Obama calls for $4 trillion in deficit reduction
Members of Congress listen to Obama speak at George Washington University
April 13th, 2011
02:43 PM ET

Obama calls for $4 trillion in deficit reduction

By CNN's Alan Silverlieb and Tom Cohen -
WASHINGTON (CNN) -President Barack Obama unveiled his long-awaited deficit reduction plan Wednesday, calling for a mix of spending reductions and tax hikes that the White House claims would cut federal deficits by $4 trillion over the next 12 years without gutting popular programs such as Medicare and Medicaid.

Obama's plan includes a repeal of the Bush-era tax cuts on families making more than $250,000 annually - something sought by Democrats but strongly opposed by Republicans. The president also called for the creation of a "debt fail-safe" trigger that would impose automatic across-the-board spending cuts and tax changes in coming years if annual deficits are on track to exceed 2.8% of the nation's gross domestic product.

The president claimed that by building on or adjusting the health care reform bill passed last year, $480 billion would be saved by 2023, followed by an additional $1 trillion in the following decade. For example, he proposed tightly constraining the growth in Medicare costs starting in 2018.

"Doing nothing on the deficit is just not an option," Obama said in the speech at George Washington University, adding that "our debt has grown so large that we could do real damage to the economy if we don't begin a process now to get our fiscal house in order."

Obama's approach seeks to carve out a political middle ground between conservatives - who are pushing for deficit reduction based solely on spending cuts and expected economic growth - and liberals, who are generally resisting entitlement reform and seeking higher corporate and personal taxes.

He called for political leaders to put aside orthodox party ideology and work together for the good of the country, saying "we can solve this problem" while noting that "any serious plan to tackle our deficit will require us to put everything on the table, and take on excess spending wherever it exists in the budget."

At the same time, Obama blasted the House Republican 2012 budget proposal unveiled last week, saying it would "lead to a fundamentally different America than the one we've known throughout most of our history."

"These are the kind of cuts that tell us we can't afford the America that I believe in and that I think you believe in," Obama said of the plan by House Budget Committee Chairman Paul Ryan, R-Wisconsin, who sat in the audience Wednesday. "I believe it paints a vision of our future that's deeply pessimistic. "

The administration's package stands in sharp contrast to Ryan's blueprint, which calls for cutting the debt by $4.4 trillion over the next decade while radically overhauling Medicare and Medicaid and dropping the top personal and corporate tax rate to 25%.

Under the Obama plan, Pentagon spending would fall by roughly $400 billion by 2023, while federal pensions, agricultural subsidies and other domestic programs would also face the budget ax, according to the White House.

In total, nonsecurity discretionary spending - Washington jargon for the 12 percent of the federal budget aside from defense spending, debt payments and the big entitlements such as Medicare, Medicaid, and Social Security - would be cut by a total of $770 billion over the next 12 years.

The $770 billion figure is in line with recommendations put forward by Obama's bipartisan debt reduction commission last December, according to the White House.

Obama's plan contained no specific proposal for Social Security, the government-run pension plan that will run out of money in coming decades. The president does not believe that the program "is in crisis (or) is a driver of our near-term deficit problems," a White House statement noted.

But Social Security does face "long-term challenges that are better addressed sooner than later," the statement added, and Obama expressed a willingness to consider changes to help the program maintain its solvency down the road.

Obama said Vice President Joe Biden would begin meeting with legislators from both parties in early May with the aim of forging agreement on a deficit reduction plan by the end of June. According to the White House, the meetings would include eight Congress members and eight senators - equally split between the two parties.

The president, however, strongly opposed the proposed Medicare and Medicaid overhaul outlined in Ryan's 2012 GOP budget proposal.

Under Ryan's plan, the government would stop directly paying Medicare bills for senior citizens in 2022. Instead, recipients would choose a plan from a list of private health insurance providers, which the federal government would subsidize. Individuals currently 55 or older would not be affected by the changes.

Medicaid, which provides health care for the disabled and the poor, would be transformed into a series of block grants to the states. Republicans believe state governments would spend the money more efficiently and would benefit from increased flexibility, while Democrats warn that such a move would shred the health care security provided to the most vulnerable Americans in recent generations.

"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," Obama said. "I will not tell families with children who have disabilities that they have to fend for themselves. We will reform these programs, but we will not abandon the fundamental commitment this country has kept for generations."

The Republican "vision is less about reducing the deficit than it is about changing the basic social compact in America," the president asserted. "It ends Medicare as we know it."

