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Obama’s Deficit Plan Sets Up a Battle With GOP on Medicare, Medicaid Cuts

More taxes on the wealthy, more cuts in defense

En español | President Obama on Wednesday laid out a vastly different vision of how to wrestle the nation’s debt problems into submission compared with a Republican plan that comes up for a vote later this week.

See also: Washington's 2011 fiscal wars: What they mean to you.

“Doing nothing on the deficit is just not an option,” Obama told a crowd at George Washington University. “Our debt has grown so large that we could do real damage to the economy if we don’t begin a process now to get our fiscal house in order.”

Obama proposed cutting the deficit by $4 trillion over 12 years or less, compared with a $6 trillion cut over 10 years in the plan led by House Budget Committee Chairman Paul Ryan, R-Wis.

One of the keenest differences between the plans is how Obama approaches the Medicaid program, which pays for much of the nation’s long-term care, and the Medicare health insurance program for older Americans and people with disabilities. Obama opposes turning Medicaid into a grant that would leave states to decide who gets benefits, but he provided little detail about his plan to cut $100 billion from the program. He opposed Ryan’s plan to turn Medicare into a program in which seniors get aid to help buy insurance from the private market.

President Barack Obama outlines his fiscal policy during an address at George Washington University in Washington DC, Wednesday, April 13, 2011

President Barack Obama's deficit plan differs sharply with that of the GOP. — Charles Dharapak/AP

“I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry, with a shrinking benefit to pay for rising costs,” Obama said.

Yet a third plan is expected soon — from a bipartisan group of senators dubbed the “Gang of Six” who are looking for a red-ink reduction plan that can win support from Republicans and Democrats. Four of the “gang” members — including leader Kent Conrad of North Dakota, who chairs the Senate Budget Committee — sat on the president’s fiscal commission.

That commission reported its plan in December to raise the Social Security retirement age to 69 and to make other spending cuts and tax law changes such as closing tax loopholes and reducing overall tax rates.

The commission’s cry for action added momentum to political and economic realities putting a spotlight on federal budgeting. Last November’s election swept into office many Republicans who promised to scale back the size of government and vigorously attack the deficit. Voters have become nervous watching some state governments and European nations teeter on the verge of bankruptcy. And the debt load has been growing as a result of the recession, stimulus spending and war costs — just as more boomers are retiring, which reduces tax revenues and increases Social Security and Medicare spending.

Next: Republicans focus on domestic spending cuts. >>

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