Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


Obama Draws Contrast with GOP in Deficit Reduction Plan

By Paul M. Krawzak, CQ Staff

April 13, 2011 -- President Obama proposed what he called a "balanced" fiscal overhaul that would shave $4 trillion from deficits over a dozen years through a combination of spending cuts and increased revenues generated by a tax code overhaul.

The plan, which he presented at George Washington University, recommends reductions in the cost of entitlement programs but offers nothing like the restructuring of Medicare and Medicaid proposed by House Republicans, based on advance information provided by the White House.

Obama's approach includes a call for a "debt failsafe trigger," an enforcement mechanism that would require across-the-board spending cuts if the projected national debt does not begin to decline as a percentage of gross domestic product beginning in 2014.

On taxes, Obama reiterated his call to allow George W. Bush-era tax cuts for couples who earn more than $250,000 a year to expire at the end of 2012, in an effort to bring in more revenue.

In advance of his speech, Obama met with congressional leaders to preview his blueprint. If early reaction from Republicans is any indication, it could be hard for the two parties to strike a deficit-reduction deal, particularly if Democrats insist on the tax changes envisioned by Obama and Republicans persist in trying to restructure Medicare and Medicaid.

"I think the president heard us loud and clear. If we're going to resolve our differences and do something meaningful, raising taxes will not be part of it," House Speaker John A. Boehner, R-Ohio, said after the morning meeting with Obama. "We don't believe that raising taxes is the answer here," House Majority Leader Eric Cantor, R-Va., said.

Republicans have consistently argued that Congress needs to cut spending to reduce the nation's reliance on borrowed money to cover the government's costs.

"A serious and credible path forward to reduce spending is the only thing in my judgment that will get the votes in the Senate to raise the debt limit," Senate Minority Leader Mitch McConnell, R-Ky., said.

Obama, in his speech, said the GOP "vision is less about reducing the deficit than it is about changing the basic social compact in America. ... There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires. There's nothing courageous about asking for sacrifice from those who can least afford it and don't have any clout on Capitol Hill. And this is not a vision of the America I know."

The president insisted, "We don't have to choose between a future of spiraling debt and one where we forfeit investments in our people and our country. To meet our fiscal challenge, we will need to make reforms. We will all need to make sacrifices. But we do not have to sacrifice the America we believe in. And as long as I'm president, we won't."

Both parties are jockeying for position as Congress faces a very difficult vote to raise the nation's debt limit sometime this spring or early summer. Failure to raise the ceiling could cause widespread disruptions in financial markets.

McConnell declined to offer specific demands for raising the debt ceiling. "We are not that far along in the process," he said.

Details of Obama's Plan

Obama tracked closely with the December recommendations of his bipartisan fiscal commission in proposing a comprehensive overhaul of the tax code, including eliminating loopholes, lowering rates and using projected increases in revenue to reduce the deficit.

Republican lawmakers have made clear they will strenuously oppose Obama's tax proposal because it would increase revenue.

In his speech, Obama proposed something close to the White House summit over deficit reduction that Senate Budget Chairman Kent Conrad, D-N.D., has been pushing for since late last year.

The president asked Republican and Democratic leaders from both chambers to tap a total of 16 lawmakers to join deficit reduction negotiations that would be led by Vice President Joseph R. Biden Jr. starting in early May.

In a further nod to the fiscal commission he appointed last year, but whose recommendations he has never embraced, Obama said his plan would seek to reduce the deficit through a 2-1 ratio of spending cuts to tax increases that he said is consistent with the commission's proposal. When interest payments are factored in, the ratio would be 3-1 spending cuts to tax increases, a senior administration official said.

While the plan adopts some of the ideas of the fiscal commission, it would require two years longer to reduce the deficit by $4 trillion. The commission proposed doing so over a decade through a combination of spending cuts, tax simplification and changes to entitlement programs including raising the Social Security retirement age.


Obama rejected House GOP proposals authored by House Budget Chairman Paul D. Ryan, R-Wis., to turn Medicaid into a block grant program and convert Medicare into a voucher-like system, where seniors would get a set sum from the government to purchase private health insurance plans. He also rejected raising the retirement age for Medicare eligibility.

"The president's framework rejects plans that would end Medicare as we know it or transform Medicaid into a dramatically under-funded block grant, putting at serious risk not only seniors but also the most vulnerable children and people with disabilities," the White House said.

Instead, Obama proposed cutting the cost of government-provided health care by $340 billion over a decade through strengthening the role of a yet-to-be-created Independent Payment Advisory Board, setting a lower target for Medicare growth, simplifying the federal contribution to Medicaid and other measures.

The White House slammed the entitlement overhaul proposals in the House fiscal 2012 budget resolution (H Con Res 34) that will be voted on by the House this week.

"The president's framework offers a stark contrast with the House Republican plan that would increase seniors' health costs by $6,400 annually starting in 2022, raise health insurance premiums for middle-class Americans and small businesses, cut Federal Medicaid spending by one-third by the end of the decade, and increase the number of uninsured by 50 million," the White House said.

The president continued to insist that Social Security is not a driver of the nation's deficits, but said he supports bipartisan efforts to strengthen the program for the long haul.

"These efforts should be guided by several principles, including strengthening the program and not privatizing it, improving retirement security for the vulnerable while protecting people with disabilities and current beneficiaries, and not slashing benefits for future generations," the White House said.

The White House said the plan targets other mandatory spending, including agricultural subsidies, with a goal of saving $360 billion by 2023.

The plan would seek to pare $400 billion off projected discretionary security spending through 2023, while saving $770 billion in non-security spending during the same period.

In a news conference before the speech, Boehner described Obama's emerging plan for long-term deficit reduction as a delayed response to Ryan's fiscal 2012 blueprint.

"Washington has a spending problem not a revenue problem," Boehner said.

Publication Details