Obama Says He Is `Eager' to Tackle Spending on Health, Tax-Code Overhaul
President Barack Obama News Conference
Alex Wong/Getty Images
President Barack Obama said he’s “eager” to tackle defense spending, health care and the tax code.
President Barack Obama said he’s “eager” to tackle defense spending, health care and the tax code. Photographer: Alex Wong/Getty Images
Feb. 15 (Bloomberg) -- David Levy, chairman of the Jerome Levy Forecasting Center, talks about the potential effect of aggressive action to reduce the U.S. budget deficit on the economy. Levy speaks with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Feb. 15 (Bloomberg) -- Former Federal Reserve Vice Chairman Alice Rivlin talks about President Barack Obama's $3.7 trillion budget proposal and the outlook for action on solutions for long-term deficits fueled by entitlement programs. Rivlin, a member of Obama's deficit-reduction commission, speaks with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Obama Says He's Ready to Work With Parties on Medicare
Jim Watson/AFP/Getty Images
President Barack Obama said he wouldn’t sign a bill that lowers corporate taxes while preserving loopholes.
President Barack Obama said he wouldn’t sign a bill that lowers corporate taxes while preserving loopholes. Photographer: Jim Watson/AFP/Getty Images
President Barack Obama said he is “prepared to work with Democrats and Republicans” to seek solutions for long-term deficits fueled by entitlement programs such as Medicare and Medicaid.
“This is going to be a negotiation process,” Obama said at a Washington news conference, saying a solution to “huge problems” from Medicare and Medicaid spending are possible if “all sides are serious about it and all sides are willing to give a little bit.”
The president said Social Security doesn’t present such an immediate threat to U.S. finances and that he’s confident the administration and Congress can find a bipartisan way to make the retirement system “stable and stronger.”
Obama sent Congress a $3.7 trillion budget yesterday that projects the federal deficit will exceed $1 trillion for the fourth consecutive year in 2012.
He didn’t offer a specific overhaul of Medicare, Medicaid or Social Security, which represent about 40 percent of the budget.
The federal deficit for the current fiscal year is forecast to hit a record $1.6 trillion -- 10.9 percent of gross domestic product. Under Obama’s plan it would be $1.1 trillion in 2012, 7 percent of GDP. The budget forecasts the deficit will be $627 billion in 2017, or 3 percent of GDP, a level the administration says is sustainable. The shortfall would grow in subsequent years, reflecting the impact of baby boomers drawing Social Security payments and Medicare benefits.
‘Tough Choices’
The government must make “tough choices,” Obama said today. “Cutting domestic spending alone won’t be enough to meet our long term fiscal challenges.” He said he’s “eager” to tackle defense spending, health care and the tax code. “Everyone’s going to have to give a little bit.”
On corporate taxes, Obama said “if we are going to get serious about deficit reduction and debt reduction, then we’ve got to look at all the sources of deficit and debt.” He said he wouldn’t sign a bill that lowers corporate taxes while preserving loopholes.
“We shouldn’t provide special treatment to the oil industry when they’ve been making huge profits,” he said.
Spending, Revenue
About two-thirds of the deficit reduction under Obama’s budget plan would come from spending cuts and the rest from increases in taxes and government fees. Obama previously pledged to freeze non-security discretionary spending for the next five years, and under his budget about half of all federal agencies would see their budgets reduced from levels in 2010, the last time agencies operated under an enacted budget, according to administration documents.
Republicans who control the House have deemed the budget for the fiscal year that begins Oct. 1 insufficient to reduce the federal debt. The budget falls short of the deficit reduction that Obama’s fiscal commission proposed in December and would have a modest impact on the $12 trillion in total deficits the Congressional Budget Office projects the government will run up over the next 10 years.
“Entitlements are going to be a key part of this issue as is tax reform,” Obama said today. He also said lawmakers must consider “unjustifiable” tax breaks.
This year’s deficit as a proportion of GDP is the highest since the 21.5 percent in 1945 at the end of World War II.
The budget calls for $1.5 trillion in tax increases over the next 10 years, with the bulk of that coming from allowing former President George W. Bush’s tax cuts for those earning more than $250,000 to expire.
‘Carried Interest’
Another $300 billion would come from limiting the ability of the wealthy to take itemized deductions. It would also impose a $30 billion “financial crisis responsibility fee” on banks, a $15 billion tax increase on the “carried interest” paid to investment managers and rescind a dozen tax breaks for the oil, gas and coal industry to raise more than $46 billion over 10 years.
Even as the battle lines over the 2012 budget are drawn, Congress and the administration continue to haggle over spending for the 2011 fiscal year.
The government has been operating under temporary spending measures known as continuing resolutions; the latest one ends March 4.
Pressure on Spending
Last week, after House Republican leaders said they would propose reducing the 2011 budget by about $35 billion over 2010 spending levels, their members forced them to come up with more cuts for a $61 billion reduction. The revised plan outlined Feb. 11 would end more than 100 government programs and cut spending on areas including the environment, health care, energy and transportation.
Also looming is a fight later this year when Obama seeks to increase the nation’s $14.3 trillion debt limit, needed to prevent a default on government obligations. Republican leaders have said they will demand deep spending cuts in exchange, and a number of Tea Party-backed members want to go further than their leaders may propose.
To contact the reporter on this story: Kate Andersen Brower in Washington at kandersen7@bloomberg.net
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net
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