The Paw Print
President Barack Obama revealed his long-anticipated deficit reduction plan on Wednesday, calling for reductions in spending and tax increases that the White House estimates would decrease federal deficits by roughly $4 trillion over the next 12 years.
Obama’s plan includes a repeal of the Bush tax cuts for families making more than $250,000 annually, and without radically overhauling programs such as Medicare and Medicaid.
Additionally, the president called for the creation of a “debt fail-safe” trigger that would impose spending cuts and tax changes if annual federal deficits were to exceed 2.8 percent of the nation’s gross domestic product.
By building on or making adjustments to the health care reform bill that was passed last year, the president claimed that $480 billion would be saved by 2023. For example, he proposed limiting the growth of Medicare costs starting in 2018.
“Doing nothing on the deficit is just not an option,” Obama said in the speech at George Washington University. “Our debt has grown so large that we could do real damage to the economy if we don’t begin a process now to get our fiscal house in order.”
Obama’s plan looks to create a political compromise between conservatives, who are pushing for deficit reduction based only in spending cuts and expected economic growth, and liberals, who are generally seeking higher corporate and personal taxes.
“Any serious plan to tackle our deficit will require us to put everything on the table, and take on excess spending wherever it exists in the budget. A serious plan doesn’t require us to balance our budget overnight,” said Obama. “…but it does require tough decisions and support from leaders in both parties.”
Simultaneously, Obama criticized last week’s House Republican 2012 budget proposal, saying that it would “lead to a fundamentally different America than the one we’ve known throughout most of our history.
“These are the kind of cuts that tell us we can’t afford the America that I believe in and that I think you believe in,” Obama said. “I believe it paints a vision of our future that’s deeply pessimistic.”
The administration’s plan stands in sharp contrast to the plan presented by House Budget Committee Chairman Paul Ryan, R-Wisconsin, that calls for cutting the debt by $4.4 trillion of the next decade while overhauling Medicare and Medicaid and cutting the top personal and corporate tax rate to 25%.
Under Ryan’s plan, the government would stop paying Medicare bills for senior citizens in 2022. Instead, recipients would choose a federally-subsidized plan from a list of private health insurance providers.
Medicaid would be transformed into a series of grants to the states, because Republicans believe that state government would spend the money more efficiently and would benefit from the increased flexibility.
“I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry, with a shrinking benefit to pay for rising costs,” Obama said. “I will not tell families with children who have disabilities that they have to fend for themselves. We will reform these programs, but we will not abandon the fundamental commitment this country has kept for generations.”
Pentagon spending would fall by about $400 billion by 2023 under the Obama plan, while federal pensions, agricultural subsidies, and other domestic program would also face some cuts, according to the White House.
Overall, the 12 percent of the federal budget aside from defense spending, debt payments, entitlements such as Medicare, Medicaid, and Social Security would be cut by a total of $770 billion over the next 12 years.
Obama’s plan had no specific proposal for Social Security. A statement released by the White House noted that the president does not believe that the program “is in crisis (or) is a driver of our near-term deficit problems.”
However, Obama admitted that Social Security does face “long-term challenges that are better addressed sooner than later,” and Obama stated that he would consider changes to the program that would help it maintain its solvency in the future.
GOP leaders, displeased with Obama’s plan in general, specifically blasted the president’s call for higher taxes on those making more than $250,000.
“We can’t tax the very people we expect to reinvest in our economy and create jobs,” House Speaker John Boehner, R-Ohio, told reporters. “Washington has a spending problem, not a revenue problem.”
At the same time, Obama said that Democrats also must recognize that significant changes in America’s fiscal structure and practices are necessary.
“To those in my own party, I say that if we truly believe in a progressive vision of our society, we have the obligation to prove that we can afford our commitments,” the president said. “If we believe that government can make a difference in people’s lives, we have the obligation to prove that it works.”
Obama said Vice President Joe Biden would begin meeting with an equal number of legislators from both parties in early May to forge an agreement on a deficit reduction plan by the end of June.