Obama Vows Veto if Deficit Plan Has No Tax Increases

Washington — President Obama called on Monday for Congress to adopt his “balanced” plan combining entitlement cuts, tax increases and war savings to reduce the federal deficit by more than $3 trillion over the next 10 years, and said he would veto any approach that relied solely on spending reductions to address the fiscal shortfall.

“I will not support any plan that puts all the burden for closing our deficit on ordinary Americans,” he said. “And I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans and biggest corporations to pay their fair share.

“We are not going to have a one-sided deal that hurts the folks who are most vulnerable,” he continued.

His plan, presented in a speech* in the Rose Garden of the White House, is the administration’s latest move in the long-running power struggle over deficit reduction. It comes as a joint House-Senate committee begins work in earnest to spell out, at the least, a more modest savings plan that Congress could approve by the end of the year in keeping with the debt deal reached this summer. If the committee’s proposal is not enacted by Dec. 23, draconian automatic cuts across government agencies could take effect a year later.

Mr. Obama is seeking $1.5 trillion in tax increases, primarily on the wealthy and corporations, through a combination of letting Bush-era income tax cuts expire on wealthier taxpayers, limiting the value of deductions taken by high earners and closing corporate loopholes. The proposal also includes $580 billion in adjustments to health and entitlement programs, including $248 billion to Medicare and $72 billion to Medicaid. In a briefing previewing the plan, administration officials said on Sunday that the Medicare savings would not come from an increase in the Medicare eligibility age.

Senior administration officials who briefed reporters on some of the details of Mr. Obama’s proposal said that the plan also counts a savings of $1.1 trillion from ending the American combat mission in Iraq and the withdrawal of American troops from Afghanistan.

Mr. Obama’s threat to veto any legislation that seeks to cut the deficit through spending cuts alone without raising taxes puts him on a collision course with the House speaker, John A. Boehner, who said last week that he would not support any revenue increases in the form of higher taxes. But the White House has compromised several times over the last year after making stern demands of Congress that were not met.

Mr. Obama’s proposal is certain to receive sharp criticism from Congressional Republicans, who on Sunday were already taking apart one element of the proposal that the administration let out early: the so-called Buffett Rule. The rule — named for the billionaire investor Warren E. Buffett, who has complained that he is taxed at a lower rate than his employees — calls for a new minimum tax rate for individuals making more than $1 million a year to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers.

That proposal, which was disclosed on Saturday, was met with derision Sunday by Republican lawmakers, who said it amounted to “class warfare” and was a political tactic intended to portray his opponents as indifferent to the hardships facing middle-class Americans.

But Mr. Obama spent much of his talk in the Rose Garden making an impassioned plea for what he called fairness in taxation, on the premise that “middle-class families shouldn’t pay higher taxes than millionaires and billionaires.”

“This is not class warfare,” he said. “It’s math.”

Nonetheless, Republicans made clear on Sunday that higher taxes on the wealthy were not acceptable to them. On NBC’s “Meet the Press,” Senator Mitch McConnell of Kentucky, the Republican leader, said: “It’s a bad thing to do in the middle of an economic downturn. And of course the economy, some would argue, is even worse now than it was when the president signed the extension of the current tax rates back in December.”

Under Mr. Obama’s proposal, $800 billion of the $1.5 trillion in tax increases would come from allowing the Bush-era tax cuts to expire as scheduled for wealthier taxpayers, while extending them for individuals making less than $200,000 a year and families making less than $250,000. He won election on that promise and tried, but failed, to get Congress to go along with that earlier in his term. Now, it appears that he wants to campaign once again on that difference with Republicans.

Treasury Secretary Timothy F. Geithner said after Mr. Obama spoke that the scale of his proposal — $3 trillion, on top of $1 trillion already agreed to in the summer debt deal — was not an arbitrary figure, but was just big enough to be a real turning point in the deteriorating fiscal trends that otherwise portend a long-term crisis in the making.

“That’s what you need to bring the deficit down to a level we can sustain over time, to a level where the debt as a share of the economy as a whole is no longer growing, stabilizes, starts to come down,” Mr. Geithner said.

Jacob J. Lew, the White House budget director, said that letting some Bush tax cuts expire while extending others — part of what the White House calls its “balanced” approach — could bring the annual deficit and the cumulative national debt into a reasonable range as a percentage of the economy.

“A balanced approach will give you the ability to let the middle-class tax cuts continue and, if you enact the entire program that we’ve proposed, bring our deficit down to the low twos, like 2.3 percent of G.D.P., at the end of this period, and keep the debt as a percentage of G.D.P. in the low 70s instead of climbing up into a very dangerous range.”

Mr. Obama’s plan will hover over Congressional budget-cutting negotiations that are under way over the next two months. A bipartisan Congressional committee is charged with coming up with its own proposal by Nov. 23; unless passed by Congress by Dec. 23, $1.2 trillion in cuts to defense and entitlement programs will go into effect automatically in 2013.

Mr. Obama, however, is challenging the Congressional committee to go well beyond its mandate, which is to find $1.2 trillion to $1.5 trillion in savings. “He’s showing them where they could find the savings,” one administration official said.

The Obama proposal has little chance of becoming law unless Republican lawmakers bend. But by focusing on the wealthiest Americans, the president is sharpening the contrast between Republicans and Democrats with a theme he can carry into his bid for re-election in 2012.

Mr. Obama’s proposal is also an effort to reassure Democrats who had feared that he would agree to changes in programs like Medicare without forcing Republicans to compromise on taxes. Indeed, Roger Hickey, co-director of the Campaign for America’s Future, a progressive center, warned in a statement that the president should not raise the Medicare eligibility age, advice that Mr. Obama, so far, seems to have heeded.

Brian Knowlton contributed reporting.

This article has been revised to reflect the following correction:

Correction: September 19, 2011

An earlier version of this article, and a headline on the Web, mistakenly referred to a figure of more than $3 trillion as the amount of federal government spending that President Obama's plan would cut. The $3 trillion figure should have referred to the amount the plan would reduce the deficit over 10 years; $1.5 trillion of that deficit reduction will come from tax increases, not spending cuts. The article also gave an incorrect date for the deadline for the bipartisan Congressional committee to come up with its own cuts. It is Nov. 23, not Dec. 23. The article also included a reference to the scale of the proposal that incorrectly described it as a $3 billion plan on top of the $1 billion cut over the summer — the figures should have been $3 trillion and $1 trillion.

This article, “Obama Vows Veto if Deficit Plan Has No Tax Increases,” originally appeared at The New York Times.

*Obama's Remarks on Deficit Plan—'Not Class Warfare; It's Math'