The president’s budget deficit speech offered a vague framework for saving $2,000 billion and taxing an extra $1,000 billion by 2023, but also his blueprint for campaign-trail criticism of Republican candidates in the 2012 election.
The Republican budget “says America can’t afford to keep the promise we’ve made to care for our seniors,” the President declared at George Washington University. “It says that ten years from now, if you’re a 65 year old who’s eligible for Medicare, you should have to pay nearly $6,400 more than you would today. It says instead of guaranteed health care, you will get a voucher. 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,” he continued in the speech, which spent almost as much time criticizing Republicans as it did describing his own proposal.
Republicans hit back quickly, and strongly. “Instead of supporting spending cuts that lead to real deficit reduction and true reform of Medicare, Medicaid, and Social Security, the President dug deep into his liberal playbook for ‘solutions’ highlighted by higher taxes,” according to a statement from Gov. Mitt Romney. “With over 20 million people who are unemployed or who have stopped looking for work, the last thing we should be doing is raising taxes on job-creators, entrepreneurs, and small business owners across America.”
The speech, dubbed a “framework” by a senior adviser prior to the speech, says the government should cut the deficit by $4,000 billion over the next 12 years. The framework calls for $2,000 billion in spending cuts, $1 trillion in taxes or reduced “tax expenditures,” and $1,000 billion in reduced interest payments.
That goal, if enacted and not offset by additional spending, would cut cumulative deficit spending by only one quarter from the level predicted by the Heritage Foundation. The foundation’s 10-year forecast says the federal government is on track to spend $60,000 billion by 2023, or $17,000 billion more than predicted tax revenues. The Congressional Budget Office, using more restrictive rules, predicts an accumulated deficit of $12,000 billion by 2021, and $13.5 billion by 2023. The national debt will reach almost 100 percent of annual income by 2021, the CBO predicts.
The president’s framework urges cuts of $480 billion in Medicare and Medicaid via savings in drug costs, a cut in programmed annual increases, and better management, which is made possible by the Obamacare law, which gives government managers more control over the health sector. “I will preserve these health care programs as a promise we make to each other in this society,” Obama said in his speech. “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 framework sets a target of saving $360 billion for other mandatory spending, including agricultural subsidies and the federal pension insurance system.
The Defense Department would have its cumulative spending reduced $400 billion by 2023, and the non-defense portion of the discretionary budget would be cut by $700 billion by 2023, according to the speech.
The framework assumes the Bush-era tax cut on wealthier Americans will be ended, bumping taxes up to almost 40 percent for people earning more than $250,000. The plan also calls for “individual tax reform that closes loopholes and produces a system which is simpler, fairer and not rigged in favor of those who can afford lawyers and accountants to game it,” according to a White House statement. In his speech, the President also boost his proposal in the 2012 budget to deny the 2 percent of earners from cutting their tax-bill by using standard itemized-deductions, such as deductions for mortgage-interest or charitable donations. “At a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more,” Obama said. “I don’t need another tax cut. Warren Buffett doesn’t need another tax cut. Not if we have to pay for it by making seniors pay more for Medicare. Or by cutting kids from Head Start. Or by taking away college scholarships that I wouldn’t be here without.”
Republicans counter that 59 percent of income-tax revenues are already paid by the top 5 percent of earners, and that higher-taxes will shrink economic growth and future tax-revenues.
The framework also calls for a Congress to establish a legislative trigger that would impose spending cuts and tax increases if Congress fails to reduce the deficit year-by-year. “The exact design of that we would have to work out,” said the official.
The president repeatedly criticized Republican proposals, especially on issues that might attract support from swing-voting independents. “The fact is, their vision is less about reducing the deficit than it is about changing the basic social compact in America,” he said. “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.”