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President Barack Obama Delivers Remarks At George Washington University On Fiscal Policy

Aired April 13, 2011 - 13:27   ET



RANDI KAYE, CNN ANCHOR (voice-over): The problem is simple.

REP. JOHN BOEHNER, (R-OH) HOUSE SPEAKER: The American people know that we can't continue to spend money that we don't have.

KAYE: The politics, not so much.

REP. ERIC CANTOR (R-VA), MAJORITY LEADER: You know, this is vintage Obama.

UNIDENTIFIED MALE: The problem with the Republican proposal is that it's not balanced.

KAYE: Now comes President Obama's approach to fixing America's finances, while our debt grows faster than we can count.

UNIDENTIFIED MALE: I have sold at $14 trillion.


KAYE: If you thought you'd heard it all on deficit spending and runaway government debt, well, you haven't.

We're moments away from President Obama's address on debt and deficit reduction at George Washington University -- there's a live picture there -- and judging from the Republican prebuttals, it will not be an easy sell.

Joining me now with their insights and expertise are the best political team on television. Wolf Blitzer and senior political analyst Gloria Borger are in our D.C. studios, senior congressional correspondent Dana Bash on Capitol Hill, senior White House correspondent Ed Henry, and from New York, business correspondent and anchor of "YOUR BOTTOM LINE," Christine Romans.

Wolf, let's kick this off with you.

We've gotten a glimpse, on paper at least, of the president's framework. He's talking about cutting $4 trillion over the next 12 years. What would you say we need to hear from the president today in terms of specifics? WOLF BLITZER, CNN ANCHOR: Well, he'll go into specifics in his speech and the specifics he doesn't lay out, his aides are getting ready -- some of this economic advisors, political advisors, they're going to be spelling it out in much greater detail in the coming hours.

So there will be a lot of specifics here and there will be a lot of contrast between what the Republicans unveiled last week when Republican Congressman Paul Ryan, the chairman of the House Budget Committee, he released a budget proposal, a deficit reduction proposal, that would cut around $6 trillion over 10 years. The president is now recommending proposals -- proposing $4 trillion over 12 years. So that will be a contrast right there.

The other huge contrast will be that the Republicans don't want to cut taxes -- don't want to increase taxes, excuse me. They don't want to increase taxes on the rich. The president will restate his longstanding position that those families making more than $250,000 a year should continue to go back to the tax rates during the Clinton administration, before the Bush administration, in other words, have a tax hike, a tax increase. As far as the Republicans are concerned, at least most Republicans, Tea Party supporters and others, that's a nonstarter as far as they are concerned.

Let's bring in our White House correspondent Ed Henry as we await the president over at George Washington University.

Ed, I know we're getting more specifics. We'll hear the president in just a few moments, but go ahead and tell us what we know.

ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: Well, what we know is what you're saying about the big picture number, which is the president, for the first time, is going to attach a number to this -- there's a lot of construction here, so I apologize for that, here at the White House -- but $4 trillion over 12 years or less.

Why is that important? Because -- you know, why is that number vague, about 12 years? Because if the economy picks up, as you know, and revenues starts coming in faster than expected, they may not need 12 years.

But the bottom line is the most important thing is going to be the details. This president has pressure from the left, liberals saying, look, stop the spending cuts that he's already giving to Speaker Boehner. Why are you piling on more? You have got Republicans, as you noted, saying tax increases will be a nonstarter.

This is a rare opportunity for the president, who's largely been on the sidelines in term of a big picture deficit reduction plan, to say, you know what, folks, the left may not like it, the right may not like it, but there needs to be bold spending cuts and tax increases to solve this.

We'll see whether or not he steps up to that challenge, Wolf.

BLITZER: And quickly, what was that noise? Are they building an addition at the West Wing or something? What's going on over there? HENRY: Wolf, they keep telling us it's a minor project with telecommunications and whatnot. There's a lot of conspiracy theorists that think maybe there's a bunker being built or something, because it's like a two-year long project. And as you can tell, it's pretty loud.

Maybe it's part of that infrastructure, get the economy back going.

BLITZER: Some secure, undisclosed location over there at the West Wing of the White House.

All right, Ed, stand by. We're going to be listening -- all of us will be listening to the president of the United States delivering this speech over at George Washington University, which is only a few blocks away from the White House. The president did not travel very far to deliver this speech.

Up on Capitol Hill, the reaction already coming in. Dana Bash is standing by, our senior congressional correspondent.

Dana, the president outlined the vision he has in a meeting with the House and Senate leadership over at the White House earlier in the day.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: That's right. He outlined the vision to them. They actually, the Republicans, came out and had a prebuttal, they didn't even wait for the president to speak before they came out and hat a press conference.

Republicans in the Senate and the House underscoring their big point that they have been making really since yesterday, which is any kind of deficit reduction, any kind of tax increase is a nonstarter for Republicans. So that was certainly something that they wanted to make clear.

