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Obama backs off from deals of summer

$2 trillion in cuts buck GOP ideas

President Obama today will draw sharp contrasts with GOP lawmakers, the White House said. President Obama today will draw sharp contrasts with GOP lawmakers, the White House said. (Olivier Douliery-Pool/Getty Images)
By Jim Kuhnhenn
Associated Press / September 19, 2011

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WASHINGTON - When President Obama announces at least $2 trillion in long-term deficit reduction measures today, he will not include all the compromises he reached with House Republican leaders before budget cutting talks broke off.

Administration officials said Obama will not offer any proposals to reduce long-term spending in Social Security, such as reducing cost-of-living adjustments. That idea drew wide criticism from Democrats when the president pitched it to House Speaker John Boehner in July.

This time, the White House wants to keep the focus on jobs and is determined to avoid getting sucked into another budget fight with lawmakers.

Administration officials see the task of attending to deficits as necessary but not necessarily urgent, compared with the need to revive the economy and increase employment. They also view this as a time to draw sharp contrasts with congressional Republicans, whose public approval ratings are lower than Obama’s.

“I would view this as the president’s vision for how we achieve deficit reduction, which makes it inherently different than the sorts of legislative negotiations we were undertaking with the speaker over the summer,’’ said Dan Pfeiffer, the White House communications director.

The deficit-reduction plan Obama will unveil today follows the $447 billion in tax cuts and new public works spending that the president has proposed as short-term measures to stimulate the economy and create jobs.

The deficit plan will be submitted to a special joint committee of Congress working on proposals to reduce deficits by $1.2 trillion to $1.5 trillion during 10 years.

The White House signaled its new approach Saturday by highlighting a proposal that would set a minimum tax rate for those earning more than $1 million.

The measure - Obama is going to call it the “Buffett Rule’’ for billionaire investor Warren Buffett - is designed to prevent millionaires from using tax-avoidance schemes to pay lower rates than middle-income taxpayers. Buffett has complained that he and other wealthy people have been “coddled long enough’’ and should not be paying a smaller share of their income in federal taxes than middle-class taxpayers.

However, the proposal is a certain dead letter with Republicans, who oppose any increase in taxes.

“It adds further instability to our system more uncertainty and it punishes job creation and those people who create jobs,’’ said Republican congressman Paul Ryan of Wisconsin, the House Budget Committee chairman. “Class warfare may make for really good politics but it makes for rotten economics,’’ he told “Fox News Sunday.’’

Senate Republican leader Mitch McConnell, noting that a similar effort to raise taxes on the wealthy failed a few years ago, continued to push for revising the tax code and looking to increasing revenue through economic activity rather than taxes. He was dismissive of the Buffett Rule.

“With regard to his tax rate, if he’s feeling guilty about it, I think he should send in a check,’’ McConnell said of Buffett on “Meet the Press’’ on NBC. “But we don’t want to stagnate this economy by raising taxes.’’

Democrats objected loudly when Obama suggested to Boehner that the government could reduce annual cost-of-living adjustments for Social Security recipients. Now Democrats are waiting to see what Obama proposes to do with Medicare, the government health care program for older people.

In his talks with Boehner, an Ohio Republican, Obama was willing to go along with gradually increasing the eligibility age for Medicare beneficiaries from 65 to 67. That idea has run into opposition from Democrats, and the White House was deciding whether keep it in the president’s new deficit plan.

“Potentially raising the retirement age for Medicare is something that deserves a lot of consideration,’’ said Christina Romer, the former head of Obama’s Council of Economic Advisers. She said such an increase in the eligibility age is more conceivable with Obama’s health care law because guaranteed private health insurance would be available to middle-class early retirees starting in 2014.

Still, an analysis by the nonpartisan Kaiser Family Foundation found that two-thirds of 65- and 66-year-olds would pay more for their new coverage than they would have under Medicare.

Raising the eligibility age is “bad policy and bad politics,’’ said Nancy Altman, a leader of Strengthen Social Security Campaign, a coalition of advocacy organizations.

“What the president proposes on Monday, especially if the Republicans were to embrace it, would be harder for Democrats in Congress to separate themselves from it,’’ she said.

Overall, the president’s proposal could help reduce long-term deficits by about $4 trillion.

Under a compromise in early August that averted a threatened government default, Congress agreed to cut nearly $1 trillion from some programs. The president’s proposal would reduce deficits by an extra $2 trillion. On top of that, drawing down military forces in Afghanistan and Iraq is estimated to reduce projected deficits by $1 trillion during 10 years.

Republicans have ridiculed the war savings as gimmicky, but House Republicans included them in their budget proposal this year, and Boehner had agreed to count them in his talks with Obama.

In addition to the new minimum tax rate for millionaires, Obama’s proposal will include revenue increases that he has identified to pay for his $447 billion jobs plan. Those include limiting deductions for wealthier taxpayers, closing corporate loopholes and eliminating tax subsidies to oil and gas companies. Boehner last week ruled out many of the tax increases Obama has proposed.

Senior administration officials say that in pushing for his jobs plan, Obama will highlight the need for long-term deficit reduction, and the need to achieve it through spending cuts and tax revenue. In so doing, they will try to create sharp differences with Republicans that could serve him in the 2012 presidential campaign.

To that end, some Democrats say it would be foolish for Obama to offer a deficit reduction plan that embraces some of the deals he was prepared to strike with Boehner.

“I don’t think he is bound by the compromise they were working on,’’ said Rob Shapiro, a former undersecretary of commerce in the Clinton administration. “It has always been the president’s position that in a compromise, he was prepared to support entitlement reform if the Republicans were prepared to support revenue increases.’’