President Obama's Blueprint For Slashing Deficit

On Monday, the president released a plan on how to pay for his $447 billion jobs bill and reduce the nation's deficit. The plan aims to slash $3 trillion from the debt over the next decade, which involves Medicare and Social Security cuts and tax increases for the wealthy. Host Michel Martin speaks with NPR's Senior Washington Editor Ron Elving about the plan.

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MICHEL MARTIN, Host:

I'm Michel Martin, and this is TELL ME MORE from NPR News.

Coming up, uprisings across the Middle East and North Africa have raised hopes for freedom and a voice for millions. One leading woman human rights activist from the region says women share the hope for a voice, too. She's on a visit to the U.S. and we'll check in with her in just a few minutes.

But first, to a pressing issue in this country, the deficit. President Obama announced his own plan to reduce the country's deficit today. One that he says could lower the debt by $3 trillion over the next 10 years. The plan calls for hundreds of billion dollars - billions of dollars in cuts to health programs for the elderly and poor, as well as tax increases for the wealthiest Americans.

Here is President Obama speaking from the Rose Garden earlier today.

(SOUNDBITE OF SPEECH)

BARACK OBAMA: Today, I'm releasing a plan that details how to pay for the jobs bill while also paying down our debt over time. And this is important, because the health of our economy depends in part on what we do right now to create the conditions where businesses can hire and middle class families can feel a basic measure of economic security.

But in the long run, our prosperity also depends on our ability to pay down the massive debt we've accumulated over the past decade in a way that allows us to meet our responsibilities to each other and to the future.

MARTIN: We hoped to hear from senior White House advisor Valerie Jarrett to talk more about this plan. But first, we have with us NPR senior Washington editor, Ron Elving. He's here with me in our Washington, D.C. studio. Ron, thanks for joining us.

RON ELVING: Good to be with you, Michel.

MARTIN: The so-called millionaire's tax is getting a lot of attention. First of all, tell us what that is. But is that the core of the plan?

ELVING: No, it's not the core of the plan. And it's actually a rather minor feature of the plan in terms of dollar amounts, but it's a major feature of the plan in terms of the attention it's likely to get and in terms of the fire it will draw from Republicans. Republicans are going to say this is class warfare. They've already started saying that yesterday - Sunday talk shows. But they will also say that it is a job killer. That it is going to prevent wealthy people from doing the things with their money that make businesses hire more workers.

This is a dicey case because while it has been largely accepted, I think, by many people in the country over the last, say, 30 years back to the early 1980s, it is difficult to make that case in the face of the experience of the 1990s when taxes on rich people went up and we also had a boom in the computer industry, and we had a big boom in high tech. And a lot of that investment money returned quite a great deal both for the investors and also in terms of hiring more workers and the economy boomed.

Also, we have seen that in the era of tax cutting, 2001, 2003, the last decade basically, tax cuts that were extended as recently as last winter in December. Those have not led to a clear creation of jobs, a clear kind of boom in jobs the way we saw in the 1990s.

Now, there maybe all kinds of reasons for this in both decades, but it's just not clear that tax rates are the only thing that determine how much investment is made that creates jobs.

MARTIN: Now, obviously I want to hear your take on the politics of this, but I'm interested in whether the president is in fact making a case based on the data? Is he making a case based on the data that tax cuts really don't yield the benefit that Republicans are saying that they do and that, in fact, taxes have gone up and wealthier Americans have been asked to pay more with positive economic results? Or is he essentially making a fairness argument that it's just not fair?

ELVING: I think he's making both. I think on one hand he is saying that the tax cuts of the last decade did not produce prosperity. We had the big downturn in 2008, 2009. And that came after a decade of tax cutting, a real era of tax cutting. And he is saying that tax increases have not always had the effect of killing job creation. So, that's an argument on the data. But he is saying on top of all of that what he calls the Buffett rule. This is a reference to Warren Buffett, the super billionaire, perhaps the richest man in the United States, an investment billionaire.

MARTIN: Certainly one of the richest.

ELVING: One of the two or three.

MARTIN: If not this year.

ELVING: Exactly. And Warren Buffett has said gee, you know, because so much of my income comes from capital gains and dividends and other things that I get from my investments that succeed, I actually pay a lower tax rate on that income than my secretary pays on the salary that I pay her or him. And that par: Look, if Warren Buffett just wants to pay more taxes, why doesn't he just write some checks to the federal government? He could help decrease this deficit.

But, of course, the point he's making is a valid one in it's own terms that he pays a lower tax rate as a multibillionaire making literally billions of dollars a year than the people who work for him for tens of thousands of dollars a year.

MARTIN: Where is the - you've already talked about the response to this - the responses from the Republicans as the details of the plan were leaking out over the weekend were not at all positive and that Republicans were using the term class warfare. And the president's using the term shared sacrifice. Do we have any sense of where the public is on this? You know, we know that this plan has just rolled out today, but it was leaking out initially. Do we have any sense of that?