But another point interesting point that the president I do not think is going to touch on -- I'm not sure, but don't think he's going to touch on in his speech, is the next big fight at the Capitol Hill was also discussed in this meeting at the White House, and that is raising the debt ceiling, Wolf.

We are told by sources in the room that they made, Republicans made it abundantly clear to the president that they would not allow the debt ceiling to be raised without something that goes along with it to deal with what they call out-of-control spending.

John Boehner, this House speaker, just at this press conference with the reporters, somebody asked him whether the president was OK to not doing what they call a clean debt ceiling bill, and he said yes, that the president sort of got it. We'll see if that's really the case, but that was an interesting comment from John Boehner.

One other point as we hear this back and forth, particularly on tax cuts, we have to remember, Wolf, that what has been going on here on Capitol Hill behind closed doors for months and months are meetings with six senators, three Democrats, three Republicans, trying to work on the kind of deficit reduction plan that the president is talking about.

We don't know the details, but they fell, we've talked to several members, that they are getting close and we could see something that they could produce in a bipartisan way maybe by the beginning of next month.

BLITZER: So then there would be a Republican plan that Paul Ryan put out, this bipartisan group of six as it's called in the Senate, their separate plan, the president's separate plan. There was the Erskine Bowles-Alan Simpson's Presidential Commission recommendations that were made in December, there were a few other plans out there as well. So there's going to be a smorgasbord, as we say, to select from.

Let's bring in Gloria Borger as we await the president of the United States.

Gloria, the president had a chance to unveil his concept for reducing the in his State of the Union Address in January; he didn't do it then. He certainly had an opportunity when he released his proposed 2012 budget; he didn't so it then. The Republicans released their proposal last week and now he's doing it, and the accusation against this president is he never initiates, he responds. He doesn't punch, he counterpunches.

How does the White House react to that criticism?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, the White House will say that they already have a budget on the table and it's their working document.

But I think you would have to say, Wolf, you know given what you just said, that the president has been kind of dragged into this a little bit, and he realizes that he has to put some kind of mark on the table because he's got to lead, he's the president of the United States.

And when you have the House Republicans out there putting out a document and a bipartisan group of senators about ready to put out a document, the president can't be AWOL in these discussions. Some criticized him, I criticized him on health care for hanging back too much. We never quite knew where the president was on the important components of the health care plan.

So I think, at this point, the White House sees an opportunity because there's a lot of controversial parts of the House Republican document, which calls for a total redo of the way the Medicare system works, and perhaps an opportunity for the president, once again, to seem like the grown-up here -- they kind of liked that during the shutdown argument -- to seem like the grown-up who can work with all groups and come out with a compromise, which is what the voters want in the end. They want to get something done. There are lots of plans out there, but no progress.

BLITZER: And Christine Romans is watching it as well.

Christine, Dana Bash pointed out, I think, something very significant, the president acknowledging in his private meeting with the congressional leadership over at the White House this morning that, yes, they've got to raise the debt ceiling otherwise U.S. creditworthiness could be questioned around the world, it would have enormous ramifications, and he is willing to go along and make some concessions, make a gesture, if you will, maybe more than just a gesture, some substance in there to help the Republicans, at least some of the Republicans, go ahead and vote to increase the debt ceiling.

For those of our viewers, Christine, who aren't familiar with what's at stake, if the Congress refused to raise the debt ceiling from $14 trillion, which it's approaching or a little bit more already $14 trillion, what would happen?

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Everything's at stake, quite frankly, Wolf, because the U.S. credit rating is the gold standard of the world. I mean, the U.S. pays its bills, the U.S. can issue debt, the U.S. Is where people want to invest because of that. And if the U.S. bumps up against the debt ceiling and surpasses it -- it could do a bit. I mean, the Treasury has a little bit of wiggle room, but it's incredibly important here.

I mean, experts say you'd have interest rates that could spike, it could be very harmful to the dollar for the stock market. It would send a pretty dangerous signal to the rest of the world that the U.S. can't get its act together, and that you actually have people who think that the U.S. is not going -- it's not going to fulfill its obligations, its financial obligations because of political reasons in Washington. So it's incredibly, incredibly important.

Now, the Republicans have an awful lot of power in this and the budget hawks have an awful lot of power, but privately, many people say they know that Democrats in the White House see how serious they are about this and a lot of people are saying they expect that the debt ceiling will passed.

But this time it's different. You know, Congress has again and again raised that debt ceiling; again and again. But this time, they know now we're having a conversation that we haven't had before, and it appears that all parties are serious about the long term -- the long-term problems this country has with spending beyond its means.

BLITZER: Yes. They've always raised it pro forma, they had no choice. But there was never this kind of attention to adding conditions to the debt ceiling.

ROMANS: Never.

