Image: Barack Obama
Chip Somodevilla  /  Getty Images
President Barack Obama makes a statement about his proposed federal deficit reduction plan in the Rose Garden at the White House September 19, 2011.
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updated 9/19/2011 3:15:49 PM ET 2011-09-19T19:15:49

In a blunt rejoinder to congressional Republicans, President Barack Obama called for $1.5 trillion in new taxes Monday, part of a total 10-year deficit reduction package totaling more than $3 trillion. He vowed to veto any deficit reduction package that cuts benefits to Medicare recipients but does not raise taxes on the wealthy and big corporations.

"We can't just cut our way out of this hole," the president said.

The president's proposal would predominantly hit upper income taxpayers but would also reduce spending in mandatory benefit programs, including Medicare and Medicaid, by $580 billion. It also counts savings of $1 trillion over 10 years from the withdrawal of troops from Iraq and Afghanistan.

First Read: Obama's populist pitch
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The deficit reduction plan represents an economic bookend to the $447 billion in tax cuts and new public works spending that Obama has proposed as a short-term measure to stimulate the economy and create jobs. And it gives the president a voice in a process that will be dominated by a joint congressional committee charged with recommending deficit reductions of up to $1.5 trillion.

His plan served as a sharp counterpoint to Republican lawmakers, who have insisted that tax increases should play no part in taming the nation's escalating national debt. Obama's plan would end Bush-era tax cuts for top earners and would limit their deductions.

"It's only right we ask everyone to pay their fair share," Obama said from the Rose Garden at the White House.

Story: Tax timeline will drive Obama and Congress

In issuing his threat to veto any Medicare benefits that aren't paired with tax increases on upper-income people, Obama said: "I will not support any plan that puts all the burden for closing our deficit on ordinary Americans."

Responding to a complaint from Republicans about his proposed tax on the wealthy, Obama added: "This is not class warfare. It's math."

The Republican reaction was swift and derisive.

"Veto threats, a massive tax hike, phantom savings, and punting on entitlement reform is not a recipe for economic or job growth_or even meaningful deficit reduction," Senate Republican leader Mitch McConnell said in a statement issued minutes after the president's announcement. "The good news is that the Joint Committee is taking this issue far more seriously than the White House."

Video: Chuck’s First Read: Obama’s populist pitch (on this page)

Obama's proposal comes amid Democratic demands that Obama take a tougher stance against Republicans. And while the plan stands little chance of passing Congress, its populist pitch is one that the White House believes the public can support.

The core of the president's plan totals just over $2 trillion in deficit reduction over 10 years. It would let Bush-era tax cuts for upper income earners expire, limit deductions for wealthier filers and close loopholes and end some corporate tax breaks. It also would cut $580 billion from mandatory programs, including $248 billion from Medicare. It also targets subsidies to farmers and benefits programs for federal employees.

Video: Watch Obama's entire speech (on this page)

Officials cast Obama's plan as his vision for deficit reduction, and distinguished it from the negotiations he had with House Speaker John Boehner in July as Obama sought to avoid a government default.

As a result, Obama's proposal includes no changes in Social Security and no increase in the Medicare eligibility age, which the president had been willing to accept this summer.

Administration officials also said that Obama's $1.5 trillion in new taxes is a goal that Congress could achieve through a broad overhaul of the tax code. They said the president's specific proposals represent one way to get to that goal under the existing tax code.

Story: Tax timeline will drive Obama and Congress

Coupled with about $1 trillion in cuts already approved by Congress and signed by the president, overall deficit reduction would total more than $4 trillion, a number many economists cite as a minimum threshold to bring the nation's debt under control.

Key features of Obama's plan:

—$1.5 trillion in new revenue, which would include about $800 billion realized over 10 years from repealing the Bush-era tax rates for couples making more than $250,000. It also would place limits on deductions for wealthy filers and end certain corporate loopholes and subsidies for oil and gas companies.

