U.S. President Barack Obama delivers a speech on the new deficit reduction plan at the White House in Washington D.C., capital of the United States, Sept. 19, 2011. Obama launched his plan on Monday to cut the country`s deficit that will raise about 1.5 trillion U.S. dollars in tax revenue over the next 10 years. (Xinhua/Zhang Jun)
WASHINGTON, Sept. 19 (Xinhua) -- U.S. President Barack Obama vowed on Monday to restore the country`s fiscal credibility by announcing a new deficit plan which will raise taxes on the rich and reduce government spending on other programs.
The plan, which is the president`s fourth package of deficit- reduction ideas this year, also serves as Obama recommendations to a bipartisan congressional debt reduction committee to pay for a 447-billion-dollar jobs bill that he announced on Sept. 8.
Job creation and debt reduction are the two top priorities of the Obama administration as the 2012 presidential election battle is on its way. "Washington has to live within its means," Obama said from Rose Garden of the White House, urging two parties of the Congress to take their responsibility to address the country`s debt challenge.
According to a fact sheet released by the White House, Obama`s plan will produce approximately 4.4 trillion dollars in deficit reduction, including 1.1 trillion dollars in presumed savings from winding down the wars in Iraq and Afghanistan. The provision has been part of Democratic and Republican budget proposals in the past.
The center piece of the new plan is a 1.5 trillion dollars tax increase over the next decade. This part is also most controversial and caused strong opponent from the Republicans.
Besides tax increase, the deficit cut plan will include 1.2 trillion dollars from the discretionary cuts and 580 billion dollars reduction and reform of a wide range of mandatory programs. Moreover, it will save 430 billion dollars in additional interest payments.
"This will be the biggest spending cut in (U.S.) history," he said, adding that everyone must pay a "fair share" including the wealthy and big corporations.
The White House expects that the U.S. deficit to GDP ration, currently about 9 percent, to fall to 2.3 percent of GDP in 2021.
Obama said that his administration will reform the social welfare programs, but it will not abandon the fundamental basis of the country.
Facing a sluggish economic growth and stubbornly high unemployment, Obama unveiled a job plan on Sept. 8 including measures like payroll tax cuts for employers and employees as well as new investment in infrastructure projects.
The newly proposed deficit reduction plan is considered as a sister plan of the Obama administration`s job plan.
A 12-member Congressional committee, formally named the Joint Select Committee on Deficit Reduction, which was created by a bipartisan debt reduction deal inked last month, will consider Obama`s plan and propose their solution later this year.
The so called "super committee" needs to reach an agreement and send to the Congress for approval by Dec. 23. Otherwise, 1.2 trillion dollars in cuts to defense and entitlement programs would take effect automatically in January 2013.
Obama said that he would veto any debt-reduction bill that cuts spending but does not raise taxes.
Again, he renewed a "balanced approach" to trim the deficit with a mix of tax increases and budget cuts, emphasizing on "the values of shared responsibility and shared sacrifice".
However, the new plan is believed to have little chance of getting through the Congress in one piece.
Republicans have consistently opposed any measures resembling tax hikes, saying they will hurt the struggling U.S. economy.
The Heritage Foundation, a Washington-based think tank said that Obama`s idea on tax increase is "war on job creators".
House Budget Committee Chairman Paul Ryan, a Republican, said that "if you tax job creators more, you get less job creation." Senate Minority Leader Mitch McConnell argued that the President`s plan is "a bad thing to do in the middle of an economic downturn."