At the same time, Obama said that Democrats also must recognize the need for significant change in America's fiscal structure and practices.

"To those in my own party, I say that if we truly believe in a progressive vision of our society, we have the obligation to prove that we can afford our commitments," the president said. "If we believe that government can make a difference in people's lives, we have the obligation to prove that it works - by making government smarter, leaner and more effective."

GOP leaders, who were briefed by Obama at the White House before his blueprint was officially released, blasted the president's call for higher taxes on those making more than $250,000.

"We can't tax the very people we expect to reinvest in our economy and create jobs," House Speaker John Boehner, R-Ohio, told reporters. "Washington has a spending problem, not a revenue problem."

As Obama and the Republicans spar over long-term deficit reduction plans, they also need to tackle the budget for the remainder of the current fiscal year, which ends September 30.

The House is scheduled to vote Thursday on a deal reached late last week that would cut spending for the year by $38.5 billion.

The package cuts funding for a wide range of domestic programs and services, including high-speed rail, emergency first responders and the National Endowment for the Arts.

Under the terms of the deal, roughly $20 billion would be taken from discretionary programs while nearly $18 billion would come from what are known as "changes in mandatory programs," or CHIMPS, which involve programs funded for multiyear blocks that don't require annual spending approval by Congress.

Republicans generally opposed CHIMP cuts because they affect only one year, with funding returning to the preauthorized level in the following year.

Democrats and Republicans also have to contend with an impending vote to raise the nation's debt ceiling. Congress needs to raise the limit before the federal government reaches its legal borrowing limit of $14.29 trillion later this spring or risk a default that could result in a crashing dollar and spiraling interest rates, among other things.

Republicans have repeatedly stressed that any vote to raise the cap has to be tied to another round of spending cuts or fiscal reforms.

The administration, in contrast, has called for a "clean" vote on the cap, which would raise the limit without adding any conditions. White House Press Secretary Jay Carney has warned that trying to force the issue is tantamount to playing a game of "chicken" with the economy.

While meeting with reporters after his meeting with Obama, however, Boehner indicated that the president might be open to a compromise on that vote.

CNN's Dan Lothian contributed to this report

Topics: Budget • President Obama • The News

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soundoff (24 Responses)
  1. Bill in STL

    I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.
    - Winston Churchill

    April 13, 2011 at 4:17 pm |
    • Dennis Rivelli

      Better the occasional faults of a government that lives in the spirit of charity and concern than the consistent omissions of a government frozen in the ice of its own indifference. It is the duty of a democratic leader to make the nation understand that Republican rule means government by selfish interests and powerfully entrenched individuals.

      April 13, 2011 at 8:50 pm |
  2. Bill in STL

    In general, the art of government consists of taking as much money as possible from one party of citizens to give to another.
    - Voltaire (1764)

    April 13, 2011 at 4:20 pm |
  3. Bill in STL

    A government big enough to give you everything you want, is strong enough to take everything you have.
    - Thomas Jefferson=

    April 13, 2011 at 4:21 pm |
  4. Gustogus

    Sounds good to me. We tried the Bush tax cuts and all that got us was a larger wealth gap. That rising tide apparently only lifted yachts. The Clinton era tax rates were fine and it gets us one step closer to solving our fiscal problems.

    Why is it Democratic Presidents are always asked to balance Republican checkbooks?

    April 13, 2011 at 5:07 pm |
  5. Dennis Rivelli

    I salute the President for his courage to stand up for the middle class and the principals the democratic party has lived by since Franklin D. Roosevelt. I represent one of 80M baby boomers who are at retirements front door. Medicare and Social Security are in sight and I will not allow the Republican party protecting 5% of this country's citizens with their stupid Reganomics that got us in this mess to begin with destroy social programs and drive us further towards a rich verses poor country. We can beat the mess Bush II put us in if we take it in steps slowly over the next 10 years rather than use the usual Republican knee jerk reaction. I will vote against anyone who tries to destroy my birth right of Social Security and Medicare and suggest any woman, or Senior who sees what the Republicans are trying to do vote the same.

    April 13, 2011 at 8:45 pm |
  6. Howard

    More smoke and mirrors from Obama. Somebody call the bunco squad ... Obama is launching another confidence swindle. And, since a democratic sucker is born every minute, you can count on this con man to bilk the American public out of another TRILLION dollars ... while the democratic pigeons continue to heap praise on the snake oil salesman and messiah whose ripping them off.