—$580 billion in cuts in mandatory benefit programs, including $248 billion in Medicare and $72 billion in Medicaid and other health programs. Other mandatory benefit programs include farm subsidies and federal employee benefits. Administration officials said 90 percent of the $248 billion in 10-year Medicare cuts would be squeezed from service providers. The plan does shift some additional costs to beneficiaries, but those changes would not start until 2017.

—$430 billion in savings from lower interest payment on the national debt.

— $1 trillion in savings from drawing down military forces from Iraq and Afghanistan.

First Read: Obama's populist pitch

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 as savings during debt ceiling negotiations with the president this summer.

Illustrating Obama's populist pitch on tax revenue, he suggested that Congress establish a minimum tax on taxpayers making $1 million or more in income. The measure — the White House calls it the "Buffett Rule" for billionaire investor Warren Buffett — is designed to prevent millionaires from taking advantage of lower tax rates on investment earnings than what middle-income taxpayers pay on their wages.

Story: The supercommittee on deficit reduction

That minimum rate, however, is not included in the White House revenue projections. Officials said it was a suggestion for Congress if it were to undertake an overhaul of the tax code.

At issue is the difference between a taxpayer's tax bracket and the effective tax rate that taxpayer pays. Millionaires face a 35 percent tax bracket, while middle income filers fall in the 15 or 25 percent bracket. But investment income is taxed at 15 percent and Buffett has complained that he and other wealthy people have been "coddled long enough" and shouldn't be paying a smaller share of their income in federal taxes than middle-class taxpayers.

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Video: Obama announces debt plan

Explainer: The debt supercommittee

  • This 12-member panel is tasked with finding $1.5 trillion more in debt savings. It has until Nov. 23 to propose ways to reduce deficits. Those proposals must be voted on by Dec. 23.

  • Sen. Jon Kyl, R-Ariz.

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    Sen. Jon Kyl, R-Ariz.

    Kyl has served in Congress since 1987, with four terms in the House before winning his Senate seat in 1994. He’s retiring at the end of 2012. He has served as Senate Republican whip since 2007. Kyl has served on the tax-writing Senate Finance Committee since 2001.

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    He has been an adept and dogged debater throughout his career, but draw scorn from Democrats when he said in April, “If you want an abortion, you go to Planned Parenthood, and that's well over 90 percent of what Planned Parenthood does.” The fact-checking site, Politifact said Kyl’s estimate was far off.

  • Sen. Pat Toomey, R-Pa.

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    Sen. Pat Toomey, R-Pa.

    Toomey worked on Wall Street in the 1980s and as a restaurateur in Allentown, Pa., then served in the House for three terms. In 2004, he challenged Sen. Arlen Specter, who was then a Republican, in a primary, losing by less than 2 percentage points.

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    After heading the anti-tax group Club for Growth, Toomey returned to Pennsylvania in 2010 and won the Senate nomination, Specter having left the Republican Party. Toomey won the general election by 2 percentage points over Democrat Joe Sestak, partly by attacking him for voting for the 2008 Wall Street bailout.

    Story: Latest picks for debt panel spark some pessimism

    When he worked on Wall Street, Toomey told viewers in a campaign ad, “I learned that Wall Street is the last place that should ever get a taxpayer bailout.” He voted against the budget and debt ceiling deal negotiated by Senate GOP leader Mitch McConnell, arguing, “Not only will our debt grow each year under this plan, it will continue to grow even as a percentage of our economy ... I am concerned that the long-term cuts over the next decade will not materialize.”

  • Sen. Rob Portman, R-Ohio

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    Sen. Rob Portman, R-Ohio

    Although a first-term senator, Portman has worked in Washington, on and off, since his days as a lawyer for an influential Washington lobbying firm in the 1980s and then as associate White House counsel and congressional liaison for President George H. W. Bush, starting in 1989. He served seven terms in the House, beginning in 1993, and then did stints under President George W. Bush as U.S. Trade Representative and as budget director.

