Obama pivots, eyes Medicare changes, tax increases

WASHINGTON - (AP) - Challenging Republican budget plans, President Barack Obama on Wednesday proposed lowering the nation's future deficits by $4 trillion over a dozen years through a blend of specific measures and vague objectives designed to lower spending in politically sensitive health care programs while also increasingtaxes.The president proposed reductions in the growth of Medicarespending, cuts in defense, an overhaul of the tax system toeliminate 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, Obamadrew sharp contrasts with a Republican plan that cuts about $5.8trillion in spending over the next decade and which the White Housesays unfairly singles out middle-class taxpayers, older adults andthe poor.This new clash, just a week after the president announced hewould seek re-election, ensures that the nation's fiscal healthwill be at the center of the 2012 presidential campaign. For thepast two months, Obama has been arguing to protect his corespending priorities, including education and innovation. His turnto deficit reduction reflects the pressures he faces in a dividedCongress and with a public increasingly anxious about the nation'sdebt, now exceeding $14 trillion.

To help enforce budget discipline, the president called forresurrecting a spending cap that would be triggered if the nation'sdebt did not stabilize and begin to decline by 2014. The cap wouldnot apply to Social Security, low-income programs or Medicarebenefits.

Even before the president spoke, Republicans were heaping scornon any plan from the president that would increase taxes. At thesame time, the president was risking liberal anger by seekingreductions on venerable Democratic programs like Medicare andMedicaid.The president's plan, outlined in a seven-page White House factsheet, draws many of its ideas from the December recommendations ofObama's bipartisan fiscal commission, which proposed $4 trillion indeficit reduction over 10 years. Like the commission's plan, threequarters of the deficit reduction would come from spending cuts,including lower interest payments as the debt eases. One quarter,or $1 trillion, would come from additional tax revenue.The proposal calls for cutting $770 billion from non-defensedomestic spending by 2023. That figure does not include spending onmajor benefit programs like Medicare, Medicaid and Social Security.It also would reduce defense spending by $400 billion during thesame 12 years. Obama envisions spending cuts in Medicare and Medicaid of $480billion through 2023. Those are in addition to the $500 billion inreductions over 10 years from projected increases in Medicarespending contained in the health care law Congress passed and Obamasigned last year.The president's planned health care reductions include vagueproposals to lower Medicaid costs and reduce Medicare prescriptiondrug expenses.While the White House concedes that Social Security is facingpressure from an aging population, Obama did not specify anychanges to the national retirement system other than calling forbipartisan efforts to "strengthen the program." In laying out his plan, the president is wading into a potentialpolitical thicket. Liberals are loath to making cuts in prizedDemocratic programs like Medicare and Medicaid, and in SocialSecurity. Moderates worry that his plan could unravel bipartisandeficit-cutting negotiations. And Republicans already are poised toreject any proposal that includes tax increases.Obama briefed Congress' bipartisan leadership on the contents ofhis speech Wednesday morning in the Cabinet Room of the WhiteHouse. Photographers captured the image of Obama, flanked by HouseSpeaker John Boehner, R-Ohio, and Senate Majority Leader HarryReid, D-Nev., before the meeting got under way. For the White House, the speech comes as Obama pushes Congressto raise the limit on the national debt, which will permit thegovernment 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 bymidsummer would drive up the cost of borrowing and destroy theeconomic recovery.The president's proposal is meant to be in sharp contrast withthe plan offered by House Budget Committee Chairman Paul Ryan.,R-Wis. That budget proposal, embraced by the House Republicanleadership, would reduce spending by more than $5 trillion over 10years with structural overhauls to Medicare and Medicaid while alsomaking permanent all Bush-era tax cuts.Obama could face resistance from Democrats. Senate MajorityLeader Harry Reid, D-Nev., on Tuesday reiterated his opposition tochanges in Social Security.

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