Coupled with the $1 trillion in spending cuts already signed into law for a total savings of more than $4 trillion over the next 10 years, by 2017 the country would be in a spot "where current spending is no longer adding to our debt, debt is falling as a share of the economy and deficits are at a sustainable level," the White House said Monday in a release.
Besides noting the $1.2 trillion in cuts included in the Budget Control Act, Obama's recommendations to the Joint Committee on Deficit Reduction would realize savings through:
-- $580 billion in cuts and reforms to a wide range of mandatory programs.
-- $1.1 trillion from the drawdown of troops in Afghanistan and the transition from a military- to a civilian-led mission in Iraq.
-- $1.5 trillion from tax reform by closing loopholes and eliminating tax breaks that benefit the wealthiest Americans and big corporations, among other things.
-- $430 billion in additional interest savings.
Obama said during remarks Monday in the Rose Garden that the spending cuts-to-revenue increases ratio for his plan is $2 to $1.
However, House Speaker John Boehner, R-Ohio, said last week any plan that includes a tax increase doesn't stand a chance.
Despite the threat, Treasury Secretary Timothy Geithner said Obama's plan as "laid out is a balanced package of reforms on all parts of government, combined with some modest reforms to our tax system designed to make our country more competitive and make sure that the most fortunate Americans are paying a greater share of their income in taxes."
Republicans and Democrats "all agree that we have a long-term deficit problem and we have to bring that down to earth. … The debate we're having is how best to do that," Geithner said.
The so-called "Buffett Rule," named after billionaire investor Warren Buffett, who repeatedly has stated the richest Americans typically pay a smaller portion of their income in federal taxes than do middle-income workers because investment gains are taxed at a lower rate than wages, would eliminate tax loopholes "that primarily go to [the] wealthiest taxpayers and corporations," Obama said during his Rose Garden comments.
Calling it the Buffett principle, Geithner said, "The basic principle at the heart of the Buffett principle is that if you're among those fortunate few in the United States, we should make sure you pay as a shared income in taxes more than what a middle-class family pays."
To do that, the tax system must be reformed, the Treasury secretary said, adding, "There are lots of different ways to achieve that principle."
"How you do it depends on what you do to the broader tax system as a whole," Geithner said. "We're not going to give the Congress a detailed proposal for how to meet that specific principle now because there's lots of different ways to do that."
The White House said the plan includes one-time investment and relief in the American Jobs Act that would add to the 2012 deficit, but would be fully paid for over 10 years. Deficit reduction phases in starting in 2013.
Obama's recommendations for the 12-member, bicameral, bipartisan supercommittee "significantly reduces deficits and puts the country on a fiscally sustainable path by 2017," the White House said. Under his plan, the deficit is projected to fall to 2.3 percent of gross domestic product in 2021.
"I think that, if you look at the details of what's in the plan that the president has sent to the Congress this morning, there is a lot of pain, it's spread broadly and, we think, fairly," said Jack Lew, director of Office of Management and Budget.
Geithner said he didn't know how Standard & Poor's would react to the recommendations in terms of the projected $4 million in deficit reductions in relation to agency's downgrade of the U.S. credit rating to AA-plus from AAA.
"But I would say that, if you step back and you look at the basic economics or the financial requirements of what we're trying to do, what this proposal does is meet the critical test of restoring financial soundness to the United States of America," Geithner said. "It would bring our deficits down … to a level below 3 percent of [gross domestic product], which is a level that's sustainable over the long run, because it allows the debt burden to stabilize and start to fall as a share of the economy."
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