BLITZER: And there will be some conservatives, especially conservative Republicans and maybe even some Democrats, who will vote against raising the debt ceiling under any circumstances, no matter what John Boehner and President Obama and Mitch McConnell and Harry Reid agree to. It just doesn't matter, on principal, they will oppose raising that debt ceiling much above $14 trillion.

I want everybody to stand by, all of our reporters and our analysts. The president of the United States, we're told, is getting ready to leave the White House to make that few-block trip by motorcade over to George Washington University.

We'll continue our coverage looking ahead to this very important speech from the president right after this.


BLITZER: The stage is nearly set, literally. Take a look. That's George Washington University, the campus here in the nation's capital, only a few blocks away from the White House. Very soon, the president will go up to the microphone there and deliver this long anticipated speech on how to deal with the country's national debt.

It's simply skyrocketing. Everybody, Democrat, Republican, everybody agrees something has to be done about the long term debt of the United States. How to deal with it is, obviously, an issue that's up for debate, serious debate. We're going to be hearing a lot about it not only in the coming hours and days, but over the next several weeks. The stakes, clearly, are enormous.

We've got members of "The Best Political Team On Television" over -- covering all aspects of this, all of our reporters and analysts. Let's bring in our White House correspondent, Ed Henry.

If you take a look at the latest CNN/Opinion Research Corporation poll, Ed, it says, "Which approach to the budget do you prefer?" Now this poll was obviously done before the president released his, which is about to be released. Obama, 48 percent; Republicans, 43 percent. You can see how evenly divided basically the country is right now on how to deal with this issue of the national debt.

And it shouldn't come as any surprise that this whole debate comes on the heel -- the president last week formally announced he's running for reelection. So this is already a heavy-duty political atmosphere that this debate is part of.

HENRY: It is, Wolf. In fact, we should note that tomorrow, right after this speech essentially, the president will be heading to Chicago to officially launch the fundraising effort for his 2012 reelection. So, politics is certainly in the air, there's no doubt about that.

But when you look at that poll number, the significance for the White House is they decided to move quickly. The president, as you've been noting, Gloria has been noting, the president has not really put a serious deficit reduction plan out there on the table, even though our reporting also shows the American people are hungry for that. They think that something needs to be done in Washington to finally deal with it.

When the White House looks at that poll number, through, saying the White House has a small advantage over the Republicans in terms of handling this issue, even though he had not put a plan on the table, they know with the bully pulpit they can jump out here very quickly after the minor budget deal that was sealed on Friday night to prevent the government from closing down.

I say minor because it's only one sliver of the budget, it's not this whole, big picture deficit reduction. That maybe now the president can seize this opportunity to lay out some details.

And I think what Dana was reporting on is very critical, because when she was saying that Republicans are reporting that the president, in private, this morning, told the Republicans maybe there's a shift here, that he is willing to embrace some sort of deficit reduction as part of lifting the nation's debt ceiling.

As of yesterday, the White House was still insisting the president want a clean vote, straight up or down vote on lifting the debt ceiling, not adding any deficit reduction or anything to it. If there really is that shift -- and I've been e-mailing the White House aides, they're not responding yet, but if there's been this shift, that suggests this president realizes that these is a shift toward the Republican push for more spending cuts and he's not going to get that vote on lifting the debt ceiling without some real specifics on the table, Wolf.

BLITZER: Yes, I want to bring Dana Bash back in because, Dana, Ed and you, Gloria, everybody is making a very important point, this is a significant development.

John Boehner, the speaker of the House, Mitch McConnell, who is the Senate minority leader, they want to raise the debt ceiling. They know, in the end, the U.S. is going to have no choice but to do so, but they need the president and the Democrats, especially the president, to give them something to show their base out there that it's not simply just an automatic increase of that debt ceiling. And now the president, apparently, is getting ready to do exactly that. What he's going to offer them, will it be enough, that remains to be seen.

But let's talk a little bit, Dana, about this so-called "Gang of Six," these six senators, three Democrats, three Republicans in the Senate. As you say, in the coming days, they're going to be releasing their national debt reduction proposal, which may be even more important than what the president is proposing or what Paul Ryan, the GOP Budget chairman proposed last week.

Tell us who's on this "Gang of Six" or why this is significant.

BASH: It's significant, Wolf, because this is a group of six senators who really run the gamut in terms of the political spectrum. You have on the most conservative side fiscally and otherwise, Tom Coburn, I would say, of Oklahoma who has been working with this group, and then Dick Durbin, who's a number two Democrat of the Senate, not exactly known as a moderate and someone who's has heft when it comes to the Democratic Party.

They've been working, as I said, for four months. And they've been working -- last week, for example, I was told they met four times for two-hour sessions. And they are trying to come up with something broadly that is along the lines of the president's debt commission. Three of the members, I believe, or maybe four were on that commission.

