Obama to Announce Specific Plans for Cutting U.S. Deficit, Plouffe Says

President Barack Obama will announce long-term proposals this week for cutting the federal deficit, following up on the budget deal he reached with congressional leaders that averted a government shutdown, White House adviser David Plouffe said.

The president will set specific deficit-reduction targets and a timeline for reaching them, Plouffe said on CNN’s “State of the Union.” Obama will use a “scalpel, not a machete” and take a “balanced approach,” Plouffe said on “Fox News Sunday.” The president will address the nation on April 13, an administration official said.

The tense negotiations between Obama and congressional leaders that produced a last-minute deal two nights ago to keep the government operating underscored the difficulties to come. Within weeks, the government may be forced to increase the $14.3 trillion federal debt ceiling to ensure the U.S. will meet its financial obligations. Republicans said they will demand major concessions on spending before agreeing to raise the debt limit.

House Majority Leader Eric Cantor, a Virginia Republican, said on “Fox News Sunday” that Republicans will demand guarantees on cutting entitlement spending. The American people “don’t want spending to spiral out of control,” he said.

He also questioned Obama’s sincerity as a budget cutter. “For the past two months, we have had to bring this president kicking and screaming” to accept spending cuts, he said.

A Second Recession

A failure to raise the debt limit “will spin us into a second recession,” Democratic Senator Dick Durbin of Illinois said on CNN. Senator Charles Schumer, a New York Democrat, said yesterday on CBS’s “Face the Nation” that failing to raise the debt ceiling would be “playing with fire that could actually have the credit markets stop taking U.S. debt.”

Republican Representative Jeb Hensarling of Texas, on CNN, emphasized the need for spending cuts over increased borrowing.

“At some point, you just got to quit spending money you don’t have,” he said. “I do not want America to default on its debt. But the president is going to have to start the process of cutting up the credit cards, pure and simple.”

Plouffe said Obama in his speech this week will address the need to control entitlement spending on such programs as Medicare and Medicaid that provide health care for millions of Americans. The Democratic president also will renew his call for higher taxes for the wealthy that were lowered when Republican President George W. Bush was in office and preserved through 2012 under a congressional compromise under Obama.

Trillion-Dollar Tax Cut

Obama believes “a trillion-dollar” tax cut for those making more than $250,000 a year is unacceptable, Plouffe said. Upper-income Americans “need to contribute to the deficit reduction in this country,” he said.

As for the debt limit, Plouffe said, “We should not be playing brinksmanship with full faith and credit of the United States.”

Details of the budget compromise for 2011 will be released to the public tomorrow, Schumer said on CBS. “The cuts are across the board,” he said.

To contact the editor responsible for this story: Ann Hughey at ahughey@bloomberg.net

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