The Wall Street Journal
By: Carol E. Lee & Damian Paletta
April 14, 2011
President Rips GOP Fiscal Plan, Says Mix of Taxes, Cuts Needed; Foes Dismayed.
President Barack Obama asked Congress to adopt a mix of revenue increases and spending cuts to tame the nation's long-term budget deficits, in a combative speech that portrayed Republicans as backing "tax cuts for millionaires and billionaires" while demanding sacrifice from the nation's seniors, poor and the middle class.
The speech, which appeared to leave Republican leaders furious, was Mr. Obama's most substantive step into the debate over the nation's fiscal future, an issue that both parties say is a matter of national security and which is likely to dominate the 2012 elections. Mr. Obama called for Congress to cut deficits by $4 trillion over 12 years and commit to automatic, across-the-board spending cuts and tax increases if an initial target is not met by 2014.
While they engaged in sharp public exchanges on taxes, Medicare and other programs, however, top Democrats and Republicans also agreed to work behind the scenes on a short-term fiscal priority: putting together a general deficit-reduction framework that would clear the way for raising the limit on how much the federal government can borrow.
But publicly, the president's tone--he said there was "nothing serious'' about the leading GOP plan--drew wide rebuke on the right. "This is very sad and very unfortunate,'' said Rep. Paul Ryan (R., Wis.), the leading House GOP voice on deficit-cutting. "Rather than building bridges, he's poisoning wells.''
Many conservative lawmakers say they will refuse to vote for a higher debt ceiling, which now stands at $14.294 trillion, unless the measure is accompanied by a deficit-reduction plan.
At a White House meeting before Mr. Obama's speech, top House and Senate leaders agreed with senior administration officials to begin working on a bipartisan deficit-reduction plan that could ease the path for a debt-ceiling vote.
That plan could include some of the elements that Mr. Obama laid out in his speech Wednesday, delivered at George Washington University. According to Democrats, officials discussed a framework for deficit reduction that would aim to cut $4 trillion in deficits and trigger automatic tax and spending-cut provisions if the deficit is not on a path to reaching 3% of gross domestic product by 2014, down from nearly 10% now.
Leaders at the White House meeting, who included House Speaker John Boehner (R., Ohio) and Senate Minority Leader Mitch McConnell (R., Ky.), agreed to work with Vice President Joe Biden on the matter but didn't make other commitments, GOP aides said.
The officials are aiming to reach agreement on a plan by June. Treasury officials say the federal government will reach its debt ceiling by May 16 but that accounting maneuvers could be employed to delay a default on U.S. debt until July 8.
Besides chiding Republicans, Mr. Obama used his speech to argue to fellow Democrats that austerity measures were needed and to assure them that he would preserve the party's commitment to health and retirement programs.
To meet our fiscal challenge, we will need to make reforms,'' Mr. Obama said. "We will all need to make sacrifices. But we do not have to sacrifice the America we believe in."
Republicans reaffirmed their opposition to tax increases. Their exchanges raised the question of whether the two sides had hardened their positions, making political deals impossible.
"If we're going to resolve our differences and do something meaningful, raising taxes will not be part of that," Mr. Boehner said.
Mr. Obama's plan includes a number of tax increases. He would eliminate the Bush-era tax cuts for people making more than $250,000 a year and eliminate a number of tax breaks, which he didn't detail. His plan would cut discretionary spending, including on the Pentagon, as well as aim to cut Medicare costs by building on changes to the health care system begun under the Democrats' new health care law.
The White House said revenue increases would account for $1 trillion of the $4 trillion in deficit reduction over 12 years. Of the rest, $2 trillion would come from spending cuts and $1 trillion from savings in interest because the U.S. would be borrowing less.
The projected savings from interest is markedly higher than the $673 billion in interest savings the White House's deficit-reduction panel projected for its 10-year, $3.9 trillion plan. However, projecting how much money the government would save in interest on the debt is difficult to do with accuracy, and the White House projections could leave the administration open to challenge.
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.Mr. Obama said he could accomplish these goals while "investing'' in medical research, road construction, education and other Democratic priorities. Social Security, Medicare and low-income programs would be protected from the proposed mechanism that would trigger automatic spending cuts and tax increases to make sure deficit-reduction targets are met.
Mr. Obama doesn't support raising the Medicare retirement age, a senior administration official said Wednesday.
Mr. Obama drew explicit contrasts with the deficit-reduction plan proposed by Mr. Ryan as part of the House GOP's 2012 budget. That plan would cut taxes and end Medicare's traditional role as a fee-for-service payment system, turning it into a menu of government-subsidized private insurance plans for younger workers.
Mr. Obama said this would undermine the programs and force seniors to pay more for health care. "Their vision is less about reducing the deficit than it is about changing the basic social compact in America...There's nothing courageous about asking for sacrifice from those who can least afford it and don't have any clout on Capitol Hill,'' he said.
Meanwhile, a new wrinkle may create problems for a smaller, more immediate budget deal the two parties just negotiated to prevent a government shutdown. The Congressional Budget Office said that the spending bill agreed to for the remainder of this fiscal year, which was advertised to cut more than $38 billion in spending, will actually produce only about $352 million of those savings by time the fiscal year ends Sept. 30. That is because many of the cuts are slower to take effect, and will be realized later. Still, the estimate may give some lawmakers unhappy with the pact's level of spending a new reason to vote against it later this week.
Mr. Obama, a formally announced candidate for re-election, nodded to the 2012 presidential race by saying that Mr. Ryan's plan had been "embraced" by several GOP contenders. Some of those likely candidates were quick to engage with Mr. Obama. "The last thing we should be doing is raising taxes on job-creators, entrepreneurs and small business owners across America," said Mitt Romney, the former Massachusetts governor, in a statement.
But some involved in the process were dismayed that Mr. Obama had cast Mr. Ryan's plan as representing all Republicans.
In the Senate, some Republicans are part of a bipartisan group, known as the "Gang of Six," who are working on a deficit-reduction plan that includes triggers similar to Mr. Obama's. They have set a goal of reducing the growth of the deficit by $4 trillion over 10 years, but they have avoided the kind of partisan broadsides invoked by the president. Still, it's possible the White House could try to align its plan with the Senate effort to win support from both parties.
Write to Damian Paletta at firstname.lastname@example.org