President Barack Obama's deficit-reduction plan seeks to reduce the federal deficit by more than $3 trillion over a decade. NPR's Ron Elving describes the details of the plan and the politics surrounding its reception — and its possible fate — in Washington.
NEAL CONAN, host: This morning at the White House, President Obama laid out his plan to reduce the federal deficit by an additional $3 trillion over the next 10 years. The plan calls for reduced spending for benefit programs, including Medicare and Medicaid. But about a third of it consists of new revenues, higher taxes on the wealthiest Americans and the president drew a line in the sand.</s>President BARACK OBAMA: 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 or 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.</s>NEAL CONAN, host: The proposal to raise taxes on millionaires, the so-called Buffett tax, emerged late last week, and Republicans in Congress declared that it would not be approved. Yesterday, House Budget Committee Chairman Paul Ryan appeared on "Fox News Sunday."</s>Representative PAUL RYAN: Class warfare, Chris, may make for really good politics, but it makes for rotten economics. We don't need a system that seeks to divide people. We don't need a system that seeks to prey on people's fear, envy and anxiety. We need a system that creates jobs and innovation, and removes these barriers for entrepreneurs to go out and rehire people. I'm afraid these kinds of tax increases don't work.</s>NEAL CONAN, host: NPR senior Washington editor Ron Elving joins us here in Studio 3A. Always good to have you on the program, Ron.</s>RON ELVING: Good to be with you, Neal.</s>NEAL CONAN, host: And during the debate a month or so ago, the Republicans are saying Mr. President, where is your plan? Here's his plan.</s>RON ELVING: Yes. This would appear to be a plan, and it certainly has some big numbers in it; we are getting increasingly comfortable in using the trillion figure. And in this case, the president is also putting forward some pretty robust proposals with respect to revenues. That was what had Congressman Ryan so upset yesterday and a number of other Republicans as well. And he is also saying something we have not heard from him before, which is no more bargaining that winds up being one sided. This will not be a one-sided deal. I will veto anything that Congress sends me if it cuts Medicare benefits but does not have serious revenues. So game on.</s>NEAL CONAN, host: Game on. I think it was last week that the speaker of the House of Representatives said any proposal that has new taxes on it is dead in the water.</s>RON ELVING: So both sides, both the speaker and the president have said we can't have politics in which one side says my way or the highway, but then, of course, immediately after saying that, the speaker said but, of course, there can't be any tax changes. That would mean higher taxes for anybody and at least not for any of the people that they're trying to protect in the income tax structure. We can get into payroll taxes maybe, but the income tax structure cannot produce more revenue coming out of the pockets of the relatively affluent because only the relatively affluent pay significant income taxes at this point, in our country.</s>RON ELVING: And the president then comes back a few days later and says, well, I believe in bargaining, and I believe in compromise. And I have shown myself willing. But I will veto any bill that does not meet these specific criteria. Sounds like my way or the highway from both directions. And what we have seen thus far in this budget year is that whichever side is most intransigent, most unwilling to compromise seems to prevail.</s>NEAL CONAN, host: Well, this next step is the so-called supercommittee. This is six Republicans and six Democrats, three from each House, chosen by the party leader in that particular body, so hewing pretty closely to the leader's line for the most part. And they are tasked to come up with - well, the president's proposal goes well beyond what they are assigned to come up with.</s>RON ELVING: That's right. What the president was talking about this morning was two things. First of all, it was pay-fors, if you will, that's the new Washingtonese for putting up the money for whatever it is you want to do. The jobs bill that the president had proposed in that speech that he made to Congress earlier this month. This is an attempt to spend something like $450 billion to juice the economy in such ways that more hiring would take place, more Americans would get back to work.</s>RON ELVING: Everybody is in favor of that, but not everyone is in favor of having the federal government spend that money in that fashion to get that done. Some of that is payroll tax decreases. Some of that is something that ought to be appealing to Republicans, although we're not sure just how committed they are to that particular kind of tax cut. And that was the first part of what the president needed to come up with money for this morning. The rest of it is approximately $3 trillion that he is proposing that the new committee, the supercommittee, the committee of 12, whatever we're going to wind up calling these people, should aim for in coming up their deficit reductions. Now, they're only actually required to come up with about half of that, so whether or not they're going to have the ambition to double their task and make their life that much more difficult, we'll have to see.</s>NEAL CONAN, host: Yet a lot of economists and, indeed, the rating services said that 4 trillion totally figure - and that's what the president is talking about - that's really what's needed.</s>RON ELVING: Yes. And, really, the bigger you can get the number the better. The president, this morning, used the figure $4.4 trillion and, you know, we really are throwing around some large boxcar numbers. Now, we're not talking billions, you know.</s>NEAL CONAN, host: There's that T word.