Obama Vows to Cut $4 Trillion in Deficits Over 12 Years

Strategic Insights -

U.S. President Barack Obama has set a goal to cut $4 trillion in cumulative deficits over the next 12 years through a combination of spending cuts and tax increases. The plan, presented in a speech at George Washington University, aims to reduce the annual U.S. deficit to 2.5% of gross domestic product by 2015, down from 10.9% projected for the current year. Obama also reiterated his support for overhauling the tax code to lower rates while closing loopholes and ending some breaks to increase revenue.

Key Takeaways:

  • The Obama administration forecasts a cumulative deficit of $3.8 trillion over the next five years and $7.2 trillion over a decade.
  • The president proposes saving $400 billion in current and future defense spending and calls for a "fundamental review" of U.S. military missions.
  • Obama sets a target of reducing the annual U.S. deficit to 2.5% of GDP by 2015, down from 10.9% projected for the current year.
  • The administration proposes a "debt fail-safe" that would trigger automatic spending cuts and tax changes if the debt-to-GDP ratio hasn't stabilized by 2014.
  • The automatic cuts would not apply to entitlements, including Social Security, Medicare, and programs intended for low-income Americans.
  • Obama would target government spending, including departments such as the Pentagon and the Department of Agriculture.
  • The president has borrowed ideas from the Simpson-Bowles debt commission and has adopted its recommendations on non-security discretionary spending, saving $770 billion by 2023.
  • Obama rejects the idea of a voucher-like system for future Medicare recipients and criticizes the Republican plan for deep cuts in federal spending.

Statistics:

  • The Obama administration forecasts a cumulative deficit of $3.8 trillion over the next five years.
  • The cumulative deficit over a decade would be $7.2 trillion.
  • The president proposes saving $400 billion in current and future defense spending.
  • The administration aims to reduce the annual U.S. deficit to 2.5% of GDP by 2015.
  • The debt fail-safe would trigger automatic spending cuts and tax changes if the debt-to-GDP ratio hasn't stabilized by 2014.

Sources:

  • Bloomberg News
  • The Toronto Star
  • Statement from U.S. President Barack Obama.