Obama pivots, eyes Medicare changes, tax increases

By Jim Kuhnhenn

Associated Press

Published: Wednesday, April 13 2011 8:33 a.m. MDT

WASHINGTON — President Barack Obama, risking liberal anger and Republican scorn, is turning his attention to the nation's crushing debt with an anti-deficit framework that tackles politically sensitive health care programs while also increasing taxes.

The president on Wednesday plans to deliver a speech outlining his approach to reducing the deficit by lowering spending in Medicare and Medicaid, raising taxes on the wealthy and cutting defense costs. Obama's address will draw contrasts with a Republican plan that cuts $5 trillion in spending over the next decade and which the White House says unfairly singles out middle-class taxpayers, older adults and the poor.

This new clash, just a week after the president announced he would seek re-election, ensures that the nation's fiscal health will be at the center of the 2012 presidential campaign. For the past two months, Obama has been arguing to protect his core spending priorities, including education and innovation. His turn to deficit reduction reflects the pressures he faces in a divided Congress and with a public increasingly anxious about the nation's debt, now exceeding $14 trillion.

The president is wading into a potential political thicket. Liberals fear he will propose cuts in prized Democratic programs like Medicare and Medicaid, the health care programs for older adults, the disabled and the poor, and in Social Security. Moderates worry that his plan could unravel bipartisan deficit-cutting negotiations. And Republicans already are poised to reject any proposal that includes tax increases.

The White House wouldn't offer details of the president's approach ahead of the speech. But an official commenting on the condition of anonymity said the plan borrows from the December recommendations of Obama's bipartisan fiscal commission, which proposed $4 trillion in deficit reduction over 10 years.

In a preview, the White House said the speech aims to achieve "balanced" deficit reduction by keeping domestic spending low, reducing the defense budget, cutting excess health care spending in the nation's biggest benefit programs, and eliminating loopholes and breaks in the tax system.

White House officials have repeatedly described the speech as Obama's "vision" of deficit reduction, a term that suggests the plan could contain broad proposals but few specific measures.

Republicans already were taking a dismissive tone. "If he were serious, he'd be talking about a detailed roadmap for action, not just grabbing headlines by announcing another speech," Senate Republican leader Mitch McConnell said on Wednesday.

For the White House, the speech at George Washington University comes as Obama pushes Congress to raise the limit on the national debt, which will permit the government to borrow more and thus meet its financial obligations. The country will reach its debt limit of $14.3 trillion by May 16. The Treasury Department has warned that failure to raise it by midsummer would drive up the cost of borrowing and destroy the economic recovery.

Obama will brief Congress' bipartisan leadership in the contents of his speech Wednesday morning at the White House.

His speech comes just before Congress votes on a $38 billion package of spending cuts that averted a government shutdown last week. Despite widespread antipathy toward the deal in both parties, House Republicans and the White House predicted the plan, which covers spending for the next six months, would pass.

As for the bigger, long-term deficit proposal, the White House was keeping a tight lid on details. But spokesman Jay Carney made clear the president would call for changes in Medicare and Medicaid. Obama also was expected to resurrect the tax increases on wealthy Americans that he put off in December as part of a tax deal with Congress. White House officials have also said the president intends to call for a reduction "tax expenditures," the tax breaks and loopholes that lower tax revenue.

"He believes that there has to be a balanced approach" to reducing long-term deficits, Carney said.

The president's proposal is meant to be in sharp contrast with the plan offered by House Budget Committee Chairman Paul Ryan., R-Wis. That budget proposal, embraced by the House Republican leadership, would reduce spending by more than $5 trillion over 10 years with structural overhauls to Medicare and Medicaid while also making permanent all Bush-era tax cuts.

Obama could face resistance from Democrats. Senate Majority Leader Harry Reid, D-Nev., on Tuesday reiterated his opposition to changes in Social Security.

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