Obama Lays Out Deficit Plan

Proshare

 

 

April 13, 2011 by CAROL E. LEE and DAMIAN PALETTA
President Calls for 'Across-the-Board' Spending Cuts, Tax Increases to Tackle Debt
President Barack Obama, stepping more forcefully into the debate about taming the nation's long-term budget deficits, called for Congress to commit to "across-the-board" cuts in spending as well as tax increases if the nation's deficit isn't brought under control by 2014.
The proposal is meant to force lawmakers to quickly move to bring down spending and collect more revenue. But approval of his plan will likely prove difficult. Many Republicans are adamantly opposed to tax increases, and many Democrats resist the heavy spending cuts the White House is now offering.
Still, members of both parties have said the only way the White House can win the congressional support it needs in the coming weeks to raise the federal debt ceiling is if there is significant progress on deficit-reduction efforts. The administration's new plan could mark the start of that effort.
Mr. Obama is calling for House and Senate leaders to designate lawmakers to begin negotiations in early May with Vice President Joseph Biden "to agree on a legislative framework for comprehensive deficit reduction."
The U.S. is expected to hit the debt ceiling no later than May 16, and Treasury officials believe the country could default on its debt by July 8 if the ceiling is not raised.
Mr. Obama layed out his plan in a speech Wednesday at George Washington University, near the White House. After meeting with Mr. Obama for a morning preview of the speech, GOP leaders said they made it clear that they would concede no ground on including revenue increases as part of a budget deal.
"I think the president heard us loud and clear," said House Speaker John Boehner (R.,Ohio). "If we're going to resolve our differences and do something meaningful, raising taxes will not be part of it."
But Mr. Boehner said Republican leaders agreed with the urgency of passing a debt-limit increase. "Not meeting our obligations, our debt obligations, is a very bad idea," Mr. Boehner said.
Mr. Obama's plan includes a number of tax increases—particularly aimed at the wealthy—as well as cuts in spending on the military, Medicare and a range of other government programs.
The White House's aim is to reduce the growth of the deficit by $4 trillion over 12 years or less. Such reductions could essentially allow the government to collect enough taxes to cover all government spending, aside from interest on the debt.
Mr. Obama called for a major rewrite of the tax code to eliminate many tax breaks, a move that White House officials hope can account for $1 trillion of the $4 trillion in deficit reduction. The remaining $3 trillion in deficit savings would come from a combination of spending cuts and a reduction in the amount of interest the U.S. would have to pay on its debt.
The U.S. has $14.2 trillion in debt, and its deficit in 2011 is projected to be between $1.5 trillion and $1.65 trillion. Rising health-care costs, the aging baby-boom population and soaring interest costs on existing debt are projected to make the country's fiscal outlook more unstable. Members of both parties describe the current scenario as unsustainable.
While a number of government and outside groups have proposed various scenarios for tackling the debt in recent months, White House officials have stayed mostly on the sidelines. Mr. Obama's proposal Wednesday is his most substantive entry into the debate.
House Republicans last week offered their own plan, which would reduce the growth of the debt through a series of major spending cuts, including overhauls of the government health programs Medicare and Medicaid.
The initiative in Mr. Obama's speech that is likely to attract the most attention is the "debt failsafe" trigger he proposed. The across-the-board spending cuts and tax increases would kick in if, by 2014, budget projections show that the ratio of the country's debt-to-GDP hasn't stabilized and begun declining.
Social Security, Medicare and low-income programs would be protected from any triggers. Mr. Obama does not support raising the Medicare retirement age, a senior administration official said Wednesday.
A group of bipartisan lawmakers in the Senate, known as the "Gang of Six," are working on their own model of deficit-reduction triggers with a similar goal of reducing the growth of the deficit by $4 trillion over 10 years. It's possible the White House could try to align its plan with the Senate effort to win support from both parties.
In laying out his plan, Mr. Obama also presented what he said was a contrast with the Republican view of government, attempting to frame a debate that will likely dominate the 2012 elections.
The president gave his first lengthy rebuttal of the House Republican budget, crafted by Rep. Paul Ryan (R., Wis.), drawing a contrast between the two plans on changes to entitlement programs and taxes. He rejected Mr. Ryan's proposal to change Medicaid into a block grant program, saying that would adversely impact Americans most in need, and said the GOP plan for Medicare would shift costs onto seniors.
The budget House Republicans are scheduled to vote on this week does not include tax increases, and GOP leaders have said they will not support any package that does.
Speaking about the coming debate over raising the debt ceiling, Senate Minority Leader Mitch McConnell (R., Ky.) said senators of both parties opposed raising the ceiling "unless we do something significant about the debt."
Republicans have been deliberately unspecific about what kind of "significant" budget measures would be needed to clear the way for a debt limit increase. "That's what the discussions that will continue over the next two, three, four weeks will entail," Mr. Boehner said. "We're not that far along.''
Liberal Democrats, meanwhile, fear that Mr. Obama and other Democratic leaders are ceding ground too quickly on the basic GOP premise that the debt-limit increase should be linked to broader budget reforms or spending cuts.
A group of 46 House Democrats have sent a letter to House Democratic Leader Nancy Pelosi (D., Calif.) and other Democratic leaders urging them to demand a vote on an unencumbered increase in the debt limit.
Source: Wallstreet
READ MORE:
Related News
SCROLL TO TOP