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Obama eyes Medicare changes, tax increases

By JIM KUHNHENN
April 13, 2011

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. The Treasury Department reports on the federal budget deficit for March. In February, the government ran the largest-ever budget gap for a single month. The shortfall kept this year's annual deficit on pace to end as the biggest in U.S. history, $1.5 trillion. And that's not likely to change much, even after President Barack Obama and congressional Republicans struck a deal last week to cut $38.5 billion from this year's budget. (AP Photo/Charles Dharapak)

President Barack Obama, two years into a presidency marked by increased spending on a weak economy, is turning his attention to the nation’s crushing debt and trying to counter a Republican anti-deficit plan with one of his own.

The president on Wednesday was to deliver a speech outlining his proposal to reduce spending in the biggest government benefits programs, 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.”

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, 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.

For the White House, the speech at George Washington University comes as it 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.

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

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. 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.”

The president’s proposal is meant to be in sharp contrast with the plan offered by House Budget Committee Chairman Paul Ryan., R-Wis. That budget proposal, embraced by the House Republican leadership, would reduce spending by more than $5 trillion over 10 years with structural overhauls to Medicare and Medicaid while also making permanent all Bush-era tax cuts.

“Where the president believes the House Republican plan fails starkly is that it is imbalanced, that it places all the burden on the middle class, on seniors, on the disabled, on people in nursing homes, through its rather drastic reform of Medicare and Medicaid,” Carney said.

Obama could face resistance from Democrats. Senate Majority Leader Harry Reid, D-Nev., has said repeatedly that he would not support making changes to 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. 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.

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 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.”

Obama has invited members of his National Commission on Fiscal Responsibility and Reform to the speech. The bipartisan commission offered a plan in December to reduce the deficit by $4 trillion over 10 years. Though Obama has said he disagrees with some commission proposals, the group did address spending with a mix of entitlement changes, defense cuts and increases in tax revenue.

Copyright © 2011 The Associated Press

 

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