The Economy According to Obama

Barack Obama introduced his budget deficit reduction plan. He anticipates decreasing spending by $4 trillion over the course of 12 years by reducing defense programs and cutting back health care and tax reform spending. Obama also offered a tax increase for rich people, a decision that fueled criticism from Republicans. The president refused to comply with the demands of political opponents about the introduction of fundamental changes to the Medicare and Medicaid programs.

On Wednesday, in his 44-minute speech, Barack Obama presented the budget deficit reduction plan at George Washington University. The plan includes reduction of defense programs and health care spending. The plan also includes a tax reform, in particular, an increase on taxes for rich people, which were lowered during the George Bush Jr. administration.

“I’m calling on Congress to reform our individual tax code so that it is fair and simple — so that the amount of taxes you pay isn’t determined by what kind of accountant you can afford,” said President Obama. The president also emphasized that the deficit reduction should be done within the overall cost reduction. “We have to live within our means. We have to reduce our deficit, and we have to get back on a path that will allow us to pay down our debt.”

Meanwhile, the Republicans offer to concentrate, initially, on decreasing social spending and folding up Obama’s health care reform. Also, they absolutely refuse to accept Obama’s offer to raise taxes on the wealthy.

The president, in turn, took apart the Republicans’ plan, which suggested lowering the budget deficit by $6.2 trillion over the next 10 years, specifying that the Republicans’ plan will hit the wallets of poor and elderly Americans.

It is expected that this fiscal year, the American budget deficit will reach a record of $1.5 trillion. In the meantime, the president expects that by 2023, the U.S. will be able to save $750 billion by cutting spending not related to the maintenance of national security, $400 billion by reducing defense costs and $500 billion by the sequestration of government spending on social programs in health care.

According to Obama, however, the legislators themselves should agree on a final belt-tightening plan. In the beginning of May, when Congress will return to work after Easter vacation, the congressmen and senators must agree on raising the national debt ceiling. The present threshold of $14.3 trillion could already be crossed this summer. If the bar won’t be raised and new borrowings won’t be made, the country could face a default. Moreover, the legislators don’t want to just raise the bar—the Democrats and Republicans are set to introduce a new working plan to control government spending.

By the way, Obama himself mentioned a “debt protection plan.” It could work automatically if Congress can’t guarantee the national debt decrease by 2014. It could also reduce the cost of every section, sparing only programs for the poor, such as Medicare, and pension plans. At the same time, the “debt protection plan” would cancel tax breaks for individuals and corporations.

I have to add that there was a funny incident during Obama’s speech—Vice President of the United States Joseph Biden couldn’t take a long president’s speech about budget reduction and started to doze off. The journalists’ attention was also drawn to a woman sitting just behind Biden and listening to Obama with closed eyes. The incident aroused a contradictory reaction. Some were outraged by the “weakness” of the second-in-command, and there were those who attributed this to the politician’s distinctive attention and claimed that Biden wanted to better concentrate on the president’s words and therefore closed his eyes. There was even a religious explanation: Biden closed his eyes to pray to God for success of the president’s plan.