In a major speech on fiscal policy in Washington, President Barack Obama has set goals of reducing deficits, and the more than $14 trillion national debt, over the next dozen years. Mr. Obama says getting the nation's fiscal house in order will require shared sacrifice.
The speech came at a pivotal moment, with the country's debt and deficit spending at historic levels, and opposition Republicans challenging Mr. Obama to sharply reduce spending while not raising taxes.
Key points in the president's plan include a phased reduction of future deficits by $4 trillion over 12 years or less, and putting the national debt on a declining path as a share of the economy by the second half of this decade.
The plan envisions that Bush-era tax cuts for wealthy Americans would not be extended. That keeps the president in conflict with Republicans, who have already labeled any steps resulting in higher taxes as a "non-starter."
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Laying out what he described as a path to shared prosperity, Mr. Obama said his strategy would protect the most vulnerable in society while preserving investments needed for job creation and continuing economic recovery.
He warned of the consequences if no action is taken to address mounting debt. "By 2025, the amount of taxes we currently pay will only be enough to finance our health care programs - Medicare and Medicaid - Social Security, and the interest we owe on our debt. That’s it. Every other national priority : education, transportation, even national security, will have to be paid for with borrowed money," he said.
Even after the U.S. economy recovers, the president said it will remain on track to be spending more money than it takes in through this decade and beyond, requiring continuing borrowing from countries like China.
Mr. Obama's proposals include a provision requiring mandatory across-the-board spending cuts if enough progress is not being made to stabilize and reduce the national debt by 2014.
The plan envisions hundreds of billions of dollars in savings from reforms in the government Medicare and Medicaid programs, reforms of the tax code, and defense spending.
A significant portion of the address was devoted to attacking the Republican budget plan for 2012, which proposes about $1 trillion more in deficit reductions over 10 years, with continuing tax breaks for the wealthy.
Mr. Obama called the Republican plan "deeply pessimistic" saying it would result in a fundamentally different America. "There’s nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires. And I don't think there is anything courageous about asking for sacrifice from those who can least afford it and don’t have any clout on Capitol Hill. That is not a vision of the America I know," he said.
Republicans say their budget, which proposes major changes to Medicare and Medicaid, will do more to attack fiscal problems without penalizing what they call "the main creators of jobs."
In a written statement, Republican House Speaker John Boehner said the president failed to deliver a plan.
Republican budget chairman Representative Paul Ryan said, "What we got was a speech that was excessively partisan, dramatically inaccurate, and hopelessly inadequate to addressing our country's pressing fiscal challenges."
President Obama said he asked Republican and Democratic leaders to designate teams for negotiations to begin in May, to achieve deficit reduction legislation by the end of June. Vice President Joe Biden will oversee that process.
The president said he does not expect any final agreement to look exactly like the plan he presented on Wednesday, but believes Americans expect leaders in Washington to compromise. "Though I’m sure the criticism of what I have said here today will be fierce in some quarters, and my critique of the House Republican approach has been strong, Americans deserve and will demand that we all bridge our differences, and find common ground," he said.
President Obama said that in the past presidents and both major parties in Congress had succeeded in reaching agreements on difficult issues, adding that he knows there are Republicans and Democrats who want to see what he called a "balanced approach" to deficit reduction.