Obama to Offer Plan to Cut Deficit by Over $3 Trillion

The plan, which Mr. Obama will lay out Monday morning at the White House, is the administration’s opening move in sweeping negotiations on deficit reduction to be taken up by a joint House-Senate committee over the next two months. If a deal is not enacted by Dec. 23, cuts could take effect automatically across government agencies.

Mr. Obama will call for $1.5 trillion in tax increases, primarily on the wealthy, through a combination of closing loopholes and limiting the amount that high earners can deduct. The proposal also includes $580 billion in adjustments to health and entitlement programs, including $248 billion to Medicare and $72 billion to Medicaid. Administration officials said that the Medicare cuts would not come from an increase in the Medicare eligibility age.

Senior administration officials who briefed reporters on some of the details of Mr. Obama’s proposal said that the plan also counts a savings of $1.1 trillion from the ending of the American combat mission in Iraq and the withdrawal of American troops from Afghanistan.

In laying out his proposal, aides said, Mr. Obama will expressly promise to veto any legislation that seeks to cut the deficit through spending cuts alone and does not include revenue increases in the form of tax increases on the wealthy.

That veto threat will put the president on a direct collision course with the House speaker, John A. Boehner, who said last week that he would not support any legislation that included revenue increases in the form of higher taxes.

Mr. Obama’s proposal is certain to receive sharp criticism from Congressional Republicans, who on Sunday were already taking apart one element of the proposal that the administration let out early: the so-called Buffett Rule. The rule — named for the billionaire investor Warren E. Buffett, who has complained that he is taxed at a lower rate than his employees — calls for a new minimum tax rate for individuals making more than $1 million a year to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers.

That proposal, which was disclosed on Saturday, was met with derision Sunday by Republican lawmakers, who said it amounted to “class warfare” and a political tactic intended to portray his opponents as indifferent to the hardships facing middle-class Americans.

Representative Paul D. Ryan, chairman of the House Budget Committee and a leading proponent of cutting spending on benefit programs like Medicare, said the proposal would weigh heavily on a stagnating economy.

On “Fox News Sunday,” Mr. Ryan said it would add “further instability to our system, more uncertainty, and it punishes job creation.”

“Class warfare,” he said, “may make for really good politics, but it makes for rotten economics.”

Administration officials said Sunday night that they were not including any revenue from the Buffett Rule in Mr. Obama’s overall $3 trillion proposal, adding that it was more of a guiding principle the president will adopt as budget negotiations with Congress advance.

Mr. Obama has been citing Mr. Buffett as he promotes his separate $447 billion jobs-creation plan. He proposes to offset the cost of that plan and to reduce future budget deficits through higher taxes on the wealthy and on corporations after 2013, when the economy will presumably be healthier.

Nonetheless, Republicans made clear on Sunday that higher taxes on the wealthy were not acceptable to them. Appearing on the NBC program “Meet the Press,” Senator Mitch McConnell of Kentucky, the Republican leader, said “it’s a bad thing to do in the middle of an economic downturn. And of course the economy, some would argue, is even worse now than it was when the president signed the extension of the current tax rates back in December.”

Under Mr. Obama’s proposal, $800 billion of the $1.5 trillion in tax increases would come from allowing the Bush-era tax cuts to expire. The other $700 billion, aides said, would come from a combination of closing loopholes and limiting deductions among individuals making more than $200,000 a year and families making more than $250,000.

Mr. Obama’s plan will hover over Congressional budget-cutting negotiations that are under way over the next two months. A bipartisan Congressional committee is charged with coming up with its own cuts by Nov. 23; unless passed by Congress by Dec. 23, $1.2 trillion in cuts to defense and entitlement programs will go into effect automatically in 2013.

Mr. Obama, however, is challenging the Congressional committee to go well beyond its mandate. “He’s showing them where they could find the savings,” one administration official said.

Liberal-leaning organizations were rallying behind Mr. Obama’s proposals on Sunday.

“The report that the president is planning to ask millionaires and billionaires to pay taxes at a higher rate than their secretaries pay is welcome news that will be wildly popular with voters,” said Roger Hickey, co-director of the Campaign for America’s Future, a progressive center, in a statement. “We applaud the president for heeding the advice from progressives that he go big on his jobs plan.”

The Obama proposal has little chance of becoming law unless Republican lawmakers bend. But by focusing on the wealthiest Americans, the president is sharpening the contrast between Republicans and Democrats with a theme he can carry into his bid for re-election in 2012.

Mr. Obama’s proposal is also an effort to reassure Democrats who had feared that he would agree to changes in programs like Medicare without forcing Republicans to compromise on taxes. Indeed, Mr. Hickey warned in his statement that the president should not raise the Medicare eligibility age, advice that Mr. Obama, so far, seems to have heeded.


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