But generally, their ultimate goal is to reduce the deficit by $4 trillion over 10 years. And unlike some Republicans, the leadership that we've been hearing from, Saxby Chambliss, for example, he's one of the Republicans in this "Gang of Six," he's made clear publicly that he does believe that some tax increases are going to be necessary.

From their perspective, that could be doing away with some of the things like the mortgage expenditure, things like that. So maybe it wouldn't be hard hit for people out there who have tax issues. But those are some of the things they're talking about in this "Gang of Six."

Whether or not, Wolf, they can come up with something, I really, I think in large part depends on the public discourse. They're trying to sort of stay in a bunker and trying to work amongst themselves.

There was some concern leading into this speech by the president that he would put pressure on them and even the Republicans. That might not be very helpful, but it doesn't sound like, from what we're hearing, that necessarily will happen. They're hoping -- Congress is going to go in recess at the end of this week for two weeks, they're hoping when they come back, shortly thereafter to have something, something to be able to put forward to the public.

Let me say one other thing very quickly, Wolf, on the debt ceiling. It's important to note that Republicans are saying they want conditions, but Republicans haven't even decided amongst themselves what conditions they want. There's discussion of a balanced budget amendment, there's discussion of spending caps, other things.

So they have to decide amongst themselves, I think, first, what they want from the president before there can be any potential deal made there.

BLITZER: Yes, and that's going to be critical in the coming weeks, the debt ceiling, as we all know.

The president has now arrived on the campus of George Washington University, and you can see the vice president, Joe Biden, there. He's obviously arrived as well. They're sitting down, they're getting ready for the president to be introduced. I believe we'll get a two- minute warning and then we'll be able to know exactly when the president is walking in.

But he's on the campus of George Washington University. He'll be speaking momentarily.

Gloria Borger, after the Bowles-Simpson Commission, that the president created, came out with their recommendations in December, why didn't the president embrace those recommendations or at least at that point say here are my improvements on them.

BORGER: I don't think he wanted -- I don't think he wanted to take the political risk.

BLITZER: Hold on. Hold on, Gloria, hold on a second, cause the president has now just been introduced. So he's getting a standing ovation over there. So we'll listen to the president, he's going to ask everybody to sit down.

Here's the president.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It is wonderful to be back at G.W. I want you to know that one of the reasons that I worked so hard with Democrats and Republicans to keep the government open was so that I could show up here today.


I want to make sure that all of you had one more excuse to skip class.


You're welcome.


I want to give a special thanks to Steven Knapp, the president of G.W. I just saw him. Where is he?

There he is, right here.


I want to -- we've got a lot of distinguished guests here. A couple of people I want to acknowledge.

First of all, my outstanding vice president, Joe Biden, is here.


Our secretary of the treasury, Tim Geithner, is in the house.


Jack Lew, the director of the Office of Management and Budget.


Gene Sperling, chair of the National Economic Council, is here.


Members of our bipartisan fiscal commission are here, including the two outstanding chairs -- Erskine Bowles and Alan Simpson are here. (APPLAUSE)

And we have a number of members of Congress here today. I'm grateful for all of you taking the time to attend.

What we've been debating here in Washington over the last few weeks will affect the lives of the students here and families all across America in potentially profound ways.

This debate over budgets and deficits is about more than just numbers on a page, it's about more than just cutting and spending. It's about the kind of future that we want.

It's about the kind of country that we believe in. And that's what I want to spend some time talking about today.

From our first days as a nation, we have put our faith in free markets and free enterprise as the engine of America's wealth and prosperity. And more than citizens of any other country, we are rugged individualists, a self-reliant people with a healthy skepticism of too much government.

But there has always been another thread running through our history: a belief that we're all connected and that there are some things we can only do together, as a nation.

We believe, in the words of the first Republican president, Abraham Lincoln, that through government, we should do together what we cannot do as well for ourselves.

And so we've built a strong military to keep us secure, and public schools and universities to educate our citizens. We've laid down railroads and highways to facilitate travel and commerce.

We've supported the work of scientists and researchers whose discoveries have saved lives, unleashed repeated technological revolutions, and led to countless new jobs and entire new industries.

Each of us has benefited from these investments, and we're a more prosperous country as a result.

Now, part of this American belief that we're all connected also expresses itself in a conviction that each one of us deserves some basic measure of security and dignity.

We recognize that, no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff may strike any one of us. "There but for the grace of God go I," we say to ourselves.

And so we contribute to programs like Medicare and Social Security, which guarantee us health care and a measure of basic income after a lifetime of hard work; unemployment insurance, which protects us against unexpected job loss; and Medicaid, which provides care for millions of seniors in nursing homes, poor children, those with disabilities. We're a better country because of these commitments.

I'll go further: We would not be a great country without those commitments.

