President Barack Obama today unveiled his plan to reduce the debt and deficit by introducing a tax and spending plan with a basis in increasing taxes on the wealthy.
In general, President Obama’s proposal calls for a reduction in the federal government’s debt by $4 trillion. The proposal is designed to cut $2 of spending for every $1 raised in revenues. The president stated that there would be modest adjustments to retirement programs and reforms to agricultural subsidies.
President Obama also referenced the wars in Afghanistan and Iraq, claiming that approximately $1 trillion would be saved by the cessation of the conflicts.
“I will not support any plan that puts all the burden for closing our deficit on ordinary Americans,” the president said. “And I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans and biggest corporations to pay their fair share.”
While vowing that Medicare would not be turned into a voucher program, where recipients would be given a certain amount annually to either pay health care providers directly or buy insurance, the president conceded there would be reforms to the 46-year-old health care program.
Douglas Holtz-Eakin, an economist and former adviser to former presidents George H.W. Bush and George W. Bush, told CNN that President Obama’s plan did not address reductions in entitlement programs. Holt-Eakin said that given the amount spent on entitlement programs like Medicare and Social Security, there was a crowding out effect on private sector spending that could stimulate economic growth.
“The choices are about how we spend money,” said Holtz-Eakin, when he addressed the issue of spending priorities.
Specific revenue generators from President Obama’s debt reduction plan include:
- Allowing the 2001 and 2003 tax cuts for upper income earners to expire ($866 billion).
- Limiting deductions and exclusions for those making more than $250,000 a year ($410 billion).
- Closing loopholes and eliminating special interest tax breaks (approximately $300 billion).
In addition, to further reduce the deficit, President Obama proposes:
- $1.2 trillion in discretionary cuts enacted in the Budget Control Act.
- $580 billion in cuts and reforms to a wide range of mandatory programs.
- $1.1 trillion in savings from the drawdown of troops in Afghanistan and transition from a military to a civilian-led mission in Iraq.
- $1.5 trillion from tax reform.
- $430 billion in additional interest savings.
President Obama said the changes he proposed would not create a more fair system of taxation. “Middle-class families shouldn’t pay higher taxes than millionaires and billionaires,” he said.
As for Republicans critics who have consistently referred to his proposals as class warfare on the rich, the president said, “This is not class warfare. It’s math.”