(Photo: REUTERS/Larry Downing)
President Obama asked the congressional supercommittee to include additional spending cuts to help pay for his jobs bill, in a speech in the White House Rose Garden Monday. Though his plan was advertised as a $4-trillion deficit reduction package, closer inspection revealed a less ambitious proposal.
Obama announced his jobs bill before a joint session of Congress on Sept. 8. He asked Congress to spend more money on infrastructure and aid to states, extend the payroll tax cut and extend unemployment benefits, in order to lower unemployment.
At the time, he said the plan would be paid for, rather than add to the deficit. Obama did not specify, however, how the plan would be paid for. On Monday, he answered that question with his deficit reduction plan.
The Budget Control Act, passed in August to raise the nation's debt ceiling, created the Joint Select Committee on Deficit Reduction, or “supercommittee,” to lower future deficits by at least $1.2 trillion over the next 10 years. Obama is now asking the supercommittee to find additional savings to pay for his jobs bill.
“The plan produces approximately $4.4 trillion in deficit reduction net the cost of the American Jobs Act,” a White House press release stated.
In that $4.4 trillion, however, the White House is taking into account the $1.2 trillion in cuts that were already passed under the Budget Control Act, $1.1 trillion in savings from a drawdown of troops in Iraq and Afghanistan that have already been planned and $430 billion in savings in interest payments on the debt. Subtracting those numbers from the $4.4 trillion figure means that Obama is actually proposing $1.67 trillion in deficit reduction.
Since the supercommittee is already tasked with reducing deficits by $1.2 trillion, Obama is actually only asking for an additional $470 billion in deficit reduction beyond the commitments already made, which is only slightly more than the estimated $447 billion that his jobs bill will cost.
Obama is essentially, therefore, asking the supercommittee to pass the minimum deficit reduction requirement plus an additional amount to pay for his jobs bill.
The supercommittee has barely begun its work, so it is unclear on whether it will seek the minimum deficit reduction requirement or go for something bigger.
Erskine Bowles and Alan Simpson, co-chairs of the president's 2010 deficit reduction commission, have already asked the supercommittee to seek $4 trillion in deficit reduction. Four trillion dollars is the minimum amount required to get the nation's finances in order, Bowles and Simpson argued.
Obama asked the supercommittee to include both spending cuts and tax increases to reduce the deficit. His proposals include:
- Cutting $248 billion from Medicare, 90 percent of which comes from lower payments to doctors and hospitals
- Eliminating some agriculture subsidies
- Requiring federal workers, including the military, to contribute more of their paycheck to their retirement
- Eliminating tax deductions and credits while lowering overall tax rates
- Implementing the “Buffett Rule” to require millionaires to pay a minimum tax rate, which would be higher than that of mid-income earners
- Allowing the tax cuts, which were first implemented under President George W. Bush, and were renewed under Obama in 2010, to expire for the top two tax brackets, or families making more than about $230,000 per year.
Obama's plan is expected to raise $1.5 trillion for deficit reduction through the elimination of some tax deductions and credits, increasing the top tax rate and the Buffett Rule.
The president’s spending cuts total $570 billion.
Obama claims that his proposal has $2 in spending cuts for every $1 in tax increases. His calculations include, however, the $1.2 trillion in cuts already passed by the Budget Control Act and $1.1 trillion in an already planned troop drawdown. Removing those from the calculations, there is about $2.6 in tax increases for every $1 in spending cuts.
Obama quoted a Thursday speech by Speaker of the House John Boehner (R-Ohio), in which he said, “We can't afford the kind of politics that says, 'It's my way or the highway.'”
“I was encouraged by that,” Obama said. However, he added, “Here's the problem. In that same speech, he also came out against any plan to cut the deficit that includes any additional revenues whatsoever.”
Later in the speech, Obama said, “I will veto any bill that changes benefits for those who rely on Medicare, but does not raise serious revenue by asking the wealthiest Americans and biggest corporations to pay their fair share.”
During the debate over passage of the Budget Control Act, the main sticking point between Republicans and Democrats was over whether tax increases would be part of the bill. Obama's speech on Monday indicates that debate will continue.