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Obama endorses 'Gang of Six' deficit plan

/ Source: msnbc.com staff and news service reports

President Barack Obama gave his endorsement Tuesday to a deficit reduction plan offered by a bipartisan group of six senators, urging congressional leaders to use that blueprint as the basis for a bill that he can sign into law before the Aug. 2 debt limit deadline.

He acknowledged that his backing of the “Gang of Six” proposal “doesn’t get us out of the House of Representatives" and "doesn’t get us out of the Senate” and cautioned “there are still going to be a lot of difficult negotiations” before the plan could be approved.

Obama's backing seemed to be a potential breakthrough.

He called the plan “a very significant step” because “Democratic senators acknowledge that we’ve got to deal with our long-term debt problems that arise out of our various entitlement programs” and Republican senators “acknowledge that revenues will have to be part of a balanced package that makes sure that nobody is disproportionately hurt” from reducing future budget deficits.

Obama spoke several hours before the House passed legislation that would require trillions of dollars in spending cuts, a two-thirds vote of both houses of Congress for any tax increase, and a balanced-budget constitutional amendment in exchange for an increase in the debt ceiling.

The Republican bill, which stands no chance of enactment in the Democratic-controlled Senate and which Obama said he'd veto if it reached his desk, passed on a vote of 234 to 190, with five Democrats voting for it and nine Republicans voting against it.

Two GOP presidential contenders, Reps. Ron Paul and Michele Bachmann, voted against the bill. Paul called it "a distraction" and predicted that the United States would default on its debt.

House vote eclipsed by 'Gang of Six'But in any event the House vote was eclipsed by the "Gang of Six" proposal.

Obama said he'd invite House Speaker John Boehner and other congressional leaders to come to the White House for negotiations on the plan.

The “Gang of Six” plan would:

  • Aim to reduce deficits by $3.7 trillion over ten years;
  • Call for the elimination of some tax deductions and preferences and the reduction of others, raising $1 trillion in new revenue, while also reducing marginal income tax rates to as low as 23 percent for high earners;
  • Require $145 billion in cuts to national defense and homeland security operations and hundreds of billions in cuts to other federal departments;
  • Shift to a new measure of inflation called “chained CPI” which would have the effect of reducing future Social Security benefits by mandating smaller annual cost-of-living adjustments.

House Majority Leader Eric Cantor said in a statement that the tax rates in the plan and Obama's endorsement of them "are a positive development and an improvement over previous discussions."

But he added, "I am concerned with the Gang of Six’s revenue target, the plan fails to significantly address the largest drivers of America’s debt, and it is unclear how the goals of tax and entitlement reforms would be enforced."

The group which devised the proposal is composed of three Republicans, Saxby Chambliss of Georgia, Mike Crapo of Idaho, and Tom Coburn of Oklahoma, plus three Democrats, Kent Conrad of North Dakota, Mark Warner of Virginia, and — perhaps most importantly — Senate Majority Whip Dick Durbin of Illinois.

As the Senate's chief Democratic vote counter, Durbin can be expected to have an acute sense of what would garner enough votes to overcome a filibuster.

In addition to the six who designed the plan, it quickly won backing from Sen. Lamar Alexander, R-Tenn., who said, "This is a serious, bipartisan proposal that will help stop Washington from spending money we don't have.”

Another Republican senator, Mississippi's Roger Wicker, told Reuters it was "highly possible" for the plan to get 60 or 70 votes in the Senate.

The plan also won support from two centrist Democratic senators, Colorado's Michael Bennet and Delaware's Tom Carper.

But there were big unknowns as of Tuesday afternoon, including:

  • Would Boehner, Cantor and a majority of the House GOP caucus vote for a plan which aims to raise revenues through eliminating tax deductions and preferences?
  • Which taxpayers would end up paying more if the plan were to become law?
  • Exactly what cuts in future benefits would the plan make in Medicare and Social Security?
  • How much opposition would progressive and liberal groups generate to the plan, especially among House Democrats?

The "chained CPI" inflation gauge in the plan would mean “cutting the benefits of every beneficiary,” said Nancy Altman, co-chair of Strengthen Social Security Campaign, a coalition of unions, women's groups and others. "The whole idea is that these benefits keep purchasing power intact. If you’re not giving full and accurate (cost of living) adjustment, then the benefits erode over time.”

Justin Ruben, executive director of the left-leaning group Moveon.org, said the “Gang of Six” plan “appears to ask seniors, the middle class and the poor to bear the burden of deficit reduction, with cuts to Social Security benefits, billions in stealth cuts to be named later, and no real effort to make corporations and millionaires pay their fair share.”

At his White House press briefing Obama said an alternative debt ceiling increase plan being crafted by Senate Minority Leader Mitch McConnell and Senate Majority Leader Harry Reid “continues to be a necessary approach to put forward in the event that we don’t get an agreement” on the "Gang of Six" proposal.

Msnbc.com's Tom Curry contributed to this report.