bloomberg – President Barack Obama, presenting his second plan in as many months to reduce the nation’s long- term debt today, is vowing to cut $4 trillion in cumulative deficits within 12 years with $3 in spending cuts and interest savings for every $1 in tax increases, according to two congressional aides familiar with the proposal.
Obama will cite those goals today as part of a debt reduction plan built around four elements: Lower domestic spending, less defense spending, excess spending in Medicare and Medicaid, and elimination of tax breaks that favor the wealthy, according to a White House statement.
Obama is setting a target of reducing the annual U.S. deficit to 2.5 percent of gross domestic product by 2015, compared with 10.9 percent of GDP projected for this year. He also will reiterate his support for overhauling the tax code to lower rates while closing loopholes and end some breaks to increase revenue.
Obama called on Vice President Joe Biden to begin regular meetings with leaders in both parties of Congress to come to an agreement on a plan to reduce the deficit by the end of June. He said while he doesn’t think the final agreement will look exactly like the approach he pitched today, he is “eager to hear other ideas from all ends of the political spectrum.”
Obama’s message to those who think we shouldn’t make any reforms to Medicare, Medicaid and Social Security: Then “we wont be able to keep our commitment” to the next generations of retirees, Obama said. And his pitch to progressives in his own party: “We have the obligation to prove that we can afford our commitments.” He said we must make government “smarter, leaner, and more effective.”
* Ending Bush-era tax rates for the wealthiest Americans
* Seeking $770 billion in savings by 2023 in cuts to non-security discretionary spending
* Saving $480 billion in Medicare and Medicaid by 2023 and at least $1 trillion more by 2033.
He proposes saving $400 billion in current and future defense spending.
The president is urging Congress to pass a “debt failsafe” that would trigger across-the-board spending cuts and tax changes if the debt-to-GDP ratio has not stabilized by 2014, according to the aides. The automatic cuts wouldn’t apply to entitlement programs, including Social Security, Medicare and programs for low-income Americans.
Most of the reductions proposed by Obama will be phased in to the second half of the 12-year timeframe, to avoid hurting the economic recovery, the aides said, speaking on condition of anonymity because the administration hadn’t released the details.
The president borrowed some ideas from the Simpson-Bowles debt commission he created last year, drawing on the panel’s recommendation for a simpler, fairer tax code that lowers rates and increases revenue. He also adopted the commission’s recommendations on non-security discretionary spending, saving $770 billion by 2023.