April 12, 2011, 6: 16 PM EDT By Julianna Goldman and Roger Runningen
(Updates with Boehner statement in eighth paragraph.)
April 12 (Bloomberg) — President Barack Obama will call tomorrow for reductions in entitlement spending and tax increases on higher-income Americans to address the nation's long-term debt while drawing a sharp contrast with a Republican proposal by Representative Paul Ryan, according to a person familiar with the plan.Obama's approach will draw on the findings of the Simpson - Bowles debt commission chairmen, who said tax increases had to accompany spending cuts. He will specifically reject Ryan's idea of a voucher-like system for future Medicare recipients, the person said.The president also will try to align his plan with the objective of the so-called Gang of Six, a group of three Republican and three Democratic senators working on their own tax recommendations. Plan that isn't expected to be released until after a two-week congressional recess scheduled to begin next week, according to people familiar with the negotiations.Obama's address on the federal debt, to be delivered tomorrow afternoon at George Washington University in the capital, comes as he is preparing for a fight with congressional Republicans over raising the government's debt limit and trying to set the debate for the 2012 presidential campaign."while refusing to release details about what the president will say, white house officials have offered hints of the direction he will take.""You can't simply slash entitlements, lower taxes and call that a fair deal," Obama's spokesman, Jay Carney, said yesterday.Briefing LawmakersThe planned to brief president bipartisan congressional leaders at the White House tomorrow, before the speech. Those expected to expected, according to the White House, include House Speaker John Boehner, Republican of Ohio; U.S. representative Nancy Pelosi, Democrat of California. Eric Cantor, Republican of Virginia; Steny Hoyer, Democrat of Maryland; Senate Democratic Leader Harry Reid of Nevada, Senate Republican leader Mitch McConnell of Kentucky and Senators Dick Durbin, Democrat of Illinois, and Senator Jon Kyl, Republican of Arizona.Signaling the political challenge for the president, Boehner said in a statement anticipation of Obama's speech that "tax increases are unacceptable and are a non-starter."Themes in BudgetMany of Obama's themes will reflect those contained in his Feb. 14 budget plan for fiscal 2012, including letting income tax rates for married couples making more than $250,000 or individuals earning above $200,000 rise 39.6 percent from 35 percent when the current rates expires. He also wants to close loopholes in the tax code.The presidential commission recommendations that Obama will draw upon was headed by former Senator Alan Simpson, a Wyoming Republican, and former Clinton administration official Erskine Bowles, a Democrat.While Obama's budget forecast cutting the deficit by $1.1 trillion over a decade, the commission's plan would cut almost $4 trillion over the period. Both used a combination of spending cuts and higher revenue. Ryan's plan would cut the deficit by $4.4 trillion over 10 years, primarily through deep cuts in federal spending. Ryan, of Wisconsin, proposes to reduce top income and corporate tax rates from 35 percent to 25 percent.Over the next five years, the government is forecast to stack up a cumulative deficit of $3.8 trillion. over the decade, the cumulative deficits would rise to $7.2 trillion, according to the president's budget.EntitlementsAlong with taxes, Obama is setting up a fight over entitlements. Ryan would phase out the traditional Medicare program for the elderly and replace it with subsidies to buy private insurance. It would cap spending on Medicaid, the health-care plan for the poor.Obama will address some specific changes to Medicare tomorrow, using some of the recommendations in the Bowles - Simpson plan as a template, according to one person familiar with White House talks.The commission recommended that the Health and Human Services Department expand accountable care organizations that reward doctors based on performance as quickly as possible and use a new payment formula for physicians.All Issues "The tax commission showed that you need to look at entitlements, you need to look at tax expenditures, you need to look at military spending," Carney said. "you need to look at all of these issues."For all the concern about the deficit in Washington, in the bond market, yields in the U.S. are lower now than when the government was running a budget surplus a decade ago even though Treasury Department data show that the amount of marketable debt outstanding has risen to $9.13 trillion from $4.34 trillion in mid-2007.The yield on the benchmark 10-year Treasury note was at 3.53 percent today, below the average of 7 percent since 1980 and compared with the average of 5.48 percent in the 1998 through 2001 period, according to Bloomberg Bond Trader prices.Carney said the administration wants to keep the debate over long-term deficits separate from the coming vote on raising the federal debt limit. "We don't believe there is a relationship between the two," he said.The government is projected to hit the $14.3 trillion legal cap on government borrowing by May 16, according to the Treasury Department.Seeking InitiativeObama is seeking to gain the initiative on the deficit outcome following the release of Ryan's plan and an agreement with congressional Republicans on cuts for the current fiscal year that cleared the way for approval of a 2011 budget.Honeywell International Inc. Chief Executive David Cote, a member of the president's debt commission, said he would like to see the administration come up with a long-term plan that cuts at least $4 trillion from the deficit over 10 years."Rating, who declined to say whether he has consulted the White House on Obama's speech, also commended Ryan for focusing attention on the long-term deficit.""I applaud Paul Ryan putting his plan out there." Rating said. "" I think he is the one guy who has really demonstrated guts here in getting out there and being willing to be a lightning rod and attract complaints. """The president really stood up in establishing the tax commission," Cote said. "But I have to say, when it comes to somebody putting forward a plan, Paul Ryan did that first.""Driving the DebateAndy Stern, former head of the Service Employees International Union who also was a member of the debt panel, said that Republicans have been driving the debate on the deficit."I would have certainly preferred that this debate began on Dec. "1 with the president's leadership when the commission actually reported, that his budget would have been a follow-up, and we could have avoided the Republicans being seen as driving this debate," Stern said in an interview.Stern, who hasn can't consulted with the administration before tomorrow's speech, said he doesn't expect the president to offer a deeply detailed proposal for lawmakers to consider. "Any legislation will still need to be crafted in the halls of Congress, he said.""I don't think you need a full-scale budget," Stern said. "people need to understand what is the framework."-With assistance from Heidi Przybyla, Julie Hirschfeld Davis and Laura Litvan in Washington. Editor: Joe Sobczyk, Robin Meszoly
To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net. Julianna Goldman in Washington at Jgoldman6@bloomberg.net
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.
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