And for much of the last century, our nation found a way to afford these investments and priorities with the taxes paid by its citizens. As a country that values fairness, wealthier individuals have traditionally borne a greater share of this burden than the middle class or those less fortunate; everybody pays, but the wealthier have borne a little more.

This is not because we begrudge those who've done well. We rightly celebrate their success.

Instead, it's a basic reflection of our belief that those who benefited most from our way of life can afford to give back a little -- a little bit more.

Moreover, this belief hasn't hindered the success of those at the top of the income scale. They continue to do better and better with each passing year.

Now, at certain times -- particularly during war or recession -- our nation has had to borrow money to pay for some of our priorities. And as most families understand, a little credit card debt isn't going to hurt, if it's temporary.

But as far back as the 1980s, America started amassing debt at more alarming levels, and our leaders began to realize that a larger challenge was on the horizon.

They knew that eventually, the baby boom generation would retire, which meant a much bigger portion of our citizens would be relying on programs like Medicare, Social Security and possibly Medicaid.

Like parents with young children who know they have to start saving for the college years, America had to start borrowing less and saving more to prepare for the retirement of an entire generation.

To meet this challenge, our leaders came together three times during the 1990s to reduce our nation's deficit -- three times. They forged historic agreements that required tough decisions made by the first President Bush, then made by President Clinton, by Democratic Congresses and by a Republican Congress.

All three agreements asked for shared responsibility and shared sacrifice, but they largely protected the middle class, they largely protected our commitments to seniors, they protected our key investments in our future.

As a result of these bipartisan efforts, America's finances were in great shape by the year 2000. We went from deficit to surplus. America was actually on track to becoming completely debt-free, and we were prepared for the retirement of the baby boomers.

But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program, but we didn't pay for any of this new spending.

Instead we made the problem worse with trillions of dollars in unpaid-for tax cuts; tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade.

To give you an idea of how much damage this caused to our nation's checkbook, consider this.

In the last decade, if we had simply found a way to pay for the tax cuts and the prescription drug benefit, our deficit would currently be at low historical levels in the coming years.

But that's not what happened. And so, by the time I took office, we once again found ourselves deeply in debt and unprepared for a baby boom retirement that is now starting to take place.

When I took office, our projected deficit annually was more than $1 trillion. On top of that, we faced a terrible financial crisis and a recession that, like most recessions, led us to temporarily borrow even more.

In this case, we took a series of emergency steps that saved millions of jobs, kept credit flowing, and provided working families extra money in their pocket. It was absolutely the right thing to do, but these steps were expensive and added to our deficits in the short term.

So that's how our fiscal challenge was created. That's how we got here. And now that our economic recovery is gaining strength, Democrats and Republicans must come together and restore the fiscal responsibility that served us so well in the 1990s.

We have to live within our means. We have to reduce our deficit. And we have to get back on a path that will allow us to pay down our debt.

And we have to do it in a way that protects the recovery, protects the investments we need to grow, creates jobs, and helps us win the future.

Now, before I get into how we can achieve this goal, some of you, particularly the younger people here -- you don't qualify, Joe --


-- some of you might be wondering, "Why is this so important? Why does this matter to me?"

Well, here's why.

Even after our economy recovers, our government will still be on track to spend more money than it takes in throughout this decade and beyond. That means we'll have to keep borrowing more from countries like China.

That means more of your tax dollars each year will go towards paying off the interest on all of the loans that we keep taking out. By the end of this decade, the interest that we owe on our debt could rise to nearly $1 trillion. Think about that. That's the interest, just the interest payments.

Then, as the baby boomers start to retire in greater numbers and health care costs continue to rise, the situation will get even worse.

By 2025, the amount of taxes we currently pay will only be enough to finance our health care programs, Medicare and Medicaid, Social Security, and the interest we owe on our debt. That's it. Every other national priority -- education, transportation, even our national security -- will have to be paid for with borrowed money.

Now, ultimately all this rising debt will cost us jobs and damage our economy. It will prevent us from making the investments we need to win the future.

We won't be able to afford good schools, new research, or the repair of roads; all the things that create new jobs and businesses here in America.

Businesses will be less likely to invest and open shop in a country that seems unwilling or unable to balance its books. And if our creditors start worrying that we may be unable to pay back our debts, that could drive up interest rates for everybody who borrows money, making it harder for businesses to expand and hire or families to take out a mortgage.

Here's the good news: That doesn't have to be our future; that doesn't have to be the country that we leave our children.

We can solve this problem. We came together as Democrats and Republicans to meet this challenge before; we can do it again. But that starts by being honest about what's causing our deficit.

You see, most Americans tend to dislike government spending in the abstract, but like the stuff that it buys.

Most of us, regardless of party affiliation, believe that we should have a strong military and a strong defense. Most Americans believe we should invest in education and medical research. Most Americans think we should protect commitments like Social Security and Medicare.

