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Obama offers $3.6 trillion deficit plan, would up taxes

Sep 19, 2011, 5:59 p.m.
President Barack Obama talks about cutting the U.S. deficit by raising taxes, from the Rose Garden of the White House in Washington, September 19, 2011. REUTERS/Jason Reed

"This is purely politics, aimed at Obama's demoralized base. It undoubtedly has been poll-tested, so now Obama has a populist campaign issue. There's obviously no chance this could pass" on a vote in Congress, said Greg Valliere, chief political strategist at consultancy Potomac Research Group.

Rudolph Penner, a former director of the Congressional Budget Office, said rating agencies would not be impressed by Obama's failure to recommend deeper healthcare cuts.

"If I were S&P I would not change my rating on the basis of this proposal," he said.

'BUFFETT RULE'

Obama's call to overhaul the U.S. tax code included a "Buffett Rule," named after billionaire investor Warren Buffett, that would set a minimum tax rate for people earning more than $1 million a year.

It would only affect a tiny minority of the millions of Americans filing tax returns. But Obama aides say it would set a standard of fairness that would boost revenue if applied.

Just hours after unveiling his plan, the president headlined a Democratic party fundraiser in New York attended by about 60 people paying $35,800 a plate.

Standing in a posh apartment on Manhattan's Upper East Side, Obama said he was confident the American people supported his vision, and took a swipe at the Republicans opposing him.

"What has been clear over the past 2 1/2 years is we have not had a willing partner. ... What we've seen is some irreconcilable differences, a fundamentally different vision about where America needs to go," he said.

While critics derided Obama's plan as purely political, some analysts saw a sober bid to tackle big fiscal problems.

"Obama's new plan is both a serious legislative proposal and an effort to stake out his ground for his re-election campaign," said Sarah Binder of the Brookings Institution.

The super committee must propose a deficit plan by November 23. Congress must then vote on the panel's proposal by December 23 or automatic spending cuts will be triggered across government agencies, beginning in 2013.

It will meet behind closed doors on Tuesday for its first deliberative meeting. "Presumably we are going to start throwing some ideas out," said Republican Senator Jon Kyl, a panel member.

Obama said his plan, together with savings agreed to under an August debt ceiling deal, will cut over $4 trillion from the 10-year deficit, helping deflect Republican claims he is a "tax-and-spend liberal" that have hurt him with independent voters.

Obama's suggestions do not raise the eligibility age for Medicare recipients, something he proposed during debt ceiling negotiations with Boehner over the summer.

Instead, he is proposing something more palatable to the left wing of his party -- $248 billion in savings from Medicare, the government health program for the elderly.

Most of that would come from reducing overpayments to healthcare providers.

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