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Obama Strikes Back In Debt War In Speech To Nation

Ryan Faughnder |
April 13, 2011 | 8:00 a.m. PDT

Senior News Editor

President Barack Obama on Wednesday called for a $4 trillion reduction of the national debt over the next 12 years in his latest volley in what is looking to be a protracted war with Republicans over fiscal policy. The plan would include tax increases and reductions in defense spending, two components of the budget that many Republicans have already pledged to shield from Democrats.

President Barack Obama (U.S. Government Work)
President Barack Obama (U.S. Government Work)

Obama pledged in a speech at George Washington University that his administration will put the deficit on track for reduction relative to the overall economy. He framed his approach as "balanced" and said that tax reform must go along with spending cuts in order to preserve programs such as Medicare, Medicaid and Social Security. The country will need to share the sacrifices necessary to balance the budget, he said, promising to never again approve extensions of tax cut extensions for the wealthy.

"In December, I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans," he said. "But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. And I refuse to renew them again."

Obama sharply criticized the budget plan proposed by Republican Congressman Paul Ryan (WI), which, among other things, would partially privatize Medicare, make major changes to other entitlements and significantly reduce funding for last year’s giant health care reform laws.

"It says instead of guaranteed health care, you will get a voucher," he said of Ryan's Medicare reform plan. "And if that voucher isn’t worth enough to buy insurance, tough luck – you’re on your own. Put simply, it ends Medicare as we know it."

"I will preserve these health care programs as a promise we make to each other in this society. 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."

The president also proposed deep cuts to defense spending, citing Defence Secretary Robert Gates' savings of $400 billion from the defence budget. "We need to not only eliminate waste and improve efficiency and effectiveness, but conduct a fundamental review of America’s missions, capabilities, and our role in a changing world." 

In line with the recommendations of the administration's fiscal commission, the plan stipulates that every dollar in increased revenue from tax increases must be matched with three dollars in spending cuts.

Don Taylor, a public policy professor at Duke University, said in an email that tax reform is a difficult but necessary part of closing the budget gap and reducing long-term debt. "He was not particularly specific about the tax reform he wants," Tayor said. "But he has given runway to a very consequential step of reforming the tax treatment of employer provided health insurance. Anyone saying they are totally opposed to any tax increases is not serious about wanting to balance the budget."

Obama also made overly general comments on Social Security, Taylor added, arguing that liberals and progressives ought to make significant reforms sooner rather than later. "Even though benefits can be paid out for the next 25 years or so, there is a long term problem that will be fixed in the future with benefit cuts by default," he said. "The earlier we begin to act, the more options we would have for shoring up social security."

Obama wants to have a full budget agreement by June. The Ryan proposal will be on the floor of the legislature Thursday and Friday.


Conservatives argue that the proposal is not a serious enough attack on the deficit, which is projected at about $1.4 trillion, much less on the $14 trillion national debt. The government is poised to soon hit the so-called debt ceiling, which currently puts a $14.3 trillion cap on the amount of money the U.S. can borrow. While the government has taken to increasing the debt-ceiling as a matter of routine, some Republicans have threatened to reject such a measure.

Meanwhile, top Republicans have already said they will not support discussions of tax increases and the elimination of the Bush tax cuts. House Speaker John Boehner called the idea a "non-starter" earlier.

Rep. Eric Cantor (R-Va) preemptively came out against taxes on the wealthy, as well. "Most people understand that Washington doesn't have a revenue problem, it has a spending problem," Cantor said.

On the other hand, Obama also risks losing the support of liberals who believe budget cuts could derail economic recovery, according to the Washington Post.

Much of the president’s deficit plan reflects the proposal put forth by his deficit commission last November, chaired by Erskine Bowles and Alan Simpson. They recommended reductions in social security benefits, a raise in the retirement age, reforms to the tax code and major spending cuts, even in areas such as defense.

The commission’s work was continued by a bipartisan Senate effort -- called the "Gang of Six" -- to find a way to reduce the national debt by $4 trillion over the next 10 years. Their report will be released later this year.

The president more or less ignored the proposals in his spending plan put forth in his State of the Union address months ago, in which he focused his fiscal razor on discretionary non-defense spending, a small portion of the budget, overall. Now Obama appears to be taking some cues from the Bowles-Simpson plan.

Negotiations nearly reached the breaking point just last Friday as the two parties reached an eleventh hour agreement to keep the government running for the remainder of the fiscal year. Now with Obama’s strategy out in the open, the threat of another shutdown is looming.

The budget agreed upon last Friday includes $38 billion in spending cuts, including slashes to agriculture, unspent stimulus money, healthcare, education and human services, while many programs cherished by Democrats were spared, such as Pell grants and the administration’s “Race to the Top” program.

As the Associated Press puts it, the administration was able to paper over many spending cuts with “accounting sleight of hand” and by “going after programs President Obama had targeted anyway.” About $10 billion of the saving will come from cutting earmark accounts.

The Obama administration has called the Ryan plan fundamentally unfair. Democrats have responded with outrage to the plan, and some economists dismissed Ryan’s rosy prediction that under his plan unemployment could drop below 3 percent in 10 years.

Tea-Party-influenced budgeteering has made the idea of a government shutdown more realistic.

The budget negotiations last week ultimately hinged on the sliver of federal funding that goes to Planned Parenthood, which Republicans have painted as indirectly funding abortion. Democrats argued that the money for Planned Parenthood did not cover abortions and that taking money away from women’s preventive care was a purely ideological, pennywise and pound-foolish measure.

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