Obama sets out plan to cut debt by $4 trillion
PRESIDENT Barack Obama yesterday sought to seize the initiative in the debate on how to cut America's soaring debt, as he proposed reform of key entitlement programmes, coupled with higher taxes for the rich and an end to many of the loopholes that festoon the US tax code.
Mr Obama set out his plan less than a week after a last-minute Congressional deal to trim $38bn (€26.3) from the 2011 budget averted a government shutdown. This, however, was a fleeting truce at best in an argument set to dominate next year's presidential campaign.
In a hastily arranged speech at George Washington University, the president set a goal of reducing the federal deficit by $4 trillion (€2.76tn) over the next 10 to 12 years, to bring it to around 2pc of gross domestic product by the end of the decade. That compares with a budget deficit currently running at more than $1.5tn (€1.03tn) annually, around 10pc of GDP.
Mr Obama's proposals were essentially the Democratic counter to a Republican blueprint presented last week by Paul Ryan, chairman of the House Budget Committee and one of the party's most influential economic policymakers.
The Ryan plan, called 'A Path to Prosperity', calls for a $6tn reduction in federal spending over 10 years -- including a radical restructuring of Social Security, Medicare and Medicaid, the giant federal entitlement programmes that account for nearly half of government spending -- that Democrats have already rejected out of hand.
The fiercest, but far from the only, point of contention is the future of the Bush-era tax cuts, now due to expire at the end of 2012 after being extended at the end of last year. Mr Obama wants to end the cuts for richer Americans earning more than $250,000, but for Republicans that is a non-starter.
Despite the jockeying, some common ground does exist between the sides. Both agree that tax loopholes must be closed, while even Eric Cantor, the Republican majority leader in the House, has admitted that spending cuts alone will not get the finances back in order.
Furthermore, a compromise is already on the table, in the report delivered last November by the bipartisan debt reduction commission set up by Mr Obama. Its non-binding conclusions involve a mix of revenue increases by raising some taxes and closing loopholes, spending cuts and changes to entitlement programmes.
But any agreement is unlikely this side of the November 2012 election in which Mr Obama is seeking a second term. (© Independent News Service)