Obama Throws Down Gauntlet on Tax Hikes, Republicans Blast Deficit Plan
President Obama, outlining his latest deficit-reduction proposal, called Wednesday for both parties to work together to balance the budget and put America on a path toward paying down its debt. But the address left both sides digging in on one crucial issue -- taxes.
In a case of an unstoppable force meeting an immovable object, Obama said he absolutely would not allow tax cuts for those making above $250,000 to be extended.
Republicans said they absolutely would not accept a new tax hike. "Any plan that starts with job-destroying tax hikes is a non-starter," House Speaker John Boehner said in a written statement.
Based on the response of Republican members of Congress -- as well as several likely presidential candidates -- the address may have served to inflame the debate rather than reset it. Tax hikes weren't the only plank in Obama's budget plan, but they generated the most criticism.
"The only concrete proposal that he proposed was raising taxes," House GOP Leader Eric Cantor said afterward. "That solution falls far short of dealing with the kind of crisis that we're facing."
Rep. Paul Ryan, R-Wis., skewered the president's address, accusing him of "exploiting people's emotions of fear, envy and anxiety."
The response previewed a grueling battle as both parties prepare to trudge through a new set of budget issues in the months ahead. The speech also served as an opening argument for the 2012 campaign, and Obama drew a clear line between his long-term budget plan and Republicans'.
In the speech at George Washington University, he positioned his spending plan as a more "compassionate" alternative to one introduced last week by Ryan. He applauded Republicans for putting a plan on the table to address entitlements, but the praise stopped there.
"The way this plan achieves those goals would lead to a fundamentally different America than the one we've known certainly in my lifetime," Obama said, calling the GOP plan "deeply pessimistic." He suggested Republicans were giving up on basic functions of government.
"It's a vision that says if our roads crumble and our bridges collapse, we can't afford to fix them. If there are bright young Americans who have the drive and the will but not the money to go to college, we can't afford to send them," Obama said of the Republican plan. "It's a vision that says America can't afford to keep the promise we've made to care for our seniors."
The president claimed his proposal would cut $4 trillion from the deficit in 12 years or less. He drew several lines in the sand as he explained how he planned to get there.
Accusing Republicans of cutting services to seniors and poor children while cutting taxes for the rich, Obama said: "That's not right, and that's not going to happen as long as I'm president."
The president's proposal would deal with entitlements like Medicare and Medicaid, but avoid the major changes being pushed by Ryan. The president opposes turning Medicaid into a block-grant program for states and making Medicare seniors purchase government-subsidized insurance, as Ryan proposed. Rather, he vowed to make other changes he claims will extract more than $300 billion in savings from those programs over the next decade. Plus he pushed cuts in discretionary spending, including to defense.
But where Obama departed most sharply from Republicans was his call for rolling back the Bush tax cuts for the most well-off Americans -- meaning a tax hike for households making more than $250,000, or the top 2 percent of wage-earners. Republicans and Democrats had agreed to extend all the Bush tax cuts for two years, but Obama said Wednesday, "I refuse to renew them again" for the top tier.
"The most fortunate among us can afford to pay a little more. I don't need another tax cut," he said.
Republicans have roundly opposed a tax hike for anyone and condemned the proposal, before and after the speech.
"The last thing we should be doing is raising taxes on job-creators, entrepreneurs and small business owners across America," former Massachusetts Gov. Mitt Romney, a likely presidential candidate, said in a statement.
Ryan said he was "very disappointed" with the president, calling his speech "excessively partisan, dramatically inaccurate and hopelessly inadequate."
"What we heard today was a political broadside from our campaigner in chief," Ryan said. "Rather than building bridges, he's poisoning wells."
Having met with the president Wednesday morning before the speech, Boehner said that he made clear to the president that if the government is going to do something credible and meaningful, "raising taxes will not be part of that."
He said after the address that the president's plan did not measure up to Ryan's.
"More promises, hollow targets, and Washington commissions simply won't get the job done," Boehner said.
In his proposal, Obama forecast $770 billion in savings over the next 12 years through non-security discretionary cuts, and another $400 billion in that time frame from the defense budget.
Obama's plan also called for a "failsafe" trigger, which would apply across-the-board spending cuts if the national debt, as a percentage of GDP, is not on the decline by 2014.
On entitlements, he proposed reducing "wasteful" subsidies and faulty payments, while cutting spending on prescription drugs by leveraging Medicare's purchasing power and coaxing generics into the market. He suggested "new incentives" for doctors to improve results and slow the growth of Medicare costs.
Though Obama projected billions in savings, the proposals were far more modest than those outlined by Ryan. The chairman of the House Budget Committee has proposed a plan he claims will cut deficits by $4.4 trillion over the next decade, in large part by overhauling Medicare and Medicaid. He offsets the savings from some of the proposed spending cuts with tax cuts, leaving critics claiming his plan is out of balance, rewarding top-earning Americans while cutting programs for the poor.
While a rebuttal to Ryan's plan, Obama's speech is also a follow-up to the 2012 budget plan he put on the table earlier in the year.
Republicans have simultaneously welcomed Obama's entry into the latest debt debate while ridiculing him for waiting so long to do so.
"This is vintage Obama. He's been standing on the sidelines expecting the rest of us to make the tough decisions," Cantor said.
Separately, a group of liberal Democrats on Wednesday described their latest budget plan, one they said was not necessarily meant as a substitute for the president's. The plan would make no cuts to entitlement programs, but would call for ending the wars in Iraq and Afghanistan and rolling back the Bush tax cuts.
Though the president may face some push-back from the rank-and-file in his party, Democratic congressional leaders voiced support for the president's plan Wednesday.
"The president made it clear: we will protect the health of our seniors by preserving Medicare and Social Security; invest in the education of our children; and ensure the strength of our middle class, as we reduce the deficit," House Democratic Leader Nancy Pelosi said. "Democratic priorities stand in stark contrast with the Republican vision that ends Medicare and shifts costs to seniors as it gives tax breaks to Big Oil and millionaires."