President Obama on Monday proposed a deficit reduction plan that calls for about $3 in new tax increases for every dollar in additional spending cuts as he seeks to put his imprint on the ongoing talks with Congress over reducing the government’s staggering debt.
In a plan his advisers described as his ideological vision rather than a compromise offer to Hill Republicans, Mr. Obama also threatened to veto any plan Congress sends him that makes changes to Medicare benefits without also raising taxes on the wealthy, which he argues is central to a “balanced” approach.
“This is not class warfare, it’s math,” Mr. Obama said in the White House’s Rose Garden as he laid out the outlines. “The money’s got to come from some place.”
The White House argues his plan totals $4.4 trillion in deficit reduction over the next 10 years, though $1.1 trillion of that comes from savings on war-fighting expenses that all sides agree were going to happen anyway as the U.S. missions in Iraq and Afghanistan shrink. Another $1.2 trillion has already been signed into law in last month’s debt deal and another $430 billion comes from lower interest payments because of the potential lower debt.
Yet another $450 billion comes from the tax increases the president proposed last week — and has already accounted for in new spending he wants on infrastructure, and other tax cuts.
That means in terms of actual new proposals, the president’s plan totals about $1.2 trillion, of which the lion’s share comes from his longstanding vow to raise taxes back to Clinton-era rates on the top income brackets. The rest is $580 billion in reductions to formula-driven entitlement programs such as Social Security, with much of the savings coming from reducing overpayments and finding waste.
Those $580 billion in newly proposed cuts are dwarfed nearly three-to-one by the $1.5 trillion in additional taxes the president wants to see going forward.
Mr. Obama said his plan calls for $2 in cuts for every $1 in tax increases, but he reaches that by re-counting cuts already in law or in the planning pipeline, and by factoring in lower debt service costs.
The White House said if Mr. Obama’s plans are enacted, debt held by the public would peak at above 75 percent of GDP in 2013 — a rise of 15 percentage points in just three years — but would then begin a slow decline.
Republicans, many of whom reject the idea of tax increases to solve the debt crisis, met the president’s call with scorn.
“Veto threats, a massive tax hike, phantom savings, and punting on entitlement reform is not a recipe for economic or job growth — or even meaningful deficit reduction,” said Senate Minority Leader Mitch McConnell, Kentucky Republican. “The good news is that the joint committee is taking this issue far more seriously than the White House.”
That joint committee, a bipartisan 12-member congressional panel formed by last month’s debt deal, is working to come up with at least $1.2 trillion in proposed deficit reductions by the end of the year.
Mr. Obama said his speech should give the panelists some thoughts about directions they may go. But he said whatever the plan, it cannot cut Medicare benefits without also including tax increases on the wealthy.
“I will not support any plan that puts all the burden for closing our deficit on ordinary Americans,” he said.
One area of broad agreement has emerged though: Both Mr. Obama and House Speaker John A. Boehner, Ohio Republican, support broad tax reform with a goal of lowering tax rates for both individuals and corporations.
But Mr. Obama said those rate reductions should be more than matched by increased revenue from ending special tax breaks already in the code.