US President Barack Obama unveiled a plan on Wednesday to cut the country's budget deficit by $4 trillion by 2023. The country's fiscal woes are expected to be a hot-button issue in the forthcoming 2012 presidential campaign.
REUTERS - President Barack Obama's proposal to cut the U.S. deficit by $4 trillion over 12 years is as much about preparing for the 2012 election campaign as it is about balancing America's books.
Obama's proposal is aimed at moderate and independent voters who swept him into power in 2008. The proposal likely will form the basis of tough negotiations in the next few weeks between Republicans and Democrats in Congress on the bloated U.S. deficit.
Obama made an appeal to the political center. He said he could match savings that Republicans seek from the Medicare government health insurance program for the elderly and disabled and the Medicaid government health insurance program for the poor, without gutting services that opinion polls show Americans from both parties hold dear.
Obama, criticized for failing to show leadership on the issue, answered that complaint with a barrage of numbers that he said created a framework for lowering the budget deficit.
His speech was an attempt to reclaim control of the debate by identifying the sources of the deficit savings, borrowing from a bipartisan fiscal commission, and talking about the need for tax reform.
But beyond broad goals to squeeze savings from defense, healthcare and other government spending, his proposal was scant on specific measures and did not identify any programs to axe.
It calls for a bipartisan group led by Vice President Joe Biden to begin negotiations next month, meaning more talk that postpones hard decisions. And on defense and Social Security he punted outright and called for further consultations.
Breaking the debt ceiling
The savings he outlined go toward those sought by Republicans in return for their support for raising the U.S. borrowing limit, which is expected to hit its current $14.3 trillion ceiling by mid-May.
But Republicans, who control the U.S. House of Representatives, say they will not permit tax hikes and were already objecting on Wednesday to Obama's proposal to allow taxes on wealthier Americans to rise.
Obama's proposal may appeal to more moderate members of both parties by laying out a path to lowering debt as a share of the economy to 2.5 percent of gross domestic product in 2015, compared with the 3.2 percent projected in the president's fiscal 2012 budget proposal.
Obama proposes a "debt fail-safe" trigger to impose cuts if the debt levels do not decline as planned. This is designed to improve investor confidence by showing the U.S. government is serious about tackling the debt problem and would have the tools to deliver on its promise.
Failure to curb rising debts could lead investors to demand a higher return for lending the country additional money, forcing up interest rates and hurting growth.
Obama took care to answer complaints from liberals, who were dismayed by last week's 11th hour budget deal to avert a government shutdown that resulted in $38 billion in government spending cuts.
They have demanded Obama stand up for Medicare, Medicaid and the Social Security retirement program. In his proposal, Obama limited cuts from healthcare programs to $480 billion by focusing on controlling cost growth and reducing Medicare's high spending on prescription drugs.
In his first major speech since announcing he was running for re-election, Obama set the parameters of the debate on the budget, which may be a pressing issue for voters in 2012.
Obama cast the Republicans as the party that favors the wealthy at the expense of the middle class.
"We cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. And I refuse to renew them again," Obama said.