Budget Debate: What Does Trillions in Spending Cuts Mean?

May 11, 2011— -- As budget talks beef up ahead of the quickly approaching debt ceiling deadline, both Republicans and Democrats are on the same page about the dollar figure of cuts, but remain wide apart -- both politically and ideologically -- on where those cuts should be centered.

Republican lawmakers are increasingly making it clear that they won't back down from their demand for hefty spending reductions.

House Speaker John Boehner on Monday said that spending cuts should be greater than any increase in the amount that the government can borrow. That would amount to more than $2 trillion in cuts.

"Let me be as clear as I can be: Without significant spending cuts and changes in the way we spend the American people's money, there will be no increase in the debt limit," the congressman from Ohio said in a speech to the Economic Club of New York. "We're not talking about billions here. We should be talking about cuts in trillions if we're serious about addressing America's fiscal problems."

While it may sound big, the "trillions of dollars" in cuts would be spread over a decade, if not more.

Even the vision President Obama laid out earlier this month called for $4 trillion in budget cuts, spread over 12 years. The starting point for Republicans outlined in House Budget Committee chairman Rep. Paul Ryan's budget proposal calls for a similar cut, but over 10 years.

Where the two sides differ -- and what will ultimately impact Americans -- is what should be put on the chopping block.

About half of Obama's budget proposal entails spending cuts that would take away money from defense and some domestic programs, including community grants. The rest includes additional revenues from higher taxes on the wealthy, and fewer tax breaks for corporations.

Republicans maintain that they will not raise taxes.

Meanwhile, GOP members are looking at entitlement programs for savings. They are proposing a significant re-haul in Medicare and Medicaid that would ultimately impact the poor and the elderly -- specifically those currently under the age of 55. A report released by the Kaiser Family Foundation Tuesday found that the block grant system that the GOP is proposing for Medicaid would eliminate coverage for between 31 and 44 million low-income Americans.

The proposal has been rejected by Democrats and the president.

The final version will likely include some combination of the two, experts say, including cuts in defense, since both sides have acknowledged there is leeway there. But given the vast ideological differences between Democrats and Republicans, hatching a final deal may be a challenging task -- especially on how to move forward with Medicare and Medicaid.

"Both parties share that vision that, 'hey we could save money without reducing the quality of care in health care,' but they have very different prescriptions of how you accomplish them," said Donald Marron, director of the Tax Policy Center at the Urban Institute and former member of the president's Council of Economic Advisers.

Vice President Joe Biden is helming a series of meeting with leaders from both sides of the aisle to hash out a deal. Republicans have criticized the president for not taking a more active role himself, but the White House says it's confident that the two sides will reach an agreement.

"We will get a fiscal agreement, we believe. We're optimistic, we believe we can get that," White House Press Secretary Jay Carney said Tuesday. "But to hold one up ... is extremely out of line."

After his second meeting with the group on Tuesday, Biden said that they are "making real progress" and agree on a number of issues, but admitted that "whether we get to the finish line with this group is another question."

The country is expected to hit its debt ceiling next week, by May 16. Treasury Secretary Tim Geithner has said he would implement short-term emergency measures to avoid a crisis, but he has also warned that the ceiling must be raised by August to keep the country from defaulting on its loan.

Debt Ceiling Debate Poses Fresh Challenges for GOP Leadership

The Republican leadership is walking a fine line between negotiations with Democrats and appeasing its own conservative members, who are unwilling to raise the debt limit if their demands are not met -- which include a repeal of the health care law passed last year.

"There's not a lot of time, and it's difficult from the outside to see how our leaders could reach an agreement about a fundamental change in Medicare, a fundamental change in Social Security, really big ticket changes," Marron said.

"A lot of the discussion, at least until very recently, has been about paring the debt limit increase with things that you might view as being more budget process kinds of tools -- discretionary spending caps, triggers -- where Congress would try to set out a vision of where it wants the fiscal posture to go, but then doesn't yet make the specific decisions about how to accomplish it," he added.

While such a move may avert a debt crisis, it's unlikely to appease Tea Party members and those members of Congress who came to the House on the back of their support. Many of them say they want to see not only big spending cuts, they want to see them now.

At a Tea Party gathering Monday, attendees blasted both Boehner and Ryan for not being aggressive enough and threatened to take them out of office if they continued down that path. The event was endorsed by Minnesota congresswoman and presidential hopeful Michele Bachmann.

The Republican Study Committee, a group made up of some of the most conservative House members, is planning to unveil its own conditions for raising the debt ceiling later this week or next week.

The committee is keeping details under lock and key, but a report by Politico suggested that the proposal will call for immediate spending cuts, spending caps at 18 percent of GDP and a balanced-budget amendment.

"[The] proposal is absolutely going to be focused on making sure that we are cutting spending and making reforms that keep it down and ensure that we're not just promising future cuts, but that we're actually doing them today, and making sure that what's promised for tomorrow actually occurs," a Republican aide told ABC News of the RSC proposal.

ABC News' John Parkinson contributed to this report.