ELVING: We have two senses of it. One is what you get if you ask people the question in polls. If you ask everyone in the country: Gee, how do you feel about this? Do you think this is fair or do you think that it would be possible for rich people to pay more in taxes and for the economy to not be worse off because of that? And do you think it's fair? Those two questions.

MARTIN: Yeah, you know, I think the rich should kick in some more money for the country's problems both in the sense of spending on things the country wants and needs, and also in the sense of reducing the deficit which is the other thing we're trying to do here. Trying to make the economy work better, create more jobs, on the one hand. And we are also trying to lower the deficit of the federal government at the same time. Two things that are kind of hard to do at the same time.

Most people are saying they think the rich should make a bigger contribution. More than 60 percent. But if you ask the question at voting time, oftentimes the politicians saying I'll cut your taxes gets more vote than the one saying somebody's taxes need to go up.

MARTIN: We're speaking with NPR senior Washington editor Ron Elving about President Obama's deficit reduction plan that he announced to the country earlier today. A couple more questions in the time we have left about sort of the politics of this and the mechanics of this. President Obama already has a major economic initiative, his $450 or so, give or take a few billion dollar jobs program. That's on the table now in Congress, which he unveiled at a meeting at a joint session of Congress.

How do those two plans work together? And is there the possibility that they are in fact - that the message is kind of interfering? One big speech followed by another big speech about subjects which are related but kind of different. So, what's the thought behind that?

ELVING: Yes. And this is the problem I referred to a moment ago trying to create jobs in the economy, on the one hand, and also reduce the federal deficit on the other hand. In some respects, those are contradictory goals. And to talk about them at the same time is to contradict one's self. But what we need to do is stretch out the time frame here.

Jobs and improving the economy, strengthening the economy, that's the immediate job. That's the right now job. That's what the $450-billion jobs bill would be about.

The deficit reduction is a longer-term goal over a period of time, which is largely a matter of changing the trajectory lines. So, for example, what the president is doing today is he's telling us how he would pay for his $450-billion jobs bill so that it did not add to the deficit. And then going beyond that, how he could get to $3 trillion in cuts and in the deficit down the road through these increased revenues and through some cuts in spending as well.

MARTIN: And speaking of spending, one of the fastest growing areas of spending just because of the population's getting older is Medicare, Medicaid. Medicare which pays for health care for seniors, Medicaid which pays for health care for the lowest income Americans, and Social Security which is, of course, the kind of the retirement safety net.

The president's proposal calls for cost cuts for these programs. But he also said in his speech that he was not going to, you know, throw the most vulnerable people under the bus, as it were. I'm sort of paraphrasing obviously. So how, then, are these cuts achieved? And how are these cuts likely to be received by the Congress?

ELVING: The Congress will be very hesitant, particularly Democrats, to cut any more money from Medicare, which already had some of its money reallocated by the Obama health care plan, the Affordable Health Care Plan, which many people call Obama Care.

Under that plan, a big chunk of Medicare money over a period of time was reallocated and much of what the president is proposing now is also a reallocation. You're giving less money to hospitals and doctors. You're giving less money to, in some cases, people who provide various and sundry kinds of services. There are cuts here. There are places in which people are going to get hurt.

What he's going to contrast that trimming with is the Republican idea, which is forget about having Medicare be a guaranteed federal program that says we're going to pay your medical bills. Let's just have the federal government make a contribution to your insurance bill and ask everybody who's over 65 to go out and get private insurance.

Now, some people over 65 already do get Medigap insurance and other kinds of private insurance. But to tell everybody who's on Medicare, you're going to have to go get a private insurance policy no matter what your current health and we're just going to help you pay for it with a certain amount of money to be determined later. That's a much more radical change from what the president is providing. And that, of course, is what the Republicans would prefer to do.

MARTIN: And the president also said that he would veto any plan that would, you know, turn Medicare into a voucher plan. And he also said that he would veto any plan that cut benefits in these programs without also raising more money, raising more revenue from the most well-off Americans.

So, Ron, you know, we have about a minute left. What should we be looking at in the days ahead? I know that already these plans are being characterized as one side throwing down the gauntlet, you know, to the other side. And yet both sides are also saying that they want to work together. What should we look for?

ELVING: I suspect we should look for more of the gauntlet than we should look for the cooperation, although it would be better if the cooperation were to be forthcoming. We just haven't seen that in this Congress since January, since they came to work. They've mostly been at loggerheads and sometimes at each others' throats.

The Republicans have a very strong unity, and they have a very strong coherence around the question of standing their ground, refusing all forms of revenue, refusing all taxes, particularly taxes that would affect people who are more affluent. And they see that as their political base. They see that as their political salvation. They don't expect to lose because they are standing by their constituencies.

MARTIN: NPR's senior Washington editor Ron Elving was here with us in our Washington, D.C. studios talking about the president's deficit reduction plan, which was announced from the Rose Garden earlier today. Ron Elving, thank you so much for joining us.

ELVING: Thank you, Michel.

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