In a speech from the Rose Garden, the president suggested a tax hike on America's highest earners coupled with spending cuts
President Obama on Monday called for a combination of spending cuts and $1.5 trillion in new tax revenue increases that would save $3 trillion over the next decade. And he will warn Congress that if they do not give him a "balanced" package that includes tax increases for the wealthiest Americans, he will use his veto and make them start again.
"We can't just cut our way out of this hole," Obama said.
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The president made his pitch in the Rose Garden, and the White House promised to provide details throughout the day. The outlines of the package were disclosed on Sunday night by senior administration officials who asked not to be named. They said deficit reductions will total $4.4 trillion when new cuts are coupled with the $1.2 trillion in discretionary spending reductions included in the bill signed into law by the president last month after the debate over raising the debt ceiling.
The additional deficit reduction, said the officials, would come from $1.5 trillion in tax reform; $580 billion in "cuts and reforms across all mandatory programs;" $430 billion from interest savings; and $1.1 trillion from the drawdown of troops in Afghanistan, the changed mission in Iraq, and caps to limit spending on future overseas contingency operations.
Slightly more than half of the $1.5 trillion attributed to tax reform -- $800 billion -- would come from letting the Bush tax cuts for the wealthiest Americans expire. The other $700 billion, the officials said, would come from other changes in tax law. Many of those measures, they acknowledged, will look very familiar because they have previously been proposed by Obama. Those would include limiting deductions for those making more than $250,000, ending tax preferences for owners of corporate jets, and ending oil and gas preferences. They said roughly $300 billion of the $700 billion would come from closing loopholes.
The administration has yet to offer a revenue estimate for a proposal the president will make that he will call "the Buffett rule," named after billionaire investor Warren Buffett. Buffett has lamented that he pays a lower tax rate than many of his employees; the president will call for a new minimum tax rate for individuals making more than $1 million to ensure that they pay at least at the same rate as middle-income taxpayers.
One senior official said the point of the Buffett rule is to establish "one of the principles that should govern how we undertake tax reform." The official stressed that the president on Monday will make "a broad call for tax reform" more than he is insisting on specific provisions. "These are suggestions for how it could be achieved," the official told reporters. "And it is meant to really start that debate."
To that end, the president will outline five principles he will insist on in tax reform: It should lower tax rates; it should cut wasteful loopholes and tax breaks; it should reduce the deficit by $1.5 trillion; it should boost job creation and growth; and it should "be consistent" with the Buffett rule in that everybody shares the burden.
On that last point, the president will stand his ground and issue a rare veto threat, said the official. "The president will make clear he is not going to support any plan that asks everything of some Americans and nothing from others," said the official. "He will say that he will veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share."
The veto threat is a response to the hard line struck last week by House Speaker John Boehner, R-Ohio, in a speech he delivered on the economy. Boehner said tax reform should be on the super committee's agenda. But he ruled out any tax increases, saying they "are not a viable option for the joint committee." With the lines drawn, the White House expects much of what the president will outline to draw immediate opposition from the Republicans who run the House.
The White House also warned not to expect the president to offer up things that he had agreed to as compromises over the summer when he and Boehner were striving for a "grand bargain."
"It will be his vision," explained the official. "Because it is a vision and not a legislative compromise being crafted to garner some number of votes in the House and the Senate, it is inherently different from the grand bargain he was working on with the speaker."
That means the president will not be recommending any raising of the eligibility age for Medicare. He will call for $248 billion in Medicare savings and another $72 billion in savings from Medicaid and other health programs over the next 10 years. An official said that roughly 90 percent of the Medicare savings come from reducing overpayments to providers, and that any changes affecting beneficiaries would not take effect until 2017.