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Originally published September 18, 2011 at 10:34 PM | Page modified September 19, 2011 at 6:29 AM

Obama plan would cut spending by $3 trillion

President Obama will unveil a deficit-reduction plan Monday that uses entitlement reform, tax increases and war savings to reduce government...

The New York Times

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WASHINGTON — President Obama will unveil a deficit-reduction plan Monday that uses entitlement reform, tax increases and war savings to reduce government spending by more than $3 trillion over the next 10 years, administration officials said.

The plan is the administration's opening salvo in sweeping negotiations on deficit reduction to be taken up by a joint House-Senate committee over the next two months. If a deal is not struck by Dec. 23, cuts could take effect automatically across government agencies.

Obama will call for $1.5 trillion in tax increases, primarily on the wealthy, through a combination of closing loopholes and limiting the amount that high earners can deduct. The proposal also includes $580 billion in adjustments to health and entitlement programs, including $248 billion to Medicare and $72 billion to Medicaid. Administration officials said the Medicare cuts would not come from an increase in the eligibility age.

Senior administration officials who briefed reporters on some of the details of Obama's proposal said the plan also counts a savings of $1.1 trillion from ending the U.S. combat mission in Iraq and the withdrawal of U.S. troops from Afghanistan.

In laying out his proposal, aides said, Obama will expressly promise to veto any legislation that seeks to cut the deficit through spending cuts alone and does not include revenue increases in the form of tax increases on the wealthy.

That veto threat will put the president on a direct collision course with House Speaker John Boehner, R-Ohio, who has said he would not support legislation that included revenue increases in the form of higher taxes.

GOP blasts "Buffett Rule"

Obama's proposal is certain to receive sharp criticism from congressional Republicans, who on Sunday were already taking apart one element of the proposal that the administration let out early: the so-called Buffett Rule.

The rule — named for billionaire investor Warren Buffett, who has complained that he is taxed at a lower rate than his employees — calls for a new minimum tax rate for individuals making more than $1 million a year to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers.

That proposal, which was disclosed Saturday, was met with derision by Republican lawmakers, who said it amounted to "class warfare" and was a political tactic intended to portray Obama's opponents as indifferent to hardships facing middle-class Americans.

Rep. Paul Ryan, chairman of the House Budget Committee and a leading proponent of cutting spending on benefit programs such as Medicare, said the millionaire-tax proposal would weigh heavily on a stagnating economy.

On "Fox News Sunday," Ryan, R-Wis., said it would add "further instability to our system, more uncertainty, and it punishes job creation."

"Class warfare," he said, "may make for really good politics, but it makes for rotten economics."

Sen. Dick Durbin, D-Ill., took direct aim at the Republican speaker of the House when he said Sunday on CNN's "State of the Union": "I wonder if John Boehner knows what it sounds like when he continues to say the position of the Republican Party in America is you can't impose one more penny in taxes on the wealthiest people. I wonder if he understands how that sounds in Ohio, where people are struggling paycheck to paycheck."

Durbin said taxes should be raised on "those who are wealthy and comfortable and wouldn't even notice it."

Administration officials said Sunday night that they were not including any revenue from the Buffett Rule in Obama's overall $3 trillion proposal, adding that it was more of a guiding principle the president will adopt as budget negotiations with Congress advance.

Obama has been citing Buffett as the president promotes his separate $447 billion jobs-creation plan. He proposes to offset the cost of that plan and to reduce future budget deficits through higher taxes on the wealthy and on corporations after 2013, when the economy will presumably be healthier.

Nonetheless, Republicans made clear on Sunday that higher taxes on the wealthy were not acceptable. On the NBC program "Meet the Press," Sen. Mitch McConnell of Kentucky, the Republican leader, said "it's a bad thing to do in the middle of an economic downturn. And of course the economy, some would argue, is even worse now than it was when the president signed the extension of the current tax rates back in December."

Letting Bush-era cuts expire

Under Obama's plan, $800 billion of the $1.5 trillion in tax increases would come from allowing the Bush-era tax cuts for the wealthiest to expire. The other $700 billion, aides said, would come from closing loopholes and limiting deductions among individuals making more than $200,000 a year and families making more than $250,000.

Obama's plan will hover over congressional budget-cutting negotiations that are under way. A bipartisan committee is charged with coming up with its own cuts by Dec. 23; otherwise $1.2 trillion in cuts to defense and entitlement programs will go into effect automatically in 2013.

Obama, however, is challenging the congressional committee to go well beyond its mandate. "He's showing them where they could find the savings," one administration official said.

Material from The Associated Press is included in this report.

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