President Barack Obama is expected to unveil a debt plan on Monday that will cut the national debt by an anticipated $3 trillion over the next decade. His plan reflects his vision for how the country can be placed on a more fiscally-sustainable course in the wake of the debt limit breach and high unemployment rates that have plagued the economy this year.
Debt Plan Proposals
In response to the recent debt crisis, Obama plans to propose a number of ways to reduce the deficit over the next decade:
- Mandatory spending cuts ($580 billion): Obama wants to make a total of $580 billion in mandatory spending cuts over the next decade. In the proposal, about $248 billion will come out of Medicare, and about 90 percent of those savings will come from reducing over-payments in the system. Another $72 billion will come from Medicaid and other health programs. The remaining $260 billion in spending cuts have yet to be named.
- Tax revenue ($1.5 trillion): The president also plans to let Bush-era tax cuts expire for some high-income households. Obama’s plan would also include another $400 billion from capping the value of itemized deductions and other exemptions for high-income households. The remaining $300 billion would come from closing various tax loopholes.
- War savings ($1.1 trillion): Obama is also counting the reduction in spending in Iraq and Afghanistan over the next decade as he plans to draw down troops and change the nature of the operations in those countries. Also, he is counting savings that would result from spending caps the administration has proposed on future overseas contingency operations.
Interest is also expected to save $430 billion. When policies are adjusted to lower future deficits, the deficits are reduced in part because of the interest costs that will be saving from less borrowing.
Will the Debt Plan Pass in Congress?
As with any other plan proposed, some begin to speculate on whether it will make it through Congress. The president’s plan is no different.
Some say that his debt reduction proposal is likely to appease some of the Democratic base who say they want the rich to pay more and also don’t want Medicare or Social Security benefits touched.
The White House has promised that it the plan will not include any Social Security reform proposals. Also, officials say that the administration has no plans to raise the Medicare eligibility age, which is something fiscal experts have recommended.
But while the plan is likely to receive some support from Democrats, many say that it may have a more difficult time pleasing Republicans who have been adamant about not wanting to raise anyone’s taxes.
It’s possible that in the end, Obama will have to make a few adjustments to see it accepted. His plan is expected to be released later today.