</s>RON ELVING: $4.4 trillion included the $1.2 trillion from the Budget Control Act - that was that nasty piece of legislation that everyone hated that the Congress passed in the first week of August so that they could get out of town and raise the debt ceiling so that the United States did not default on its obligations.</s>RON ELVING: So we're really talking about big numbers now. And when the president adds in what was done back in August, plus what is a widely anticipated draw down in the cost of defense because of the Iraq withdrawal, and one hopes down the road less cost in Afghanistan, and savings from lower interest costs, if we're borrowing less money - the president's numbers this morning included almost half a trillion, $430 billion in lower interest costs, that, of course, is a hopeful thing. We don't know for certain that interest costs will go down.</s>And then the tough parts: about $600 billion in savings in mandatory spending, which translates primarily little more than half to savings in the federal health care programs, that's Medicare and Medicaid. Now, the president didn't raise the Medicare or didn't propose raising the Medicare age as some people have proposed, but he is looking to save a lot of money in Medicare and Medicaid, and that's going to hurt. There are going to be a lot of folks who are severely disadvantaged by that kind of spending reduction. So the president is putting that on the table, and he is saying, I've got to get something back now from the other side, from the people who don't want to give on revenues.</s>NEAL CONAN, host: And he has taken Social Security off the table.</s>RON ELVING: There is nothing proposed in this - today's plan from the president that affects Social Security. But, look, Social Security and, frankly, the rest of Medicare is really on the table in the larger sense as bait for the Republicans. If you really want to reform these entitlement programs along the lines of what, say, Congressman Paul Ryan who was on TV yesterday has proposed doing, if you really want to reduce the costs of these programs substantially over the coming decades, not just the next few years, then you've got to meet us half way. You've got to really want to restructure the entire tax system to make it fairer, to make it more productive so that we can have a balanced approach to reducing the deficit long term.</s>NEAL CONAN, host: Now, there are two shorter-term time periods that we need to look. The first is between now and Thanksgiving. The supercommittee is assigned to make its proposal to Congress by then. It has to come up with a plan by then or, there's an or else, we will be sequestered. We will go through a process called sequestration. Like the debt ceiling, this is a term that we're going to come to know.</s>RON ELVING: I'm afraid it is. It's an ugly word, perhaps, but it is one that also connotes a rather ugly process, which is the across the board sequestering, that is the withdrawal of legal authority for spending a lot of money, a very large amount of money that would then have to be equally divided between defense and nondefense spending. That is a scary prospect for many Republicans as well as many Democrats because the Defense Department is already being squeezed. There's already a trillion dollars in what the president was talking about this morning that assumes lower spending by the Pentagon.</s>RON ELVING: If you go back in for another $500 billion later on this year and say, well, you know, that's sequestration, tough. You can't argue with it. That, too, is going to truly make a difference. It's really going to make the Pentagon feel it. And, of course, there'll be enormous political pushback. There'll be enormous political pain associated with that as there would be with these cuts to Medicare and Medicaid that the president is talking about. This is real stuff. This is going to affect real people, and they're going to be vocal about it.</s>NEAL CONAN, host: And so that's the first time period. The next one, isn't this the argument that we're going to be hearing between now and November of 2012?</s>RON ELVING: That's right. The big date that hovers over all of this is November of 2012. Everyone is thinking ahead to what the next election is going to produce. Will it be a 2008-type election or 2010-type election? We had very different electorates in those two years. They were in quite different moods, and they elected entirely different people. So if we have another 2008 election and the president could be re-elected and could possibly improve his standing in Congress, that would give tremendous impetus to the kinds of solutions that he has been proposing.</s>RON ELVING: If, on the other hand, the Republicans are going to continue to gain seats in Congress, take over the Senate, as many people expect them to do now just on the numbers of exposed seats, vulnerable seats, and if the president is defeated by any of the candidates we're looking at on the Republican side, then you would have a strong movement in the opposite direction of the kind of policies that we hear from Paul Ryan or Mitch McConnell or the other Republican leaders in Congress today.</s>NEAL CONAN, host: It's interesting. We see opinion polls which say the balance approach to cutting the deficit, in other words, including some revenues in there is supported by a pretty big majority of the American people, raising taxes on the wealthiest Americans, those making over $250,000 a year, much less millionaires, that is supported by big majorities too. Yet, we also see in the Republican presidential debate question, how many of you would - if the deal was for $1 in revenue increases and $10 in spending cuts, would you take that deal? And everybody said, I will vote no.</s>RON ELVING: That's right. It has become absolutely necessary for any Republican presidential candidate to say that they do not favor any kind of tax increase even if you give them the bait of a 10-1, which is, of course, totally fanciful. It would never be that great.</s>NEAL CONAN, host: The president's proposed about...