And without even looking at a poll, my finely honed political instincts tell me that almost nobody believes they should be paying higher taxes.


So because all this spending is popular with both Republicans and Democrats alike, and because nobody wants to pay higher taxes, politicians are often eager to feed the impression that solving the problem is just a matter of eliminating waste and abuse.

You'll hear that phrase a lot: "We just need to eliminate waste and abuse."

The implication is that tackling the deficit issue won't require tough choices.

Or politicians suggest that we can somehow close our entire deficit by eliminating things like foreign aid, even though foreign aid makes up about 1 percent of our entire federal budget.

So here's the truth.

Around two-thirds of our budget -- two-thirds -- is spent on Medicare, Medicaid, Social Security and national security -- two- thirds.

Programs like unemployment insurance, student loans, veterans' benefits and tax credits for working families take up another 20 percent.

What's left, after interest on the debt, is just 12 percent for everything else. That's 12 percent for all of our national priorities: education, clean energy, medical research, transportation, our national parks, food safety, keeping our air and water clean. You name it, all of that accounts for 12 percent of our budget.

Now, up 'til now, the debate here in Washington -- the cuts proposed by a lot of folks in Washington have focused almost exclusively on that 12 percent.

But cuts to that 12 percent alone won't solve the problem. So any serious plan to tackle our deficit will require us to put everything on the table and take on excess spending wherever it exists in the budget.

A serious plan doesn't require us to balance our budget overnight. In fact, economists think that with the economy just starting to grow again we need a phased-in approach. But it does require tough decisions and support from our leaders in both parties now. Above all, it will require us to choose a vision of the America we want to see five years, 10 years, 20 years down the road.

Now, to their credit, one vision has been presented and championed by Republicans in the House of Representatives and embraced by several of their party's presidential candidates. It's a plan that aims to reduce our deficit by $4 trillion over the next 10 years, and one that addresses the challenge of Medicare and Medicaid in the years after that.

Those are both worthy goals. They're worthy goals for us to achieve. But the way this plan achieves those goals would lead to a fundamentally different America than the one we've known, certainly in my lifetime. In fact, I think it would be fundamentally different than what we've known throughout our history.

A 70 percent cut in clean energy, a 25 percent cut in education, a 30 percent cut in transportation, cuts in college Pell Grants that will grow to more than $1,000 per year.

That's the proposal.

These aren't the kind of cuts you make when you're trying to get rid of some waste or find extra savings in the budget. These aren't the kind of cuts that the fiscal commission proposed.

These are the kind of cuts that tell us we can't afford the America that I believe in and I think you believe in.

I believe it paints a vision of our future that is deeply pessimistic. It's a vision that says if our roads crumble and our bridges collapse, we can't afford to fix them; if there are bright young Americans who have the drive and the will but not the money to go to college, we can't afford to send them.

Go to China and you'll see businesses opening research labs and solar facilities.

South Korean children are outpacing our kids in math and science. They're scrambling to figure out how they put more money into education.

Brazil is investing billions in new infrastructure and can run half their cars not on high-priced gasoline, but on biofuels.

And yet, we are presented with a vision that says the American people, the United States of America, the greatest nation on Earth, can't afford any of this.

It's a vision that says America can't afford to keep the promise we've made to care for our seniors. It says that 10 years from now, if you're a 65-year-old who's eligible for Medicare, you should have to pay nearly $6,400 more than you would today.

It says, instead of guaranteed health care, you will get a voucher. And if that voucher isn't worth enough to buy the insurance that's available in the open marketplace, well, tough luck; you're on your own.

Put simply, it ends Medicare as we know it.

It's a vision that says up to 50 million Americans have to lose their health insurance in order for us to reduce the deficit.

Who are these 50 million Americans?

Many are somebody's grandparents, maybe one of yours, who wouldn't be able afford nursing home care without Medicaid.

Many are poor children. Some are middle-class families who have children with autism or Down's syndrome. Some are these kids with disabilities are -- the disabilities are so severe that they require 24-hour care.

These are the Americans we'd be telling to fend for themselves.

And, worst of all, this is a vision that says even though Americans can't afford to invest in education at current levels or clean energy, even though we can't afford to maintain our commitment on Medicare and Medicaid, we can somehow afford more than $1 trillion in new tax breaks for the wealthy.

Think about that.

In the last decade, the average income of the bottom 90 percent of all working Americans actually declined. Meanwhile, the top 1 percent saw their income rise by an average of more than a quarter of a million dollars each. That's who needs to pay less taxes?

They want to give people like me a $200,000 tax cut that's paid for by asking 33 seniors to each pay $6,000 more in health costs.

That's not right, and that's not going to happen as long as I'm president.


This vision is less about reducing the deficit than it is about changing the basic social compact in America. Ronald Reagan's own budget director said there's nothing serious or courageous about this plan.