    April 13, 2011 at 8:53 pm |
  7. Rudy Gonzales

    President Obama hold your ground! These Republican and TEA party members are hell bent to derail your programs.Taxes on the richest 2% should be increased. Corporations should be taxed on their gross income instead of their net income and all corporate subsidies cancelled or reduced to effect a wider spreading of the tax burden. As it stands now the lower and President Obama must resist any GOP tactic or attack towards the entitlements the retired have earned. It was Congress through the past thirty to forty years who borrowed monies from Social Security and left IOU's in place. I agree with President Obama! Anyone making over $250,000.00 should pay more taxes! The lower and middle class have enough pressures on them to have to support the richest 2%. All companies should be taxed on Gross Income generated world-wide and the mega- rich 2% should be taxed on gross earning. Here's an example of what I'm talking about:
    The total compensation in 2007 for the 9 banks that received the first batch of government aid through TARP.
    1. Ken D Lewis – Bank of America – 24.8 Million
    2. Gary Crittenden – CUITIGROUP – 19.4 million
    3. Lloyd C. Blankfein – Goldman Sachs – 70.3 million
    4. James Dimon – Chase Bank – 27.8 million
    5. Gregory J Fleming – Merrill Lynch – 27.4 million
    6. Colm Kelleher – Morgan Stanley – 21.0 million
    7. Thomas A. Renyi – New york Mellon Bank – 22.2 million
    8. State Street Corp Bank – Ronald E Logue – 28.3 million
    9. Richard M. Kovecevich – Wells Fargo Bank – 22.9 Million
    Top TWELVE Compensation 2010
    1. Philippe P. Dauman – Viacom – 84.5 million
    2. Ray R.Irani – Oxydental Petroleum – 76.1 Million
    3. Lawrence J. Ellison – Oracle – 70.1 Million
    4. Michael D. White – DIRECTTV – 32.9
    5. John F. Lundgren – Stanley/Black & Decker – 32.6 Million
    6. Brian L Roberts – COMCAST – 28.2 Million
    7. Robert A. Iger – Walt Disney – 28.0 Million
    8. Allen Mulally – Ford – 26.5 Million
    9. Samuel J Palmisano – IBM – 25.2 Million
    10. David Farr – Emerson Electric – 22.9 Million
    11. Howard Schultz – Starbucks – 21.7 million
    12. William Weldon – Johnson & Johnson – 21.6 million
    The middle class bailed out the banking and auto industries as well as Wall Street.

    April 13, 2011 at 9:36 pm |
    • Jay in NC

      Rudy, you said "Corporations should be taxed on their gross income instead of their net income" is proof that Liberals just do not understand business.

      Take for an example a grocery store that runs on a 2% margin. If they can not deduct for cost of goods, or other expenses they would owe more than they currently make. Prices would have to increase to offset Rudy's new tax. And what about the flow of products to the store shelf, some items have a long chain. Would each owner of the product, at each stage have to pay the tax on their gross income? Prices would have to rise. Could they circumvent this by holding the title to the goods until the customer purchased?

      April 14, 2011 at 8:21 am |
      • Jana in NE

        Face it, most Liberals don't want to work "hard" and perfer to live off the sweat and paychecks from those of us who came from nothing, educated ourselves (without parents or government help), worked hard, sacrificed (which is a concept most libs don't get), and finally succeeded in a business (mind you, taking all the risks). I'll tell you what – you take more of my money and you will lose more jobs.

        April 14, 2011 at 2:31 pm |
    • Johnny

      Rudy, 99% of TARP has been paid back to the government. Most banks couldn't wait to return the money with interest. That is what you call a real government investment. Now compare that to GM, Dept. of Education, Fannie or Freddie. It's buffoonery to attack TARP in the first place. It worked. Let's take a hard look at cutting off non-performing "loans" and "investments" like Dept. of Energy, most, non-military, foreign aid, corporate subsidies including food, agenda based items like NPR and Planned Parenthood.

      Rudy, we need policy that WORKS, not policy that is "FAIR" in some people's opinion. I think America would be better off if we had 10 more GE's on our shores and got rid of 10 GM's.

