How to rein in America’s $14.7 trillion national debt remains as contentious as ever, one day after President Barack Obama called for raising taxes on wealthier Americans, ending tax breaks for corporations and trimming federal spending. The president aims to slash federal budget deficits by $3 trillion during the next decade. Mr. Obama’s debt blueprint is receiving mixed reviews on Capitol Hill.
It was a combative-sounding President Obama who argued that wealthy investors and favored corporate sectors need to pay more taxes, so the burden of fixing America’s fiscal woes does not fall on the middle class and the poor.
Republican Senator John Thune of South Dakota dismissed the president’s call as political posturing ahead of next year’s general election. “The president has chosen election-year politics over what is good for the economy and good for jobs in this country," he said.
Other Republicans doubt Mr. Obama’s promised spending cuts will ever materialize. The ranking Republican on the Senate Budget Committee, Jeff Sessions, said the president’s claim of fiscal restraint is an illusion based on accounting tricks, such as counting decreased defense expenditures from ending wars in Iraq and Afghanistan as spending cuts.
“The White House asserts two dollars in cuts for every one dollar in tax hikes. The true figure is nowhere close to that. The president’s plan is comprised of tax hikes alone, in reality,” Sessions said.
White House officials dispute those accusations. The president says his plan would force some of the deepest spending cuts in U.S. history.
Many Democratic lawmakers, including Senator Carl Levin of Michigan, welcomed the substance of Mr. Obama’s plan as well as his feisty tone in unveiling it.
“I think the president is leading an effort which is, frankly, overdue. We cannot do serious deficit reduction without revenue being added. The gaps between the wealthy and middle-income [citizens] have grown dramatically in this country,” Levin said.
In the Republican-controlled House of Representatives, Majority Leader Eric Cantor criticized the Obama plan as class warfare - stoking disdain for the rich. But according to Democratic Senator Charles Schumer of New York: “It is not class warfare to fight for the middle class. It is not class warfare to say that we need funding for roads and bridges, for teachers, and that the wealthiest among us should pay their fair share to do it,” Schumer said.
The United States taxes investment income at a lower rate than most wages and salaries. Republicans say to do otherwise would be to deny the private sector the capital needed to start new businesses, create jobs and foster economic expansion. Democrats say the tax structure allows billionaire investors to pay a lower tax rate than the workers they employ.
President Obama’s deficit-cutting plan comes as a special bipartisan congressional committee works to craft a debt reduction plan that must be voted on by year’s end. If the committee fails to act, automatic spending cuts would be triggered. Those cuts would likely fall on social welfare programs championed by Democrats as well as national defense, which many Republicans are reluctant to trim.