Obama Lays Out Deficit Reduction Plan

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ROBERT SIEGEL, Host:

As party leaders on Capitol Hill scramble to lock down votes for this year's budget, President Obama was speaking about the long-term. He gave a speech laying out his plan to reduce the country's deficit.

BARACK OBAMA: It's an approach that puts every kind of spending on the table, but one that protects the middle class, our promise to seniors and are investments in the future.

MELISSA BLOCK, Host:

The president said his plan would cut the deficit by $4 trillion in 12 years or less. He pledged to reform Medicare and Medicaid and make them more efficient and he took a swipe at the deficit reduction plan proposed last week by Republican Congressman Paul Ryan. The president criticized that plan, saying it's time for the wealthy to pay more taxes, not less.

OBAMA: There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires. And I don't think there's anything courageous about asking for sacrifice from those who can least afford it and don't have any clout on Capitol Hill. That's not a vision of the America I know.

SIEGEL: We're going to hear more now about President Obama's deficit reduction plan. In a moment, NPR's Julie Rovner will check the facts on his vision to reform Medicare.

But, first, for a broader view of the president's blueprint, we turn to NPR's Jim Zarroli. And, Jim, how much does the president think he can cut $4 trillion in 12 years from the deficit?

JIM ZARROLI: Well, this was the president's effort, really, to respond to the plan put out by Paul Ryan, you know, to show he's serious about reducing the deficit but wants to do it on his own terms.

One of the things he pointed out was that at the rate the country is going, by 2025, every cent in the federal budget is going to have to go to entitlement programs or to pay interest on the debt. Anything else the government wants to do, it will have to borrow to pay for.

So the president says, we have to take this on. His plan would reduce the deficit, as you point out, by $4 trillion within 12 years. That's two trillion in spending cuts, then a trillion more in what they call base broadening, which essentially means tax deductions and loopholes, especially for high income Americans. And then, finally, because the total amount of debt be going down, interest payments would get smaller, the White House says, and that's another trillion in savings.

SIEGEL: Let's focus on the $2 trillion in spending cuts that President Obama is talking about. Where would he make those cuts?

ZARROLI: Well, there haven't been very many specifics so far. I mean, the White House did talk about cuts in non-security discretionary spending. The White House is talking about cuts in agriculture subsidies, federal pension insurance system. The White House also says increases in security spending, which includes military spending, would be held below inflation, which would mean defense spending would be cut over time.

Now, defense spending is a very big part of the budget, obviously. It's one area that's been politically off limits in budget cuts, but the president is saying this is an area we need to look at.

SIEGEL: And Mr. Obama introduced something new to the budget debate, what he calls a debt failsafe trigger. What is a debt failsafe trigger?

ZARROLI: Well, the president says by the middle of the decade, the budget deficit needs to stabilize. In other words, it just needs to stop growing as a percentage of the nation's gross domestic product. If it doesn't, this failsafe would kick in, which would mean automatic spending cuts.

Now, this failsafe would not be triggered in certain conditions, if the country's in a, you know, a national security emergency like a war or if there's a severe recession. The cuts also wouldn't apply to Social Security, Medicare and low-income programs. Those would not be touched.

Of course, these are some of the biggest areas in the federal budget, especially Medicare. And if those are off the table, then the cuts in spending will have to come from other areas of discretionary spending and so those cuts would have to be pretty brutal.

SIEGEL: So, Jim, today we got President Obama's speech about deficits and the budget. Last week, Congressman Paul Ryan presented his ideas. How would you describe the big differences between the two?

ZARROLI: Well, one of the biggest is the - involves the Bush era tax cuts, which would expire at the end of 2012. This is an extension of the debate that took place last year. We know the positions pretty much. The Republicans want to continue these tax cuts. The president says he wants to end them for the wealthiest Americans. He says he's not going to be talked into extending them again, the way he was last year. So if he holds onto that, you know, look for a huge battle next year.

SIEGEL: OK, Jim. Thanks.

ZARROLI: You're welcome.

SIEGEL: That's NPR's Jim Zarroli.

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