Calling for a reduction in federal deficits of $4 trillion over 12 years, U.S. President Barack Obama outlined his position in the looming Capitol Hill budget debate in a speech delivered yesterday (Wednesday) at George Washington University.
Although thin on specifics, some key elements of President Obama's deficit plan include eliminating the President Bush-era tax cuts for people making over $250,000 a year, reducing defense spending by $400 billion, and trimming Medicare and Medicaid costs by $480 billion by building on provisions in last year's healthcare reform package.
The president projects $1 trillion in savings from revenue increases, $1 trillion in savings on interest payments and $2 trillion from spending cuts.
Obama's plan draws upon some of the proposals put forth by his bipartisan deficit commission, which submitted its recommendations last fall – though the president's proposals don't go quite as far.
"The plan itself contains less in savings than theWhite House Fiscal Commissionrecommended, which we look at as the minimum of what is needed to reassure credit markets and get our debt levels back on track," the Committee for a Responsible Federal Budgetsaid in a statement.
However, the plan does include a trigger for automatic spending cuts and reductions in "tax expenditures" – primarily taxpayer deductions for mortgage interest and charitable donations – if the deficit is not on track to reach 3% of U.S. gross domestic product (GDP) by 2014.
Republican leaders are believed to support this idea.
But the president made very clear his objections to the deficit reduction plan put forth last week by Republican Rep. Paul Ryan, R-WI. Ryan's plan would reduce the top tax rate for individuals and corporations from 35% to 25%, change Medicare to a subsidy program that allows retirees to shop for coverage among private insurers, and turn Medicaid over to the states, which would receive block grants from the federal government.
Ryan's proposal would trim the deficit by $4.4 trillion over 10 years.
"There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires," the president said. "There's nothing courageous about asking for sacrifice from those who can least afford it and don't have any clout on Capitol Hill."
Ryan, not surprisingly, was disappointed in what President Obama had to say.
"This is very sad and very unfortunate,"' Ryan told The Wall Street Journal. "Rather than building bridges, he's poisoning wells."
Other Republican lawmakers also responded icily to Obama's ideas, particularly his pledge to let the Bush tax cuts for the wealthy expire.
"If we're going to resolve our differences and do something meaningful, raising taxes will not be part of that," House Speaker John Boehner, R-OH, told The Journal.
Not all Democrats were enthusiastic, either, perhaps still smarting over the compromise the president made last week to avert a government shutdown.
"This administration has a tendency of getting people's hopes that they'll go in one direction, then reversing field. So we'll have to see," Rep. Dennis Kucinich, D-OH, told Reuters.
Hopefully, now that both sides have presented their plans the debate can begin in earnest.
"[The president] actually did what he wanted to do, which is to reframe this debate and give himself both a credible plan that won't have the left going ballistic but also gave him the running room to criticize the Ryan plan," Norman Ornstein, a scholar at the American Enterprise Institute, told Reuters. "The Republicans have captured the narrative for the last month or two months. Now he's got a plan that's credible enough to really begin to talk about two different visions."
News and Related Story Links:
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Obama's Debt Plan Sets Stage for Long Battle Over Spending - Reuters:
Factbox: Lawmakers battle over deficit plans - Reuters:
Obama sets deficit target, rips Republican plan - CNNMoney:
Deficit hawks: Not too bad, Mr. President - Web site:
National Commission on Fiscal Responsibility and Reform - Money Morning:
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