President Obama this morning will outline more than $2 trillion in new deficit reduction over the next decade, including $1.5 trillion in new taxes and means-testing Medicare for wealthy recipients — both in higher fees and benefit cuts for top income brackets, senior administration officials tell ABC News.
Combined with savings from the debt deal and drawing down the wars in Iraq and Afghanistan, the proposal will guarantee that the size of the debt — as a share of the economy and percentage of GDP — will fall, with more than $4 trillion in deficit reduction total.
The president’s purpose in laying out this detailed plan is to avoid the criticisms that have dogged him throughout this year for not putting out a more assertive deficit reduction plan, and to further illustrate his “balanced approach,” requiring “shared sacrifice.”
A senior administration official described the president’s proposal as having “very tough policies in it, and we know that that’s going to be something that our friends and our opponents alike are going to notice. But there is no way to get this job done without making tough decisions, and this is putting forward a plan that does it in a fair and a balanced way.”
The president will propose roughly $580 billion in cuts to mandatory spending programs, including $248 billion from Medicare and $72 billion from Medicaid and other health programs.
Part of this will include asking wealthier seniors who receive Medicare to pay higher premiums and accept fewer benefits — means-testing the program.
But that said, the president will not accept any cuts to Medicare if tax increases on wealthier income brackets and corporations are not part of the final package.
“He will say that he will veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share,” a senior administration official said.
Obama’s remarks will push the so-called “super-committee” charged with finding at least $1.2 trillion in deficit reduction by November to undertake comprehensive tax reform guided by five principles: lowering tax rates; eliminating wasteful loopholes and tax breaks; reducing the deficit by $1.5 trillion; boosting job creation and growth; and being consistent with the “Buffett Rule.”
The Buffet Rule, named in honor of billionaire investor Warren Buffett, will state that those who make more $1 million a year “should not pay a smaller share of their income in taxes than middle-class families pay,” a senior administration official said.
Other ways to raise taxes that the president will propose are now familiar: $800 billion from letting expire the lower Bush tax rates for the top two tax brackets; and $700 billion from other revenue — capping income tax deductions for wealthier Americans; eliminating subsidies for petroleum companies; eliminating tax loopholes for corporate jets; and requiring hedge fund managers to pay a higher tax rate than the 15 percent carried interest rate they pay now.
Obama is seeking to draw contrasts with Republicans.
“If we stay on the path of just cutting spending and letting the chips fall where they may, we know where that leads to,” a senior administration official said. “Because congressional Republicans have put out a plan that does that. Millionaires and big corporations keep their special tax breaks and tax cuts, and there are severe cuts in programs which are very important to the American people and our economic future.”
Continued the official: “It’s not the right way to go to have 320,000 kids cut from Head Start, to have 75,000 teachers laid off, to have the maximum Pell award that 8 million students rely on be substantially reduced, or to cut our investments in energy programs by as much as 70 percent. It’s not the right approach to have Medicare end up become something that working people, when they retire, may not be able to afford, by shifting as much as $6,000 of cost to individuals in order to pay for $1 trillion in tax cuts for people who are much better off.”