which powerful interests prevail, but rather how those who are jobless, hungry, homeless or poor are treated,” it said. Liberals say Ryan is offering nothing new to the poor beyond image-softening speeches.

Ryan’s more immediate problem is the reality of fiscal-cliff politics. The country wants the debt and deficit reduced, but powerful lobbies like AARP, not to mention the millions of middle-class voters they purport to represent, firmly oppose privatization of Social Security, Medicare and other New Deal and Great Society programs. Pushing those reforms while insisting that tax rates on the rich must stay at historic lows is not a negotiating position that intimidates the White House. Big budget cuts come rarely in Washington, and Democrats say that whatever the outcome of this round, the debt issue will soon lose momentum and Ryan will return to his role as a revolutionary who can’t sell a radical alteration of beloved middle-class programs. Ryan says the White House took less than an hour to reject the House Republicans’ latest proposal.

Ryan’s uncertainty about whether to deal or fight is a reminder that he is still, after all, a seventh-term Congressman from Janesville, Wis., who has yet to step into the role of the party’s putative leader. Driving down Capitol Hill to the Kemp Foundation dinner, Ryan says he didn’t think twice about jumping back into the budget battle as part of Boehner’s team. How long will he stick with it? Having just won re-election, he says he has “every intention” to run for Congress again in 2014. But advisers admit he is eyeing a run at the White House in 2016, something other Republicans say is virtually a given. “I’ve decided not to decide” whether to run for President, Ryan says. “You can’t hold on forever doing that, but I’ve decided to focus on my family and my job.”

In his head-to-head speech with Rubio, Ryan looked well past the fiscal-cliff talks, laying out his message of outreach to the poor. “We have a compassionate vision based on ideas that work,” he said. “But sometimes we don’t do a good job of laying out that vision. We need to do better.” First, however, the GOP and Ryan need to decide where they stand on the fiscal cliff.