      April 15, 2011 at 12:14 pm |
  8. Darcy

    Increase taxes for those earning $250,000 + and start cutting down on Medicare and Social Security. Hard decisions, but it is time for a change that will get us out of debt. Stop many of the help given to those who do not want to work, I work in Human Resources, and believe me there are people who simply don't want to work because it is easier to collect unemployment and take advantage of all the help out there. It is time that help is limited to those who actually need it and to cut down on unemployment. Enough is enough and MANY people take advantage of the help! I am tire of paying taxes to encourage people to be lazy and girls to have children just to collect more government help!

    April 14, 2011 at 2:19 am |
  9. Jason A. Senteney

    I am trying very intently to remain an Independent politically, but day after day I see examples of how one side or the other chooses corporate interests over their own constituents. I believe that we need to help those individuals that haven't caught a break, I believe that we need to invest and revamp the educational system, I believe we need revenue(usually generated from taxes) to pay off our debt, I believe we need to disolve the Federal Reserve, and I believe we need to Keep Lobbyists out of Washington!!!

    We as Americans are at a point where, We need to wake up because our country is being sold to the highest bidder and our wonderful Supreme court said that's OK corporations are people too!!! Yeah Right!!! There is a Legislative War going on in Many states over making "Collective Bargaining" Illegal, For many of you out there working for or maybe you retired from an industrial sector job, guess what more than likely the reason you made a decent wage is because of "Collective Bargaing" and yet you blindly vote for the party outlawing that!!! Great Job!!!

    When it comes to the Budget, many people don't realize that there is a 3-5 year lag between when fiscal regulations become a law and the impact it actually has on the economy! So for those screaming bloody murder about this administration or any other, look at the statistics but don't forget to include this part of the equation.

    The reason our budget is on the course it is, is because we cut taxes over and over, deregulated many of the laws that kept smaller businesses capable of competing with these super corporations, and now because of tax loopholes created by these armies of corporate accountants and lawyers small businesses can't compete because they don't make enough. We need to wake up and tell our congressmen to put the anti-monopoly laws back in place, offer tax cuts for small businesses, and make sure that companies like GE don't make $5 Billion plus then on top of it are allowed to recieve over $3 Billion in subsidies. We need to put the Tariffs back in place, and Put price controls on the Insurance, Medical, and any other Industries that could be deemed as a price gouging entity. We need to take the Speculators out of Wall Street and make them live for a year on a part-time minimum wage income so they can experience how their BS industry effects many Americans. I also believe that we should make a tax law that states that if you make over $3 Million a year, and anything over that will be taxed at a 70% rate(that would impact around 500k people) this would be Trillions in yearly revenue. Then we could use that money to spend on paying off the debt and rejuvenating our crumbly infrastructure and most importantly get out of the debt with China and various other countries we don't need to be indebted to. If we as people demand changes such as these we would not only be improving our way of life, but most importantly setting our children up for success!!!

    When it comes to education, we need to start by holding teachers accountable and I don't mean by standardized testing, we should set up a system that monitors the graduation rates, student subject success rates, helps with social skills. Our teachers need to be some of the more successful students coming out of universities, I believe that those that are hired to be role models for our children need to be the best and brightest. In requesting this I understand that we will have to compete with various industries to attain such talent. That's why I propose that we pay teachers more with proven success!!! I believe that if we require our teachers to graduate with a minimum 3.5 GPA and some emphasis on public speaking classes, we can and will be able to have some of the best and brightest young Americans entering the workforce, afterall we would be setting the children up for success!!!

    We as Americans need to return to the fundementals that this great nation was built on Education, Ingenuity, and Compassion!!!

    April 14, 2011 at 3:16 am |
  10. NClaw441

    Jay– well said. Many have also said, and I agree, that we do not have a revenue problem– we have a SPENDING problem. I wonder how much of the claimed deficit reduction under President Obama's plan comes in the first one to two years? Everyone knows that budget plans are re-done each year. If all the cuts are in the outlying years they mean NOTHING.

    April 14, 2011 at 9:28 am |
  11. Bill in STL

    I think we should consider the British approach to taxes, this would satisfy liberals in their question be more like Europe and also allow their fondest wish of having government be evertything to everyone ... in a CNBC article dated Septermber 20, 2010

    The UK system is much like the United States in that employers deduct the government’s cut from your salary before you see your paycheck. This is smart on the part of the socialists because you’re less likely to object to high taxation if you never see the money you earned–but were forced to fork over to the government–before you receive your paycheck.

    This is egregious and deceptive enough, but this idea takes statism to a whole new level. This requires businesses to hand over all of the loot, and Big Brother in its benevolent wisdom will dole out “what it deems appropriate” for you to have.

