Will President Obama’s deficit plan work?
Jeremy Hobson: In a few hours, President Obama will unveil a new plan to slash trillions of dollars from the Federal deficit over the next decade. Washington needs to show that it’s serious about getting its fiscal house in order after that S&P downgrade of the U.S. credit rating last month.
Let’s get the details now from our Washington bureau chief John Dimsdale. Good morning, John.
John Dimsdale: Hello, Jeremy.
Hobson: Well what do we know about what the president is going to be proposing later this morning?
Dimsdale: He’s hoping to cut deficits by $3 trillion above the $1.5 trillion that the bipartisan Congressional super committee is going for over then next 10 years. About a third of the president’s savings will come from troop draw-downs in Iraq and Afghanistan. He gets about half of his deficit reduction from tax increases. Some of those we’ve heard about in the past — letting the Bush tax cuts expire for the wealthy, getting rid of breaks for oil and gas companies. The president will also propose a new minimum tax on millionaires and billionaires. It’s called the “Buffet rule” after Warren Buffet, who says that the rich should pay more for government programs. And the president will also find some savings in Medicare, although he says he won’t cut Social Security.
Hobson: OK, John, standby — I want to get reaction now from Harvard economist Ken Rogoff. Professor Rogoff — no cuts to Social Security, more tax increases on the wealthy, and troop draw-downs — that sounds like a plan Republicans are just going to love.
Ken Rogoff: Indeed. Well, I mean, the troop draw-downs, for example, certainly something we’d hope for, but I don’t think the world has particularly become safer place. I do think taxes have to go up, and the right way to have them go up is by reducing the loopholes, the exemptions, the ways people can avoid paying taxes, rather than raising the rates. He’s doing both. I think ultimately Republicans on the super committee will go along with getting rid of some of the exemptions. I think raising the rates is going to be a tough sell.
Hobson: But do you think that what we’re hearing today from the president is really more about the 2012 campaign than getting the deficit under control now?
Rogoff: Well — of course it is. But at the same time, he’s laying out a reasonably centrist position. It’s pretty obvious that tax collection has to go up, you can’t do it all with cutting government spending. And the troop reductions, I think, is a bit of a campaign thing because they’re going to come out of one area that could well go into another. But you know, he’s trying to lay out his view — and I think it’s high time he did that, whether one agrees with it or not — rather than simply turn it over to the Senate and the House for what they want to do.
Hobson: Harvard economist Ken Rogoff and Marketplace Washington bureau chief John Dimsdale, thanks to both of you.
Rogoff: Thank you.
Dimsdale: Thank you.
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