There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires. And I don't think there's anything courageous about asking for sacrifice from those who can least afford it and don't have any clout on Capitol Hill. That's not a vision of the America I know.

The America I know is generous and compassionate. It's a land of opportunity and optimism. Yes, we take responsibility for ourselves, but we also take responsibility for each other, for the country we want and the future that we share.

We're a nation that built a railroad across a continent and brought light to communities shrouded in darkness. We sent a generation to college on the G.I. Bill and we saved millions of seniors from poverty with Social Security and Medicare.

We have led the world in scientific research and technological breakthroughs that have transformed millions of lives.

That's who we are. This is the America that I know.

We don't have to choose between a future of spiraling debt and one where we forfeit our investment in our people and our country.

To meet our fiscal challenge, we will need to make reforms, we will all need to make sacrifices. But we do not have to sacrifice the America we believe in. And as long as I'm president, we won't.

So today I'm proposing a more balanced approach to achieve $4 trillion in deficit reduction over 12 years. It's an approach that borrows from the recommendations of the bipartisan fiscal commission that I appointed last year, and it builds on the roughly $1 trillion in deficit reduction I already proposed in my 2012 budget.

It's an approach that puts every kind of spending on the table, but one that protects the middle class, our promise to seniors and our investments in the future.

The first step in our approach is to keep annual domestic spending low by building on the savings that both parties agreed to last week. That step alone will save us about $750 billion over 12 years.

We will make the tough cuts necessary to achieve these savings, including in programs that I deeply care about. But I will not sacrifice the core investments that we need to grow and create jobs. We will invest in medical research. We will invest in clean energy technology. We will invest in new roads and airports and broadband access. We will invest in education. We will invest in job training. We will do what we need to do to compete, and we will win the future.

The second step in our approach is to find additional savings in our defense budget.

Now, as commander in chief, I have no greater responsibility than protecting our national security, and I will never accept cuts that compromise our ability to defend our homeland or America's interests around the world.

But as the chairman of the Joint Chiefs, Admiral Mullen, has said, the greatest long-term threat to America's national security is America's debt.

So just as we must find more savings in domestic programs, we must do the same in defense. And we can do that while still keeping ourselves safe.

Over the last two years, Secretary Bob Gates has courageously taken on wasteful spending, saving $400 billion in current and future spending. I believe we can do that again.

We need to not only eliminate waste and improve efficiency and effectiveness, but we're going to have to conduct a fundamental review of America's missions, capabilities, and our role in a changing world.

I intend to work with Secretary Gates and the Joint Chiefs on this review, and I will make specific decisions about spending after it's complete. The third step in our approach is to further reduce health care spending in our budget. Now, here the difference with the House Republican plan could not be clearer.

Their plan essentially lowers the government's health care bills by asking seniors and poor families to pay them instead. Our approach lowers the government's health care bills by reducing the cost of health care itself.

Already, the reforms we passed in the health care law will reduce our deficit by $1 trillion. My approach would build on those -- these reforms.

We will reduce wasteful subsidies and erroneous payments. We will cut spending on prescription drugs by using Medicare's purchasing power to drive greater efficiency and speed generic brands of medicine onto the market. We will work with governors of both parties to demand more efficiency and accountability from Medicaid.

We will change the way we pay for health care: not by the procedure or the number of days spent in a hospital, but with new incentives for doctors and hospitals to prevent injuries and improve results.

And we will slow the growth of Medicare costs by strengthening an independent commission of doctors, nurses, medical experts and consumers who will look at all the evidence and recommend the best ways to reduce unnecessary spending while protecting access to the services that seniors need.

Now, we believe the reforms we've proposed to strengthen Medicare and Medicaid will enable us to keep these commitments to our citizens while saving us $500 billion by 2023, and an additional $1 trillion in the decade after that.

But if we're wrong, and Medicare costs rise faster than we expect, then this approach will give the independent commission the authority to make additional savings by further improving Medicare.

But let me be absolutely clear: I will preserve these health care programs as a promise we make to each other in this society. 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. I will not tell families with children who have disabilities that they have to fend for themselves.

We will reform these programs, but we will not abandon the fundamental commitment this country has kept for generations.

That includes, by the way, our commitment to Social Security. While Social Security is not the cause of our deficit, it faces real long-term challenges in a country that's growing older.

As I said in the State of the Union, both parties should work together now to strengthen Social Security for future generations. But we have to do it without putting at risk current retirees or the most vulnerable or people with disabilities, without slashing benefits for future generations and without subjecting Americans' guaranteed retirement income to the whims of the stock market. And it can be done.

The fourth step in our approach is to reduce spending in the tax code, so-called tax expenditures.

In December, I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans.

But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. We can't afford it. And I refuse to renew them again.

