US President Barack Obama unveiled a politically risky plan to reduce the US deficit by US$4 trillion over 12 years by cutting healthcare and defense while raising some taxes.
Obama’s proposal on Wednesday set the stage for the ideological and political fight that is sure to dominate next year’s presidential and congressional campaign.
Under Obama’s plan, three quarters of the deficit reduction would come from spending cuts, including lower interest payments as the debt eases. One quarter, or US$1 trillion, would come from additional tax revenue.
“We have to live within our means, reduce our deficit and get back on a path that will allow us to pay down our debt,” he said in a speech at George Washington University.
NOT FAR ENOUGH
Even before Obama’s speech announcing his proposal, Republicans argued that it didn’t go far enough to reduce a debt that has reached US$14 trillion. They also oppose any tax increases.
“If we’re going to resolve our differences and do something meaningful, raising taxes will not be part of that,” Republican House Speaker John Boehner said.
The House and Senate were scheduled yesterday to vote on legislation cutting almost US$40 billion from the budget for the current year, but Obama and his Republican rivals are both eager to move on to multiyear spending plans that cut trillions of dollars, not billions.
Yesterday’s votes were on a long-overdue spending measure funding the day-to-day budgets of federal agencies through September. Later in the day, Republicans dominating the House were to debate a plan for next year and beyond that promises to drastically cut spending.
Obama and the Democrats have rejected a Republican proposal that would reduce spending by US$5.8 trillion over the next decade, largely through cuts in healthcare programs for the elderly and the poor. It would also cut taxes for corporations and the wealthy.
DIM PROSPECTS
Prospects are dim for the quick passage of either proposal. While the Republicans are likely to win approval for their plan in the House of Representatives, where they have a majority, the Democratic-led Senate would reject it.
For all his tough talk, Obama called for both parties to work with him and strike a deficit cutting compromise. He asked party leaders to name negotiating teams and set a June deadline for an agreement.
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