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    In last fall’s election, Portman easily defeated an underfunded Democratic opponent, getting 57 percent of the vote – this in a state which Barack Obama had won in 2008 with 51 percent. He brings a deep knowledge of both politics and budget details to the committee.

  • Sen. Patty Murray, D-Wash./Co-chair

    Image: Patty Murray
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    Sen. Patty Murray, D-Wash.

    Murray, as the self-described “mom in tennis shoes” and with scanty political experience, won her Senate seat in 1992 and has proven to be a durable politician and a skillful member of the chamber's Appropriations Committee.

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    Despite her re-election race last year being rated a tossup in late summer, she defeated Republican opponent Dino Rossi, winning 52 percent of the vote. Some reform groups have criticized her for serving on the deficit reduction committee while she is chair of the Democratic Senatorial Campaign Committee, the fundraising and candidate recruiting arm of her party. But Murray’s response hearkens back to her “mom in tennis shoes” persona: "Multitasking is something every mom knows how to do."

  • Sen. Max Baucus, D-Mont.

    Image: Baucus
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    Sen. Max Baucus, D-Mont.

    Although rarely seen on television and not given to flamboyant speechmaking, Baucus, the chairman of the Senate Finance Committee, is one of the most powerful people in Washington. His first job in Washington was in 1967 as an attorney for a now-defunct federal agency, the Civil Aeronautics Board. Baucus won a House seat in 1974 in the wake of the Watergate scandal and was elected to the Senate in 1978.

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    Since 2001, with one interruption when Republicans were in control of the Senate, he has chaired the Finance Committee, playing decisive roles in writing the 2001 tax cuts into law and in designing last year’s health care overhaul.

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    Last year, he served on the Bowles-Simpson deficit commission, but voted against its recommendations, such as raising the eligibility age for Social Security retirement benefits and raising the gasoline tax, which he said “would hurt people in states like Montana who often have to travel long distances.”

  • Sen. John Kerry, D-Mass.

    Image: John Kerry
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    Sen. John Kerry, D-Mass.

    Democratic presidential nominee in 2004, Kerry brings the perspective of a party leader and a 26-year Senate veteran. He has served on the Senate Finance Committee for many years and was a strong advocate of President Obama’s health care overhaul. He tried last year to design climate change legislation in partnership with Sen. Lindsey Graham, R-S.C., and Joe Lieberman, I-Conn., contrasting it with the health care bill. "Health care never, ever became bipartisan,” he said. But in end, Kerry’s effort couldn’t gain enough momentum.

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    He complained shortly before the 2010 elections that Republicans were creating “a period of know-nothing-ism in the country, where truth and science and facts don't weigh in. It's all short-order, lowest common denominator, cheap-seat politics.”

  • Rep. Jeb Hensarling, R-Texas/Co-Chair

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    Rep. Jeb Hensarling, R-Texas

    The Texan is probably the most conservative member of the joint committee. He opposed the 2008 Troubled Asset Relief Program which bailed out Wall Street firms, saying TARP was “a step down the slippery slope to socialism.”

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    In the 1990’s, he served as an aide to Texas Sen. Phil Gramm, helping run the National Republican Senatorial Committee. Last year, he served on the Bowles-Simpson deficit commission, but voted against its recommendations which included tax increases (by phasing out deductions and credits) and reductions in entitlement spending. Explaining his “no” vote, Hensarling said, “If I believed that the increased revenue would actually be used for deficit reduction, you know, I might reluctantly come to the table ... .” But he said when he looked at Reagan’s agreeing to tax increases in 1982 and George H.W. Bush’s tax reversal in 1990, “It just seems to me that somehow the spending restraint never quite materializes, and yet the increased revenues do, and it seems like the increased revenues simply chase more spending.

  • Rep. David Camp, R-Mich.

    Image: Camp
    Harry Hamburg  /  AP file
    Rep. David Camp, R-Mich.

