Speaking at a White House press conference Tuesday afternoon, President Obama backed a $3.7 trillion deficit-reduction plan created by a bipartisan group of Senators known as the “Gang of Six”. Obama says the proposal is the kind of balanced compromise he has been looking for since the beginning, cutting spending, overhauling Social Security and entitlement programs like Medicare, while also reworking tax code.
The plan’s lead authors are Democratic Senator Mark Warner, of Virginia, and Republican Senator Saxby Chambliss, of Georgia. The original plan seemed at first to be too ambitious, but was revived recently to bipartisan support in the Senate. However, it will need the approval of House Republicans to go forward. To date, most GOP representatives have been unwilling to support any form of tax increase.
The plan, also authored by Republican Senators Tom Coburn and Mike Crapo and Democratic Senators Kent Conrad and Richard Durbin, builds upon a reduction package proposed in December by the White House’s deficit-reduction commission. Both White House officials and leaders in Congress alike have been working on a plan that could both get adequate Republican approval in the House and the President’s signature by the Treasury’s August 2 debt ceiling deadline.
Most lawmakers refuse to vote to increase the government’s debt ceiling before a plan for reducing the deficit has been put in place. But Treasury Department officials say that, if August 2 comes and the debt ceiling hasn’t been raised, the government will run out of money to make payments on its obligations, spelling catastrophe for financial markets and the economy.
So far the Gang of Six plan has received significant bipartisan support, but the true test of the proposal is whether its $1 trillion in new tax revenue over the next 10 years will clear Republicans in the House. The new revenue would come from the narrowing or elimination of several tax breaks for the wealthy. Making that pill a little easier to swallow is the fact that the plan would also lower tax rates and end the alternative minimum tax, ultimately resulting in a $1.5 trillion tax cut.
Seventy-four percent of the $3.7 billion in savings would come from spending cuts, with other twenty-six percent coming from new taxes. “I think the vibe in the room was very positive,” said Republican Senator Kelly Ayotte, of New Hampshire. “My first impression is that this is a very credible plan.”
The plan was presented to Congress this morning and received President Obama’s public approval this afternoon. The House is scheduled to vote on a largely symbolic Republican measure, being called the “Cut, Cap, and Balance Act” this evening. The act would cut spending by $5.8 trillion over the next 10 years, cap future spending, and require Congress to approve a constitutional amendment to balance the federal budget before raising the debt ceiling by $2.4 trillion. While the plan has the support of Republican members of the House, it is not expected to pass the Senate, and according to a White House statement, would certainly be vetoed by Obama if it ever reached his desk.