President Barack Obama will Monday call for new deficit cuts of $3.0 trillion but warn Republicans he will veto any bill that trims healthcare for the elderly without hiking taxes on the rich.
In a speech in the White House Rose Garden, Obama will ignite a new clash with political foes who have declared tax increases off the table and accuse him of waging class warfare in the run up to the 2012 election.
Obama will lay out a series of proposals that include a broad overhaul of the tax code designed to raise $1.5 trillion dollars, partly by letting previous tax cuts for the wealthy expire and by closing corporate loopholes.
Officials said the plan, which Obama will reveal at 10.30 am (1430 GMT) would ensure America’s fiscal future and permit continued investment in education, new generation energy and job creation.
“The president will make clear he is not going to support any plan that asks everything of some Americans and nothing of others,” a senior Obama administration official said on condition of anonymity.
“He will say he will veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and the biggest corporations to pay their share.”
The plan will match Obama’s increasingly populist tone at a time when the stagnant economy is dragging his approval ratings to record lows and he demands passage of his $447 billion jobs bill.
Specifically, Obama will lay out a plan for tax revenue raises and spending cuts which he will suggest a congressional supercommittee charged with coming up with up to $1.5 trillion dollars in spending cuts should adopt.
Obama’s proposals will bring total deficit cutting plans over the next decade to $4.4 trillion, officials said.
That topline figure includes $1.2 trillion in cuts in federal discretionary spending already agreed by Obama in August as part of a compromise which ended a standoff with Republicans over raising the federal debt ceiling.
It includes 580 billion in spending cuts across all mandatory spending programs and $1.1 trillion of savings realized from drawing down US troop numbers in Afghanistan and Iraq.
Tax reform would result in 1.5 trillion dollars in savings, and a further 430 billion dollars will be found in additional interest savings elsewhere.
Included in the spending cuts will be $248 billion in savings from Medicare programs for the elderly and $72 billion in cuts from the Medicaid service for the poor, officials said.
The tax portion includes $800 billion dollars that would be saved by letting Bush administration tax cuts on individuals earning over $200,000 a year expire, a provision that will be fiercely fought by Republicans.
But officials said Obama would not propose raising the eligibility age for Medicare health benefits above the current 65 years.
The plan will also include a new tax on those earning a million dollars or more, to ensure the pay taxes at a similar rate to lower earners.
The plan would be called the “Buffett Rule,” a reference to an objection by billionaire investor Warren Buffett that richest Americans generally pay a smaller share of their income in federal taxes than middle-income workers.
Some millionaires enjoy the lower rate because investment profits — such as capital gains, dividends and “carried interest” compensation paid to investment managers and hedge fund partners — are taxed at a lower rate than wages.
But Republicans decried the proposal on Sunday as “class warfare” reflecting the febrile political atmosphere in which Obama’s deficit plan will land on Capitol Hill as the 2012 election looms.
South Carolina Republican Senator Lindsey Graham dismissed the Buffett rule as “just a political move by the president.”
“The tax code should be reformed for one purpose — generate jobs. When you say we’ll tax one percent of the economy, that’s class warfare,” said Graham.
Obama has announced that he will seek to fund his jobs bill by curtailing itemized tax deductions for individuals earning $200,000 and families earning $250,000 a year.
Republicans, who control the House of Representatives, have rejected that idea and also came against Obama’s plan to close tax loopholes for energy firms, saying his policies would slow the economy and harm jobs growth.
The White House’s Office of Management and Budget has projected that the annual budget shortfall with reach 1.3 trillion dollars, this year, down from an earlier 1.65 trillion estimate.