    Chairman of the House Ways & Means Committee, which writes tax law and runs the entitlement programs (Medicare, Social Security and Medicaid), Camp is a 21-year House veteran. Like many other members of Congress, Camp worked on the Hill as a staffer — in his case, as chief of staff in the 1980s for the Republican who once held the same seat he now holds.

    Story: Exclusive: Republican Dave Camp rules nothing out for debt panel

    Neither flashy, nor particularly charismatic, Camp is a wonkish, detail-oriented legislator. He voted for the 2008 financial sector bailout and the auto industry bailout, but is staunchly conservative on most issues. President Barack Obama carried his Michigan district with 50 percent of the vote in the 2008 election.

  • Rep. Fred Upton, R-Mich.

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    Rep. Fred Upton, R-Mich.

    Of the six Republicans serving on the committee, Upton is the only one who might be called "moderate" or who has occasionally deviated from the party line on a major issue (he opposed President Bush’s 2007 Iraq troop surge). After the 2010 election gave Republicans control of the House, some conservatives tried to block Upton from becoming chairman of the Energy and Commerce Committee.

    Story: Pelosi names final members to debt supercommittee

    FreedomWorks, a group headed former House Majority Leader Dick Armey, assailed his votes to bail out the auto industry and financial firms. "He has consistently been one of the least fiscally conservative Republicans in the House," FreedomWorks Max Pappas told Congressional Quarterly. But Upton, an ally of Speaker John Boehner, prevailed. Like fellow committee member and fellow Michigander Dave Camp, Upton has been on Capitol Hill for decades, having won his seat in 1986. Before that, Upton worked as a staffer for Rep. David Stockman, and then went with Stockman when he became President Ronald Reagan’s budget director in 1981. Obama carried his district with 54 percent of the vote in the 2008 election, but Bush won it in 2004 with 53 percent.

  • Rep. James E. Clyburn, D-S.C.

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    Rep. James E. Clyburn, D-S.C.

    Clyburn, first elected to the House in 1992, served as Democratic whip when his party had the majority from 2007 to the end of 2010. He represents one of the nation’ poorest and most heavily Democratic congressional districts. After the 2010 GOP wave, Clyburn was left as the only Democrat in his state’s six-member congressional delegation.

    Story: House Democrats tap 3 for deficit super committee

    Referring to the deficit and the national debt, Clyburn told a South Carolina newspaper just before his appointment to the deficit reduction committee, “Entitlements aren’t causing these problems. This is just blaming poor people ... when fat cats in the upper 2 percent (of Americans) are getting tax cuts.”

  • Rep. Xavier Becerra, D-Calif.

    Image: Beccerra
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    Rep. Xavier Beccerra, D-Calif.

    Elected in 1992, Becerra represents a district in Los Angeles which President Obama won in 2008 with 80 percent of the vote. He serves on the House Ways & Means Committee, and also served on the Bowles-Simpson deficit commission, but voted against its recommendations, complaining that the deficit and debt had been created mostly by President Bush and Republicans in Congress.

    “We cut taxes for the wealthy in a time of war and recession and never paid for it,” he said. He also said, “We cannot balance the federal budget with 15 million Americans out of work.” And he contended that “short-term deficits, incurred for policies that promote economic recovery and investment, are not incompatible with responsible, long-term deficit reduction.”

  • Rep. Chris Van Hollen, D-Md.

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    Rep. Chris Van Hollen, D-Md.

    Senior Democrat on the House Budget Committee, Van Hollen is perhaps the House Democrats’ most ubiquitous spokesman on national television, rarely missing a chance to do battle with Republicans. He chaired his party’s House campaign committee — in both good times for Democrats (2008) and during the 2010 election debacle.

    Story: House Democrats tap 3 for deficit super committee

    He opposes short-term deficit reduction, saying, “This focus on the near term on just cutting, cutting, cutting is actually the opposite course that we should take. We need a long term plan to reduce the deficit. But in the short term it is counterproductive to make these deep cuts.”