Obama pivots, eyes Medicare changes, tax increases

[April 13, 2011]  WASHINGTON (AP) -- President Barack Obama, two years into a presidency that increased spending to prime a weak economy, is turning his attention to the nation's crushing debt and trying to counter a Republican anti-deficit plan with a framework of his own that tackles politically sensitive health care programs while also increasing taxes.

The president on Wednesday was to deliver a speech outlining his proposal to reduce spending in Medicare and Medicaid, raise taxes on the wealthy and cut defense costs. In a pre-emptive response Tuesday, House Speaker John Boehner, R-Ohio, called any proposed tax increase "a nonstarter."

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 of the speech, the White House said it 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.

Obama's speech 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.

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.

Republicans have said they would not raise the debt ceiling without deficit reduction, or at least without the White House showing progress toward sizable cuts in long-term spending. White House spokesman Jay Carney reiterated the White House view Tuesday that passage of a higher debt ceiling should not be encumbered with deficit-reduction legislation.

Pressure from Congress, however, eventually could result in a debt ceiling deal that includes fiscal discipline measures, though not necessarily a wholesale restructuring of government benefit programs.

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

Obama's 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 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.

"He believes that there has to be a balanced approach" to reducing long-term deficits, Carney said. "And that's entitlements, tax expenditures and defense."

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.

"Where the president believes the House Republican plan fails starkly is that it is imbalanced, that it places all the burden on the middle class, on seniors, on the disabled, on people in nursing homes, through its rather drastic reform of Medicare and Medicaid," Carney said.

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

The president's speech also comes as six senators -- three Republicans and three Democrats -- have been working on a bipartisan compromise that would tackle Medicare, Medicaid and Social Security costs but also seek to raise more revenue through tax increases. Obama's decision to give a speech caught those senators by surprise. The Democrats are Mark Warner of Virginia, Dick Durbin of Illinois and Kent Conrad of North Dakota. The Republicans are Saxby Chambliss of Georgia, Tom Coburn of Oklahoma and Mike Crapo of Idaho.

Senate aides said members of that so-called Gang of Six would not attend the speech to avoid any suggestion that they supported the president's view or that the president endorsed their work.

Meanwhile, Republicans were already girding for a confrontation.

"If the president begins the discussion by saying we must increase taxes on the American people -- as his budget does -- my response will be clear: Tax increases are unacceptable and are a nonstarter," Boehner declared Tuesday. "We don't have deficits because Americans are taxed too little, we have deficits because Washington spends too much."

In the Senate, the top Republican on the Budget Committee said Obama needed to offer not just a speech but a new budget with detailed deficit-cutting proposals.

"We can begin a conversation if his proposal is substantive and is capable of evaluation, even if I might disagree with it," Sen. Jeff Sessions, R-Ala., said. "What I don't find acceptable at this late date is just another speech with vague generalities."

[Associated Press; By JIM KUHNHENN]

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