Obama deficit plan: Medicare changes, tax hikes

In this April 8, 2011 photo, President Obama poses for photographers in the Blue Room at the White House in Washington after he spoke regarding the budget and averted government shutdown after a deal was made between Republican and Democrat lawmakers. AP Photo/Charles Dharapak

WASHINGTON - President Barack Obama, two years into a presidency that increased spending to prime a weak economy, is turning his attention to the nation's crushing debt and trying to counter a Republican anti-deficit plan with a framework of his own that tackles politically sensitive health care programs while also increasing taxes.

The president on Wednesday was to deliver a speech outlining his proposal to reduce spending in Medicare and Medicaid, raise taxes on the wealthy and cut defense costs. In a pre-emptive response Tuesday, House Speaker John Boehner, R-Ohio, called any proposed tax increase "a nonstarter."

His vehement opposition to new taxes was echoed just hours in advance of Obama's speech by the No. 2 GOP leader, Rep. Eric Cantor of Virginia.

"Most people understand that Washington doesn't have a revenue problem, it has a spending problem," House Majority Leader Eric Cantor, R-Va., said on "The Early Show" Wednesday. "We can't raise taxes. That was settled last November during the elections."

Cantor: Spending, not revenue, is the problem

Cantor acknowledged "we cannot fix our fiscal crisis and bring down the debt just through cuts alone" but said spending must be the priority.

"Everyone understands that Washington has been on a spending binge of late and we've got to start spending money the way taxpayers are right now and that's learning how to do more with less," he said.

The White House wouldn't offer details of the president's approach ahead of the speech. But an official commenting on the condition of anonymity said the plan borrows from the December recommendations of Mr. Obama's bipartisan fiscal commission, which proposed $4 trillion in deficit reduction over 10 years.

In a preview of the speech, the White House said it aims to achieve "balanced" deficit reduction by keeping domestic spending low, reducing the defense budget, cutting excess health care spending in the nation's biggest benefit programs, and eliminating loopholes and breaks in the tax system.

Sen. Republican leader Mitch McConnell suggested that Mr. Obama was late getting in the game.

Both sides line up to hit Obama's deficit plan

"Those on the left and right who have been clamoring for presidential leadership on these issues have to welcome the president's long-awaited decision to engage on them," he said.

But the president's delay was deliberate. He waited until Rep. Paul Ryan laid out the Republican plan, reports CBS News White House correspondent Bill Plante.

That proposal envisions slashing the deficit by $5 trillion over the next decade by making Medicare a voucher program and putting caps on Medicaid, food stamps and housing assistance programs, while reducing taxes for the very wealthy and for corporations.

This new clash, just a week after the president announced he would seek re-election, ensures that the nation's fiscal health will be at the center of the 2012 presidential campaign. For the past two months, Mr. Obama has been arguing to protect his core spending priorities, including education and innovation. His turn to deficit reduction reflects the pressures he faces in a divided Congress and with a public increasingly anxious about the nation's debt, now exceeding $14 trillion.

The president is wading into a potential political thicket. Liberals fear he will propose cuts in prized Democratic programs like Medicare and Medicaid, the health care programs for older adults, the disabled and the poor, and in Social Security. Moderates worry that his plan could unravel bipartisan deficit-cutting negotiations. And Republicans already are poised to reject any proposal that includes tax increases.

The president's goal Wednesday is to appear as the adult voice of reason in the deficit debate.

What's in the budget?

For the White House, the speech at George Washington University also comes as Mr. Obama pushes Congress to raise the limit on the national debt, which will permit the government to borrow more and thus meet its financial obligations. The country will reach its debt limit of $14.3 trillion by May 16. The Treasury Department has warned that failure to raise it by midsummer would drive up the cost of borrowing and destroy the economic recovery.

Republicans have said they would not raise the debt ceiling without deficit reduction, or at least without the White House showing progress toward sizable cuts in long-term spending. White House spokesman Jay Carney reiterated the White House view Tuesday that passage of a higher debt ceiling should not be encumbered with deficit-reduction legislation.

Pressure from Congress, however, eventually could result in a debt ceiling deal that includes fiscal discipline measures, though not necessarily a wholesale restructuring of government benefit programs.

Mr. Obama will brief Congress' bipartisan leadership in the contents of his speech Wednesday morning at the White House.

Mr. Obama's speech comes just before Congress votes on a $38 billion package of spending cuts that averted a government shutdown last week. Despite widespread antipathy toward the deal in both parties, House Republicans and the White House predicted the plan, which covers spending for the next six months, would pass.

As for the bigger, long-term deficit proposal, the White House was keeping a tight lid on details. But Carney made clear the president would call for changes in Medicare and Medicaid. Mr. Obama also was expected to resurrect the tax increases on wealthy Americans that he put off in December as part of a tax deal with Congress.

"He believes that there has to be a balanced approach" to reducing long-term deficits, Carney said. "And that's entitlements, tax expenditures and defense."

Mr. Obama could face resistance from Democrats. Senate Majority Leader Harry Reid, D-Nev., on Tuesday reiterated his opposition to changes in Social Security.

The president's speech also comes as six senators — three Republicans and three Democrats — have been working on a bipartisan compromise that would tackle Medicare, Medicaid and Social Security costs but also seek to raise more revenue through tax increases. Mr. Obama's decision to give a speech caught those senators by surprise. The Democrats are Mark Warner of Virginia, Dick Durbin of Illinois and Kent Conrad of North Dakota. The Republicans are Saxby Chambliss of Georgia, Tom Coburn of Oklahoma and Mike Crapo of Idaho.

Senate aides said members of that so-called Gang of Six would not attend the speech to avoid any suggestion that they supported the president's view or that the president endorsed their work.

Meanwhile, Republicans were already girding for a confrontation.

"If the president begins the discussion by saying we must increase taxes on the American people — as his budget does — my response will be clear: Tax increases are unacceptable and are a nonstarter," Boehner declared Tuesday. "We don't have deficits because Americans are taxed too little, we have deficits because Washington spends too much."

In the Senate, the top Republican on the Budget Committee said Mr. Obama needed to offer not just a speech but a new budget with detailed deficit-cutting proposals.

"We can begin a conversation if his proposal is substantive and is capable of evaluation, even if I might disagree with it," Sen. Jeff Sessions, R-Ala., said. "What I don't find acceptable at this late date is just another speech with vague generalities."

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