Obama Offers Plan To Cut Deficit By Over 4 Trillion

Fresh off brokering a spending cut deal last weekend that narrowly prevented a government shutdown, President Obama countered the GOP’s 2012 budget plan on Wednesday by proposing a series of spending cuts, tax increases and entitlement reforms that would reduce the nation’s deficit by $4 trillion over the next dozen years.

In a speech at George Washington University Obama shared little in the way of specifics, opting instead to rely heavily on his rhetorical skills. He broadly outlined his plan, which he said takes a more “balanced” approach to reigning in the country’s bloated budget.

“It’s an approach that puts every kind of spending on the table, but one that protects the middle-class, our promise to seniors, and our investments in the future,” the President said.

While Obama lauded the objective of the Republican plan, constructed by House Budget Chairman Paul Ryan (R-Wis.), he admonished it for proposing steep cuts to clean energy, education and transporation budgets.

“These aren’t the kind of cuts you make when you’re trying to get rid of some waste or find extra savings in the budget,” he said. “These aren’t the kind of cuts that Republicans and Democrats on the Fiscal Commission proposed. These are the kind of cuts that tell us we can’t afford the America we believe in. And they paint a vision of our future that’s deeply pessimistic.”

Obama’s plan essentially targets three main factors that have contributed to the current debt of over $14.1 trillion: Domestic spending (both non-defense and defense), health care (including Medicare and Medicaid) and taxes.

The following is a summary of how the President’s plan deals with each:

DOMESTIC SPENDING (NON-SECURITY AND SECURITY):

The President’s plan proposes cutting non-security discretionary spending by $200 billion over the next decade, a proposal was advocated by the President’s fiscal commission.

Said Obama, “We will make the tough cuts necessary to achieve these savings, including in programs I care about, but I will not sacrifice the core investments we need to grow and create jobs.  We’ll invest in medical research and clean energy technology.  We’ll invest in new roads and airports and broadband access.  We will invest in education and job training.  We will do what we need to compete and we will win the future.”

The President’s plan proposes eliminating waste within the Pentagon’s budget, an idea that Defense Secretary Robert Gates has given approval to. The White House estimates that doing so would save $400 billion by the year 2023.

HEALTH CARE:

President Obama’s plan to curb healthcare spending builds on the Affordable Care Act, and aims to save $480 billion by 2013 and another $1 trillion in the decade after that. Obama has argued in the past that the ACA will reduce healthcare spending itself by roughly $1 trillion by 2020. In his speech today, Obama argued that his proposal would preserve the structure of both Medicare and Medicaid, while the Ryan budget essentially privatizes the former and turns the latter into a block grant to states.

TAXES:

Despite the fact that Obama signed a two-year extension of the Bush tax cuts back in December, his plan calls for allowing them to expire on the top two percent of income earners at the end of 2012. The President’s plan also proposes limiting tax deductions for the wealthiest two percent — the White House believes this will save $320 billion over the next decade. Obama also supports the fiscal commission’s recommendation of eliminating other so-called “tax expenditures” while simultaneously lowering individual and corporate tax rates.

SOCIAL SECURITY:

While the fiscal commission proposed gradually raising the program’s minimum age of requirement to 67 by 2050, Obama’s plan (and Ryan’s for that matter) largely ignores Social Security. Most experts say the program’s trust fund will become insolvent by 2037. Still, right now there is more support in Washington for addressing other entitlements and mandatory spending before Social Security.

Said Obama, “While Social Security is not the cause of our deficit, it faces real long-term challenges in a country that is growing older.  As I said in the State of the Union, both parties should work together now to strengthen Social Security for future generations.  But we must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market.”

*The President’s plan also proposes making a series of mandatory spending cuts that would save roughly $360 billion over the next decade.