Obama to lay out deficit plans

The US Capitol is seen in Washington, DC. US President Barack Obama is set to try and wrest control of Washington's fevered debate over the economy and bulging deficit, sure to be a dominant theme of his 2012 reelection bid.

An elderly patient watches Barack Obama speaking on television from her hospital bed. Obama will on Wednesday seek to wrest control of Washington's fevered debate over the economy and bulging deficit. Advance details of Obama's speech are at the capital's George Washington University are sketchy, but aides hint at some reform of costly health programs like Medicare for the elderly.

Protestors in Chicago call for an extension of unemployment benefits and continued funding of job programs during a protest in the city. Democrats have responded to Republican criticism of their financial policies by stating the last Democratic president Bill Clinton bequeathed budget surpluses to George W. Bush, who they say ran up debt with tax cuts for the rich and wars that were not paid for.

AFP - President Barack Obama will on Wednesday seek to wrest control of Washington's fevered debate over the economy and bulging deficit, sure to be a dominant theme of his 2012 reelection bid.

The White House says the president will lay out his vision for constraining the fiscal gap, as fresh political battles over spending escalate less than a week after the dramatic climax to a 2011 budget fight.

Advance details of Obama's speech are at the capital's George Washington University are sketchy.

But aides hint at some reform of costly health programs like Medicare for the elderly, tax hikes for the wealthy and a trimming of the trillions spent on the military -- all recipes for pitched political conflict.

Cuts will be with a "scalpel and not a machete," they say, seeking to safeguard Obama's core aspirations for education and energy reform, and portraying the slashing approach of conservative Republicans as extreme.

Republicans meanwhile are challenging the president with new boldness, after claiming what many commentators scored as a victory in securing $39 billion in new spending cuts in a last-gasp deal averting a government shutdown last week.

"The buzz continues to build about the president's much anticipated 'budget do-over' speech," said Eric Cantor, the number two Republican in the House of Representatives.

"He will outline his plan to hike taxes on families and business owners in order to get a grasp on our deficit and debt crisis."

Republicans frequently use painful US debt figures -- a projected annual deficit of 1.6 trillion dollars this year and a cumulative public debt of 14.27 trillion dollars as a political weapon.

But Democrats hit back that the last Democratic president Bill Clinton bequeathed budget surpluses to George W. Bush, who they say ran up debt with tax cuts for the rich and wars that were not paid for.

The president's political goals on Wednesday seem two-fold: to seek leverage in a short-term row in extending the US debt ceiling; and to define the coming campaign debate over spending.

The White House is already warning of a financial "Armageddon" should Congress fail to raise the US borrowing limit from $14.29 trillion dollars it is set to exceed in May.

Republican leaders, aware of the likely severe crisis of confidence and possible recessionary results of a failure to act say the ceiling will be raised -- but are seeking new budget cuts in return.

The White House says the issues of the debt ceiling and constraining the runaway deficit are separate, and that Republicans should not "play chicken" with the economy.

But Obama's decision to give a speech on deficit cutting is seen as an indirect acknowledgement of Republican demands.

In the long-term, Obama's speech will help define the dominant economy and jobs debate heading into his 2012 reelection battle, amid a palpable feeling among many Americans that the country needs to tighten its belt.

Republicans have swung their first punch with a plan by Congressman Paul Ryan to slash government spending by $6 trillion over the next decade.

The plan calls for reform and spending curbs on health and retirement programs for the poor and the elderly but would also cut tax rates faced by corporations and the wealthiest Americans in a bid to unleash growth.

Obama has made it known that he finds the plan unfair.

"It places all the burden on the middle class, on seniors, on the disabled, on people in nursing homes, through its rather drastic reform" of health programs for the poor and the elderly, his spokesman Jay Carney said.

Obama may indirectly respond to Ryan's gambit by going some way to embrace embracing a rival plan being formulated by a bi-partisan group of six senators with similar goals, but a less stark approach.

But his top Republican foe, House Speaker John Boehner, declared on Tuesday that Ryan "has set the bar" hinting at the intensity of the fight to come.

"If the president begins the discussion by saying we must increase taxes on the American people... my response will be clear: tax increases are unacceptable and are a nonstarter," he said.

"We don't have deficits because Americans are taxed too little. We have deficits because Washington spends too much."

Obama has solid political reasons for seeking to dominate the budget debate.

A Gallup poll taken in February put his approval rating for tackling the deficit at only 27 percent.

Even more importantly, among critical independents who rallied to his banner in 2008 but who deserted Democrats in 2010 mid-term elections, his rating on the issue was a lowly 19 percent.

But as he courts vital independent voters, Obama must at least keep one eye on his own core Democratic coalition, parts of which appear to believe he is already conceding too much to Republicans.