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One idea that has been gaining steam among both Democrats and Republicans is to put deficit targets or spending caps on the debt limit increase in order to get it through Congress. But exactly how to construct those caps is sure to have both sides bickering for weeks.
Obama offered his own idea for a debt cap Wednesday. Under his plan, debt would have to start dropping as a percentage of the economy by 2014. Failure to do so would trigger automatic spending cuts and tax increases.
Proposals from Republicans for spending caps would require much deeper cuts than Obama is contemplating and trigger across-the-board cuts but not tax increases. Republicans also are united behind a proposal for a balanced-budget amendment to the Constitution, although Ryan’s own budget fails to comply with it because it doesn’t balance the budget until the late 2030s.
In the meantime, the political rhetoric isn’t cooling off despite last week’s agreement on funding the government for the next six months.
Obama painted a grim picture of grandparents being kicked out of nursing homes and poor kids losing their health insurance if Ryan’s cuts are enacted.
“This is a vision that says up to 50 million Americans have to lose their health insurance in order for us to reduce the deficit,” Obama said.
He particularly targeted Ryan’s proposal to force anyone 55 or younger to obtain private insurance with a set federal subsidy instead of traditional Medicare.
“I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry, with a shrinking benefit to pay for rising costs,” he said.
Obama instead called for shared sacrifice, requiring the wealthy to pay more in taxes alongside far more modest cuts in spending.
Obama’s blueprint, which builds off the proposal of his fiscal commission, includes $2 trillion in spending cuts, including cuts in defense, discretionary accounts and entitlements; $1 trillion from shrinking tax deductions; and $1 trillion from reduced interest payments.
The tax reform package would reduce deductions and tax expenditures enough to simultaneously lower tax rates and generate more revenue to cut the deficit, Obama said. He also said Social Security should be shored up for future generations, but without slashing benefits.
Senate Majority Leader Harry Reid (D-Nev.), who has vowed to oppose any cuts to Social Security, praised Obama for separating Social Security from the larger debate over the debt.
And Rep. Chris Van Hollen, ranking member of the Budget panel, said it’s not clear whether Congress can reach a deal in the June timeline set by the president. But he said it was important to set a target.
“If you don’t set a target, then it’s hard to get people to focus,” the Maryland Democrat said.
The looming backdrop of a potential default on the federal debt had Democrats warning a stalemate could lead to a catastrophe.
Nearly four dozen House Democrats signed a letter Wednesday saying they want a “clean” vote on the debt ceiling.
“Nobody should be playing the game of political chicken with the full faith and credit of the United States,” Van Hollen said.