    What better apparatus (short of the old Soviet style) could you come up with to ensure the government is empowered to distribute wealth as it sees fit. It would be an easy step from this to a place where government decides how much a person “needs” to live, gives them that from their paycheck, and either keeps the rest or distributes it to those who aren’t earning what it in its infinite government wisdom deems appropriate.

    Remember, folks: liberals in the United States have been clamoring for years that we need to be more like Europe.

    April 14, 2011 at 10:24 am |
    • Michael

      We need to be more like Europe.

      April 14, 2011 at 12:44 pm |
  12. Phil Hansen

    This president is an embarrassment. Why oh why didn't we get Hillary. This guy is nothing but a political action committee.

    April 14, 2011 at 12:56 pm |
  13. Howard

    In a couple of years from now, when Obama's policies plunge America into poverty ... the Americans who were deceived by this two faced lying traitor, will clearly realise that Obama was in fact the anti-Christ !!!

    April 14, 2011 at 8:40 pm |
  14. Johnny

    About every four or five years our family has had a big reunion. We budget for it. Once every 10 or 15 years, it is something really special. Obama added the original Bush, one-time Lehman / TARP spend to the baseline budget, then added his own stimulus to the new, in-perpetuity, budget. Gosh, just because we went to the Grand Canyon in 2005 does it mean we are going to do that every year. Something's like a really big family vacation or buying a house, or dealing with a job loss happen once in awhile. Does Obama really think we need to "stimulate" the economy in perpetuity with millions of government jobs fund through debt? If he does, he really needs to get his money back on any economics and finance classes he took.

    April 15, 2011 at 12:26 pm |
  15. Howard


    Obama has spent more American tax money in the first two years of his Presidency, than all the Presidents before him, COMBINED !!! ... and, he still is pushing to spend TRILLIONS more !!!

    Here are just a few examples of how Obama is ruining our economy:

    2009 GAS $1.83 per gallon TODAY $4.00 + per gallon
    2009 SOYBEANS $9.66 TODAY $13.75
    2009 SUGAR $$13.37 TODAY $35.39
    2009 NUMBER OF LONG TERM UNEMPLOYED 2,600,000 TODAY 6,400,000
    2009 PEOPLE IN POVERTY IN U.S. 39,800,000 TODAY 43,600,000
    2009 NATIONAL DEBT IN TRILLIONS $10,627 TODAY $14,052
    Just take this last item: In the last two years we have accumulated national debt at a rate more than 27 times as fast as during the rest of our entire nation's history. Over 27 times as fast! Metaphorically, speaking, if you are driving in the right lane doing 65 MPH and a car rockets past you in the left lane 27 times faster . . . it would be doing 1,755 MPH! This is a disaster!
    (1) U.S. Energy Information Administration; (2) Wall Street Journal; (3) Bureau of Labor Statistics; (4) Census Bureau; (5) USDA; (6) U.S. Dept. of Labor; (7) FHFA; (8) Standard & Poor's/Case-Shiller; (9) RealtyTrac; (10) Heritage Foundation and WSJ; (11) The Conference Board; (12) FDIC; (13) Federal Reserve; (14) U.S. Treasury


    April 15, 2011 at 12:40 pm |
  16. spike

    His deficit reduction plan is a joke. Taking todays spending levels and whacking off the 330 billion a year that his proposal amounts to ( 4 tril over 12 yrs ), leaves you with an annual deficit of 1.3 trillion, maning the national debt climbs by at least this much every single year. Is this a rerun of a movie I have seen before? Dumb and dumber

    April 15, 2011 at 2:08 pm |
  17. micheal

    Initiate a "Flat Tax" across the board with no end of year tax filings

    April 15, 2011 at 2:51 pm |
  18. micheal

    If our glorious president is so concerned, then why doesn't he have the 1 billion dollars he hopes to raise for his own job security be donated to the nations debt

    April 15, 2011 at 2:57 pm |
  19. Liz Carter in Georgia

    The Anti-Christ has been pretty well decided and documented on one of the greatest educational stations I believe is THE HISTORY CHANNEL, by researchers, and analysts that he and his agents are spawned from EUROPE! Not AFRICA nor AMERICA! (KENYAN/AMERICAN) He will be a WHITE MAN, of course! Who else has been the supreme master planners and deciders of the courses the globe should take to be able to participate in global interactions and practices, with every other race falling to subordination to him?

    April 17, 2011 at 11:26 am |