First Posted: 9/18/11 10:49 PM ET Updated: 9/18/11 11:18 PM ET
WASHINGTON — President Barack Obama will veto a comprehensive deficit reduction package if it includes cuts to entitlement program benefits but no tax hikes on the wealthy or well-to-do corporations, senior advisers said on Sunday.
The veto threat is an addendum of sorts to a $3 trillion-plus set of deficit reduction proposals that the White House will make to the congressional super committee tasked with comprehensive deficit reduction. But if administration officials are to be believed, it is now a principle by which the committee must act and it raises the specter of gridlock. Just last week, House Speaker John Boehner insisted that tax hikes should be off the table.
“[W]hat the president is saying is he is not doing [beneficiary reforms] if the Republicans are unwilling to ask the wealthiest Americans and biggest corporations to pay their fair share,” explained a senior administration official. “What they can’t do is send something to us with the things we propose and without the stuff on the revenue side because we will veto that.”
Previewing the president’s proposal during a conference call on Sunday evening, the same administration officials confirmed that Obama would not be calling for changes to Social Security payments or a raising of the eligibility age of Medicare — reforms that he had embraced during talks with Boehner over the summer.
“Because it is his 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,” explained on official, who left open the possibility that the president would endorse further means testing Medicare.
In addition to explaining what he would not sign into law, the president on Monday will also outline what his preferred deficit reduction methods during a speech on Monday. Of the $3 trillion-plus in reductions, $1.5 trillion would be made up of tax increases. That total includes $800 billion from letting the Bush tax cuts for earners above $250,000-a-year expired, and $700 billion by ending special interest breaks, deductions, exclusions, and through closing loopholes – reforms that the president has already said he wants done to pay for his jobs plan
The president will also advance what is being referred to as a Buffett rule, which states that the tax rates paid by someone who earns a million dollars or more shouldn’t be lower than the rates that middle-income wage earners pay. That rule, however, will be more of a guiding principle for tax reform than detailed law, administration officials said.
As part of his debt reduction plan, the president will also count the $1 trillion in savings that will come from the draw-downs of the war in Afghanistan and Iraq, senior administration officials said. That calculus is expected to be ridiculed as an accounting gimmick by Republicans. But those same officials noted that the Congressional Budget Office counts those numbers and that House Budget Committee Chairman Paul Ryan (R-Wisc.) included those savings in his own budget.
Finally, the president’s deficit reduction plan will include $580 billion in cuts and reforms to a “broad range of mandatory programs,” the officials confirmed. This includes $240 billion in Medicare cuts and $72 billion in cuts to Medicaid and other health care programs. Some of those cuts will be on the beneficiary side, administration officials confirmed. But those won’t take affect until 2017. The White House estimates that the totality of their reforms could extend the life of the Medicare trust fund by three years.
None of this includes the approximately $1 trillion in cuts that congressional negotiators have already signed off on as part of a deal to raise the nation’s debt ceiling this past August — a deal that also established the congressional super committee.
“This will bring the country to a place whereby in the middle of this decade, current spending is no longer adding to our debt,” said a senior administration official. “Debt will be falling as a share of the economy, as a percentage of GDP; and deficits on a year-by-year basis will be at a sustainable level so that we maintain that.”
Taken as a whole — and considering the surrounding political realities — the president’s proposal represents an ambitious starting point for what seems likely to be weeks if not months of intense negotiations. Indeed, if you exclude the $1 trillion in savings already realized and count the $1 trillion in troop draw-downs as a budget saving (as opposed to a spending cut), the proposal Obama will unveil on Monday will include three dollars in revenue raisers for one dollar in every spending reduction.
“I think this is less ‘Let’s be the grownups in the room and start at the 50 yard line,’ and more ‘Let’s start on our side of the field,’” Jared Bernstein, former economic adviser to Vice President Joe Biden, told the Wall Street Journal.
That said, there is reason to believe that the deficit-reduction talks will evolve dramatically from here. For starters, Boehner and Obama did make progress in narrowing their differences during their August negotiations. And if the super committee were to remain in gridlock, it would result in a severe cuts to defense spending and Medicare funding one year later — triggers that neither side want pulled.