The president proposed reductions in the growth of Medicare spending, cuts in defense, an overhaul of the tax system to eliminate many loopholes enjoyed by individuals and corporations, and an end to Bush era tax cuts for wealthier Americans.
In a speech at George Washington University Wednesday, Obama drew sharp contrasts with a Republican plan that cuts about $5.8 trillion in spending over the next decade and which the White House says unfairly singles out middle-class taxpayers, older adults and the poor.
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.
To help enforce budget discipline, the president called for resurrecting a spending cap that would be triggered if the nation's debt did not stabilize and begin to decline by 2014. The cap would not apply to Social Security, low-income programs or Medicare benefits.
Even before the president spoke, Republicans were heaping scorn on any plan from the president that would increase taxes. At the same time, the president was risking liberal anger by seeking reductions on venerable Democratic programs like Medicare and Medicaid.
The proposal calls for cutting $770 billion from non-defense domestic spending by 2023. That figure does not include spending on major benefit programs like Medicare, Medicaid and Social Security. It also would reduce defense spending by $400 billion during the same 12 years.
Obama envisions spending cuts in Medicare and Medicaid of $480 billion through 2023. Those are in addition to the $500 billion in reductions over 10 years from projected increases in Medicare spending contained in the health care law Congress passed and Obama signed last year.
The president's planned health care reductions include vague proposals to lower Medicaid costs and reduce Medicare prescription drug expenses.
While the White House concedes that Social Security is facing pressure from an aging population, Obama did not specify any changes to the national retirement system other than calling for bipartisan efforts to "strengthen the program."
In laying out his plan, the president is wading into a potential political thicket. Liberals are loath to making cuts in prized Democratic programs like Medicare and Medicaid, 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.
Obama briefed Congress' bipartisan leadership on the contents of his speech Wednesday morning in the Cabinet Room of the White House. Photographers captured the image of Obama, flanked by House Speaker John Boehner, R-Ohio, and Senate Majority Leader Harry Reid, D-Nev., before the meeting got under way.
For the White House, the speech comes as 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.
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.
Obama could face resistance from Democrats. Senate Majority Leader Harry Reid, D-Nev., on Tuesday reiterated his opposition to changes in Social Security.