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Obama eyes tax increases, Medicare changes

Photo by WVLT Video

Photo by WVLT Video

WASHINGTON (AP) - President Barack Obama 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."

His vehement opposition to new taxes was echoed just hours in advance of Obama's speech by the No. 2 GOP leader, Rep. Eric Cantor of Virginia, and Rep. Paul Ryan, R-Wis., chairman of the House Ways and Means Committee, who said the country needs "tax reform," not 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 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.

Obama's initiative comes more than two years into his presidency and in the aftermath of significant federal spending to bolster the ailing economy.

The president is wading into a potential political thicket, however. 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.