Following on the heels of the protracted budget extension debate and as a precursor to the fight for raising the $14.3 trillion national debt ceiling, President Obama has revealed his high level plan to tackle America’s growing national debt challenge. His debt plan is also a response to the Republican’s 2012 budget plans (announced by Paul Ryan, R-Wisconsin), that would overhaul the Medicare and Medicaid government health care programs for the elderly while reforming the tax code to lower rates and eliminate loopholes.
Obama’s 2011 Deficit Reduction plan is based on 4 key items aimed at reducing the deficits by $4 trillion over 12 years (vs Republican proposed cuts of $5.8 trillion over 10 years), with $3 trillion coming from spending reductions and $1 trillion from tax reform. In particular:
- Cut domestic discretionary spending by reducing spending on various federally funded programs.
- Reduce the defense budget by $400 billion through eliminating obsolete programs (like a number of fighter jet development programs)
- Tax Cuts: Administration officials confirmed that the president will renew his call to end the Bush-era tax cuts for families making over $250,000 a year, a proposal that Republicans fiercely opposed. “The most fortunate among us can afford to pay a little more. I [and Warren Buffet] don’t need another tax cut [at the expense of medicare for seniors]” Obama said during his press conference. He also pushed for corporate tax reform by proposing to cut the corporate tax rate, while eliminating other loopholes.
- Medicare: Control entitlement spending on such programs as Medicare and Medicaid that provide health care for 30% of Americans. Obama is aiming to cut more than $300 billion in savings from Medicare and Medicaid programs over the next decade. Unlike the Republicans proposal which makes much larger cuts – $771 billion from Medicaid over 10 years – Obama does not want to push seniors to purchase government-subsidized insurance.
The President positioned his debt reduction plan as a more “compassionate” alternative to one introduced last week by Ryan. He applauded Republicans for putting a plan on the table to address entitlements, but the praise stopped there.
“The way this plan achieves those goals would lead to a fundamentally different America than the one we’ve known certainly in my lifetime,” Obama said, calling the GOP plan “deeply pessimistic.” He suggested Republicans were giving up on basic functions of government.
“It’s a vision that says if our roads crumble and our bridges collapse, we can’t afford to fix them. If there are bright young Americans who have the drive and the will but not the money to go to college, we can’t afford to send them,” Obama said of the Republican plan. “It’s a vision that says America can’t afford to keep the promise we’ve made to care for our seniors.” (source: foxnews)
Obama’s deficit reduction proposal also calls for a “failsafe” trigger, which would apply across-the-board spending cuts if the national debt, as a percentage of GDP, is not on the decline by 2014. This would force Congress to act.
The President has appointed vice-president Joe Biden to lead a congressional effort to put together a bi-partisian plan to tackle the national debt. He wants to see concrete proposals by the end of June. I will provide more updates on these specifics and you can subscribe (free) via Email or RSS to get notified of the latest news.