Obama Unveils Deficit Plan Containing $1.5T in Tax Hikes, GOP Cringes

close

Video

Obama: U.S. Can't 'Cut Our Way' Out of Budget Crisis

President rejects 'class warfare' argument against his tax hike proposal

WASHINGTON – President Obama, drawing immediate condemnation from congressional Republicans, unveiled a new deficit reduction plan Monday anchored by $1.5 trillion in new taxes, including an end to Bush-era rates for upper income earners making $250,000 or more and additional taxes on millionaires.

Keying in on a populist message that millionaires and billionaires should pay more in taxes than their secretaries, the president announced a plan in the Rose Garden that includes more than $2 trillion total in entitlement cuts and tax increases over the next decade.

Together with spending cuts enacted last month and projected savings from interest payments, the savings in the president's plan total more than $3 trillion. The Obama administration is also adding on another $1 trillion in savings over 10 years from winding down the wars in Iraq and Afghanistan, though that kind of accounting has been dismissed in past debates as a gimmick.

The $4 trillion effort is tied to his American Jobs Act, aimed at putting nearly 14 million unemployed back to work. Critics have stated that targeting job creators -- the top 1 percent pays 38 percent of the tax burden, according to 2008 estimates -- won't help the jobless find employment.

House Speaker John Boehner last week warned that tax hikes should be off the table as a newly formed bipartisan committee meets to extract long-term deficit savings.

"That's not smart. It's not right," Obama said of the GOP stance.

In a combative set of remarks, the president vowed to veto any package that cuts into Medicare without raising "serious revenues" from wealthy Americans and corporations. He effectively dared Republicans to follow through on their no-tax-hike pledge as the deficit committee works under a strict timeline to find at least $1.2 trillion in deficit savings by Thanksgiving.

"We can't just cut our way out of this hole. It's going to take a balanced approach," Obama said. "It's only right that we ask everyone to pay their fair share."

The most controversial part of the plan was already shaping up to be the proposed tax increases.

"Pitting one group of Americans against another is not leadership," Boehner said Monday. "The Joint Select Committee is engaged in serious work to tackle a serious problem: the debt crisis that is making it harder to get our economy growing and create more American jobs. Unfortunately, the president has not made a serious contribution to its work today. This administration's insistence on raising taxes on job creators and its reluctance to take the steps necessary to strengthen our entitlement programs are the reasons the president and I were not able to reach an agreement previously, and it is evident today that these barriers remain."

In total, the new tax revenue Obama is seeking is nearly double the $800 billion that Boehner had been willing to consider in July, before the so-called "grand bargain" fizzled.

Sen. Pat Toomey, R-Pa., a Tea Party-aligned senator and member of the bipartisan deficit committee, said the panel does not have "time to waste on political games" and economy-harming tax increases.

"I am concerned that his deficit reduction strategy sometimes seems more defined by political posturing, such as recycling tax hikes that even lawmakers in his own party have publicly opposed," he said in a statement.

Senate Republican Leader Mitch McConnell said the joint deficit committee was taking its task "far more seriously" than the White House.

"Veto threats, a massive tax hike, phantom savings, and punting on entitlement reform is not a recipe for economic or job growth -- or even meaningful deficit reduction," McConnell said.

Treasury Secretary Tim Geithner disputed claims that the plan would hurt the economy, describing the tax changes as "modest" and fair. "I am very confident that the modest changes we're suggesting in terms of revenues would make the economy stronger in the long term," he said.

The plan includes the tax hikes Obama previously proposed to pay for his $447 billion jobs plan -- those proposals ranged from limits on deductions for wealthy filers to an end to certain corporate loopholes and subsidies for oil and gas companies. And it includes about $800 billion over 10 years from letting the Bush tax cuts expire for families making more than $250,000 a year.

In addition, the plan includes the so-called "Buffett Rule," named after billionaire Warren Buffett who complained he was paying a lower tax rate than his secretary. The provision would set a new tax rate for those making more than $1 million a year. Geithner suggested the administration would leave it up to Congress to work out the particulars.

Based on early details of the plan over the weekend, Republicans on Sunday accused the president of playing "class warfare."

But Obama rejected the claim. "This is not class warfare. It's math," he said.

He said eliminating loopholes and making other changes would also allow lawmakers to simplify the tax code and ultimately lower the corporate tax rate, among the highest in the world.

One administration official acknowledged that the plan represented the president's "vision," and not a "legislative compromise."

The plan includes $580 billion in cuts to mandatory benefit programs, including $248 billion from Medicare and $72 billion from Medicaid and other health programs. Obama said it would also target farm subsidies.

It includes no changes in Social Security and no increase in the Medicare eligibility age, which the president had been willing to accept this summer.

Administration officials said 90 percent of the $248 billion in 10-year Medicare cuts would be squeezed from service providers. The plan does shift some additional costs to beneficiaries, but those changes would not start until 2017.

The Associated Press contributed to this report.