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Obama debt plan to seek cuts in entitlements, tax hike on rich

WASHINGTON — President Barack Obama this week will lay out a new approach to reducing the nation's soaring debt, proposing reductions in spending on entitlements such as Medicare and Medicaid and renewing his call for tax increases on the rich.

In an effort to go on the offensive in the battle over government spending, Obama will look for cuts in "all corners of government," senior adviser David Plouffe said on several Sunday talk shows.

But contrasting the president's approach with what Republican leaders have put forward, Plouffe said Obama would use a "scalpel" and not a "machete" as he seeks to preserve funding for education and other areas he sees as crucial to the country's long-term economic success.

The Republican plan includes an overhaul of Medicare and trillions of dollars in tax cuts, while sparing defense spending. Obama, by contrast, envisions a comprehensive plan that would include tax increases for the richest taxpayers and military spending cuts as well as savings in Medicare and Medicaid, along with changes to Social Security that the administration says will ensure its solvency for decades — much like his fiscal commission recommended in December.

In his remarks, which come after Friday's bipartisan deal cutting domestic spending by about $38 billion for the remainder of this budget year, Obama will not offer details but will set deficit-cutting goals, White House officials said. The numbers, too, are still under discussion.

For Obama, the political stakes are high. He'll be trying to convince voters concerned about the growing debt that he is serious about cutting spending and Democratic allies that he will protect key government programs, all the while ensuring that spending is not cut so much that it impairs economic recovery.

In the speech scheduled for Wednesday, Obama will present his most extensive response to date in the debate over reining in federal spending. White House advisers have been discussing for months whether Obama should take the lead on deficit and debt reduction, concluding that his best approach for beating back Republican proposals for much deeper cuts would be to put forward his own vision.

The new approach is coming as Obama seeks a way to defuse a potentially damaging battle over how much the federal government can borrow. The debt limit is set to be reached in mid May, and the government will be able to meet all of its obligations only through early July at the latest. Many Republicans say they will not vote to increase the limit without significant cuts in spending.

While Obama has long acknowledged the importance of deficit reduction — there was a fiscal summit at the White House in the first months after he took office and he appointed a fiscal commission to address it last year — he has not embraced the most ambitious plans to roll back borrowing.

Obama did not support the full report of his fiscal commission, which offered a plan in December to cut borrowing by nearly $4 trillion by 2020. Nor did he offer significant deficit reduction in the budget blueprint he released in February. That document contained a five-year freeze on domestic discretionary spending and proposed a slew of tax increases originally offered in his previous budgets, but it also proposed nearly doubling the debt over the next 10 years.

House Republicans upped the pressure on the president last week when they introduced a plan to slash government spending by $6 trillion more than his plan over the next decade — largely by shrinking Medicare and Medicaid. The House may vote on a resolution supporting the budget this week — perhaps Wednesday, the same day as the president's speech.

In his appearances Sunday, Plouffe did not specify how much more the president wants to cut or whether his speech would propose a specific legislative agenda other than to say he will be looking for savings in both Medicare and Medicaid.

He said that though Obama does not think Social Security liabilities are a primary driver of the nation's deficit and debt, the president would be open to discussing that, too.

Republicans responded to Obama's plan to address deficit reduction with a mixture of skepticism and openness.

House Majority Leader Eric Cantor, R-Va., said on Fox News Sunday that "we had to bring this president kicking and screaming to the table to cut spending" in last week's 2011 budget negotiations. "It's really hard to believe what this White House and the president is saying."

But Rep. Paul Ryan, R-Wis., the architect of the House Republican plan to cut government spending, said that if the president "does choose to follow with serious proposals that address the drivers of our debt and the anchors holding back our economy, the door is open."

Plouffe held open the possibility of compromise, saying that "the parties are going to have to come together to find common ground" and that the Republicans "should be credited" for advancing a plan with specific ideas to trim the deficit and debt. But, he warned, the plan was a boon for millionaires and had draconian cuts that would never be acceptable.

In recent days, administration officials have expressed interest in the work of a bipartisan group of senators, known as the Gang of Six, who are meeting to develop a strategy for implementing the fiscal commission's proposals.

Information from the New York Times was used in this report.

Obama debt plan to seek cuts in entitlements, tax hike on rich 04/10/11 [Last modified: Monday, April 11, 2011 10:55am]

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