</s>RON ELVING: Two or three - ratio of two or three to one for cuts over revenue increases. But what the point that's being made when you say 10-1, 20-1, 100-1, is that they're just not willing to consider the one. They're not willing to consider any kind of a tax increase as a political proposition as candidates for the Republican nomination. Now, down the road, a couple of years from now, maybe less, if one of them is actually president of the United States and a deal like that comes along, it's entirely possible he or she might take it.</s>NEAL CONAN, host: We're talking with NPR senior Washington editor Ron Elving. You're listening to TALK OF THE NATION from NPR News.</s>NEAL CONAN, host: Now, let's get a couple of callers in on reaction to the president's proposal and the political conundrum that we find ourselves in with lines drawn now in the sand by leaders in both parties. Jerry(ph) joins us, Jerry from Cookeville, Tennessee.</s>JERRY: Hi, Neal.</s>NEAL CONAN, host: Hi, Jerry.</s>JERRY: Yeah. Well, you know, the president's speech, it's just the same thing over and over and over again. He had two years to do this if he wanted to do this. He knew he couldn't do it with even a Democratic Senate and House with super majorities. This is nothing but a way to try to shore up his base. And, frankly, I find it quite disgusting when they call it the Buffett law. How come Mr. Buffett spends millions of dollars for tax attorneys so he can keep his own money? I mean, this president, the stuff he says, it's just - it's unbelievable. He thinks he's vanquished an enemy when he won. It's not like he won an election, he has vanquished the enemy. And he is doing everything he can to redistribute the wealth like he said he was going to do. It's disgusting.</s>NEAL CONAN, host: Redistribute wealth, in other words: take it from the rich, give it to the poor.</s>JERRY: Well, take it from anybody who seems to be paying taxes. I mean, there's 47 percent of the people in this country don't pay taxes. So what about their fair share? Is it just on the backs of the people who pay taxes?</s>NEAL CONAN, host: All right, Jerry. Thanks very much for the call. This is interesting, Ron, because at the same time, taxes as a percentage of gross national product are at the lowest point they've been since 1950. People don't feel under-taxed, but the government, in fact, is - as many economists would say - underfunded.</s>RON ELVING: There are a number of things here that are basic and that we're going to hear again and again over the months of this political debate. This 47 percent figure, that's a reference to the federal income tax. And as I mentioned earlier in my discussion with you a few minutes ago, almost half of the people in the country don't pay the federal income tax. What they do pay is the payroll taxes that support Social Security and Medicare, and they do pay state taxes of all kinds. And the state taxes tend to be quite regressive because they tend to fall more heavily on those who have less income.</s>RON ELVING: So the 47 percent refers to the federal income tax and that does not mean that those people pay no taxes. On the other hand, it does mean that the federal income tax system has been getting more progressive as it applies to the lowest incomes. Where it has not been getting more progressive is in how it applies to the highest incomes. And that's why you do get a pretty good percentage of people saying: It seems to me that with all the tax cuts we have had for the affluent in recent years, in the 1980s and then, of course, 2001, 2003, which blew a big, big hole in the Bush budgets in the last 10 years, there could be some adjustment at that end of the income scale.</s>NEAL CONAN, host: Let's now get to Brian(ph), Brian with us from Portland.</s>BRIAN: Hi. Thank you for taking my call.</s>NEAL CONAN, host: Sure.</s>BRIAN: Yeah. I just wanted to disagree with Mr. Elving's comment that those both sides are being intransigent. When the Republicans say absolutely no to any tax increases, that's intransigent. And if Obama were to say absolutely no to any spending decreases, that would be intransigent. Obama is extending an even-handed approach, that's not intransigent. He's just being a little firmer in the way he's phrasing it, but he's not the - he's not being intransigent.</s>NEAL CONAN, host: Well, the president would like people to believe he's believing reasonable so would Speaker Boehner, Ron.</s>RON ELVING: The speaker would, I supposed, see himself as being reasonable as well, but there's a slight difference between what I was saying about the two parties both wanting to have the approach that they want to make and then the president issuing a veto threat which, of course, is one form of insisting on his own way.</s>RON ELVING: The intransigent word that I used was with reference to those who have prevailed this year. And those who have prevailed this year have, generally speaking, on all these budget negotiations been Republicans. They have essentially said, we're not going to budge on the debt ceiling. We're going to risk that the United States would actually default. And, in fact, a number of their leading voices, people like Michele Bachmann, people who were running for president, said that they would accept a default on U.S. debt. So that's a form of intransigence. That's when I used that word.</s>NEAL CONAN, host: Any reasonable belief that even facing sequestration and those military budgets they're going to budge now?</s>RON ELVING: It does not appear so. I think that sequestration is better than an even bet. I hope that that's not true, and I hope they can work out something that's more ambitious and that addresses the problems more creatively.</s>NEAL CONAN, host: Ron Elving, thanks very much for your time.</s>RON ELVING: Thank you, Neal.</s>NEAL CONAN, host: NPR's senior Washington editor Ron Elving. Tomorrow, we'll broadcast from National Geographic headquarters here in Washington and talk about the mystery of the teenage brain. Scientists think they've finally figured it out. I'm pretty curious as to what they have to say. Join us then. I'm Neal Conan. It's the TALK OF THE NATION from NPR News.