Obama’s plan to slash $3 trillion from deficit
President Obama will announce a plan to slash more than $3 trillion from the nation’s deficit over the next decade by winding down the wars in Afghanistan and Iraq, raising taxes on wealthier Americans, closing tax loopholes and cutting the cost of Medicare and other government health programs, senior White House officials said.
Obama also will warn congressional Republicans during a Rose Garden speech Monday that if they pass legislation that cuts programs for poor and elderly Americans without asking profitable corporations and others to sacrifice, he will veto the measure.
“In his remarks, the president will make clear he’s not going to support any plan that asks everything of some Americans and nothing of others,” said a senior White House aide, who spoke on the condition of anonymity so he could describe the plan to reporters Sunday.
Obama will present his recommendations to a congressional “super committee” considering a deficit reduction package of its own. The 12-member committee, an outgrowth of the debt ceiling negotiations over the summer, is charged with hammering out a bill that will go to Congress for an up-or-down vote this year. The committee must complete its work by Nov. 23.
Obama hopes his proposal will form the basis of a deficit reduction package that Congress ultimately approves. Failing that, it would give him an issue to use in the 2012 campaign.
His plan for lopping $3 trillion from the deficit is on top of the approximately $1 trillion in spending cuts that he signed into law in August, after reaching a deal with Republican congressional leaders to lift the nation’s debt ceiling and avert a potential default. Obama pledged to unveil the plan this month, when he called for a $447-billion jobs bill as he addressed a joint session of Congress.
Breaking down the numbers Sunday night, White House advisors said they would reach the deficit target by:
• Raising $1.5 trillion by a tax code overhaul. About $800 billion of that would come from the expiration of the George W. Bush-era tax cuts for upper-income Americans — families who earn more than $250,000 a year and individuals who earn more than $200,000. The other $700 billion would consist of revenue increases achieved by closing loopholes, limiting deductions for high earners and ending tax breaks for oil and gas companies. As part of any changes to tax law, the White House wants lawmakers to follow a principle it calls the “Buffett rule”: No one earning more than $1 million a year should be taxed at a lower rate than middle-income households.
• Saving $1 trillion by wrapping up the Iraq and Afghan wars. Obama’s aim is to steadily withdraw U.S. forces from Afghanistan and transfer combat responsibilities to the Afghans by 2014.
• Cutting $580 billion from various federal programs, including the major healthcare entitlement programs Medicare and Medicaid.
The Buffett rule — named for Obama supporter Warren Buffett, the billionaire investor who complains that his effective tax rate is less than the rate his secretary pays — drew heated comments on the Sunday talk shows, along with GOP vows to oppose it on grounds that it would hurt economic growth.
“Class warfare … may make for really good politics, but it makes for rotten economics,” House Budget Committee Chairman Paul D. Ryan (R-Wis.) said on “Fox News Sunday.” “We don’t need a system that seeks to prey on people’s fear, envy and anxiety. We need a system that creates jobs and innovation and removes these barriers for entrepreneurs to go out and rehire people.”
Sen. Lindsey Graham (R-S.C.) called the proposal a political move that would do little to reduce the deficit.
“The truth of the matter is, if you raise taxes on billionaires and millionaires it adds a de minimis amount of money to the Treasury to pay off the debt,” Graham said on CNN’s “State of the Union.” He too accused Obama of waging class warfare.
But Sen. Richard J. Durbin (D-Ill.), the Senate’s second-ranking Democrat, said Republicans risked the public’s wrath if they opposed raising taxes on people like Buffett.
“I wonder if [House Speaker] John Boehner knows what it sounds like when he continues to say the position of the Republican Party in America is that you can’t impose one more penny in taxes on the wealthiest people,” Durbin told CNN. “I wonder if he understands how that sounds in Ohio to working families who are struggling paycheck to paycheck.”
Another lightning rod for criticism in Obama’s plan is the provision on Medicare and Medicaid. Administration officials said it included $240 billion in savings from Medicare and $72 billion from Medicaid and other health programs. Although the proposal does not call for immediate benefit cuts, officials indicated that after 2017, some Medicare beneficiaries would be asked to pay more.
Obama has previously shown interest in means-testing — asking high-income seniors to pay more for their medical care.
The White House plan rules out lifting the Medicare eligibility age from 65 to 67, as some Republicans have suggested. Other savings would come from what one senior White House official called “overpayments,” signaling that the administration wants to ask medical providers and drug makers to help reduce costs.
Changes in Medicare benefits carry enormous implications for the 2012 elections. Over the last week, congressional Democrats have privately urged the White House to leave Medicare benefits intact.
Curbing Medicare could undercut an argument Democratic candidates hope to use in next year’s election. Democratic strategists believe the party’s candidates can gain traction by highlighting Republican efforts to convert Medicare into a voucher program in which the government would give seniors a fixed amount to buy insurance, and seniors would be responsible for the costs it didn’t cover.
Were Obama to come out in favor of benefit reductions, the argument might lose some of its potency.
Obama appears to have rejected requests from fellow Democrats to rule out cuts in Medicare benefits. But aides said he intended to draw a firm line: No such cuts without accompanying revenue increases from the well-to-do.
“There are Medicare beneficiary adjustments in this plan,” a senior White House aide said. “But what the president is saying is he’s not doing those if Republicans are unwilling to ask the wealthiest Americans and biggest corporations to pay their fair share.”
House Democratic leader Nancy Pelosi of San Francisco praised Obama’s call for overhauling the tax code, but she underlined her support for entitlements.
In a statement Sunday night, she said she was “encouraged by the president’s focus on the need for tax reform that calls on all Americans to contribute their fair share” but said Democrats “remain committed to strengthening Medicare and Medicaid.”
Pelosi called for “a balanced approach that addresses the No. 1 concern of Americans — jobs.”
During the recession and two wars, the nation’s total debt has soared.
When George W. Bush took office in 2001, the debt was less than $6 trillion. By the time Obama took office, it was $10.6 trillion, and this year it passed $14 trillion.
If Congress adopted Obama’s plan, the debt would start shrinking, White House aides said.
“This would bring the country to a place where by the middle of this decade, current spending is no longer adding to our debt — that debt will be falling as a share of the economy,” a White House aide said. “And deficits on a year-by-year basis will be a sustainable level so that we maintain that.”
Noam N. Levey and Jim Puzzanghera in the Washington bureau contributed to this report.