Beyond that, the tax code is also loaded up with spending on things like itemized deductions. And while I agree with the goals of many of these deductions, from homeownership to charitable giving, we can't ignore the fact that they provide millionaires an average tax break of $75,000 but do nothing for the typical middle-class family that doesn't itemize.

So my budget calls for limiting itemized deductions for the wealthiest 2 percent of Americans, a reform that would reduce the deficit by $320 billion over 10 years.

But to reduce the deficit, I believe we should go further. And that's why I'm calling on Congress to reform our individual tax code so that it is fair and simple, so that the amount of taxes you pay isn't determined by what kind of accountant you can afford.

I believe reform should protect the middle class, promote economic growth, and build on the fiscal commission's model of reducing tax expenditures so that there is enough savings to both lower rates and lower the deficit. And as I called for in the State of the Union, we should reform our corporate tax code as well, to make our businesses and our economy more competitive.

So this is my approach to reduce the deficit by $4 trillion over the next 12 years.

It's an approach that achieves about $2 trillion in spending cuts across the budget. It will lower our interest payments on the debt by $1 trillion. It calls for tax reform to cut about $1 trillion in tax expenditures -- spending in the tax code. And it achieves these goals while protecting the middle class, protecting our commitment to seniors and protecting our investments in the future.

Now, in the coming years, if the recovery speeds up and our economy grows faster than our current projections, we can make even greater progress than I've pledged here.

But just to hold Washington and to hold me accountable and make sure that the debt burden continues to decline, my plan includes a debt failsafe.

If, by 2014, our debt is not projected to fall as a share of the economy, if we haven't hit our targets, if Congress has failed to act, then my plan will require us to come together and make up the additional savings with more spending cuts and more spending reductions in the tax code.

And that should be an incentive for us to act boldly now, instead of kicking our problems further down the road.

So this is our vision for America, this is my vision for America, a vision where we live within our means while still investing in our future, where everyone makes sacrifices but no one bears all the burden, where we provide a basic measure of security for our citizens and we provide rising opportunity for our children.

There will be those who vigorously disagree with my approach. I can guarantee that as well.


Some will argue we should not even consider -- ever, ever -- raising taxes, even if only on the wealthiest Americans.

It's just an article of faith to them.

I say that at a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more.

I don't need another tax cut. Warren Buffett doesn't need another tax cut. Not if we have to pay for it by making seniors pay more for Medicare or by cutting kids from Head Start or by taking away college scholarships that I wouldn't be here without, and that some of you wouldn't be here without.

And here's the thing: I believe that most wealthy Americans would agree with me. They want to give back to their country, a country that's done so much for them. It's just Washington hasn't asked them to.

Others will say that we shouldn't even talk about cutting spending until the economy is fully recovered. These are mostly folks in my party.

I'm sympathetic to this view, which is one of the reasons I supported the payroll tax cuts we passed in December. It's also why we have to use a scalpel and not a machete to reduce the deficit, so that we can keep making the investments that create jobs.

But doing nothing on the deficit is just not an option. 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.

Finally, there are those who believe we shouldn't make any reforms to Medicare, Medicaid or Social Security out of fear that any talk of change to these programs will immediately usher in the sort of radical steps that House Republicans have proposed. And I understand those fears.

But I guarantee that if we don't make any changes at all, we won't be able to keep our commitment to a retiring generation that will live longer and will face higher health care costs than those who came before.

Indeed, to those in my own party, I say that if we truly believe in a progressive vision of our society, we have an obligation to prove that we can afford our commitments.

If we believe that government can make a difference in people's lives, we have the obligation to prove that it works, by making government smarter and leaner and more effective.

Of course, there are those who simply say there's no way we can come together at all and agree on a solution to this challenge. They'll say the politics of this city are just too broken, the choices are just too hard, the parties are just too far apart.

And after a few years on this job I have some sympathy for this view.


But I also know that we've come together before and met big challenges.

Ronald Reagan and Tip O'Neill came together to save Social Security for future generations.

The first President Bush and a Democratic Congress came together to reduce the deficit.

President Clinton and a Republican Congress battled each other ferociously -- disagreed on just about everything -- but they still found a way to balance the budget.

And in the last few months, both parties have come together to pass historic tax relief and spending cuts. And I know there are Republicans and Democrats in Congress who want to see a balanced approach to deficit reduction.

And even those Republicans I disagree with most strongly I believe are sincere about wanting to do right by their country. We may disagree on our visions, but I -- I -- I truly believe they want to do the right thing.

So I believe we can and must come together again.

This morning, I met with Democratic and Republican leaders in Congress to discuss the approach that I laid out today. And in early May, the vice president will begin regular meetings with leaders in both parties with the aim of reaching a final agreement on a plan to reduce the deficit and get it done by the end of June.

I don't expect the details in any final agreement to look exactly like the approach I laid out today. This is a democracy; that's not how things work. I'm eager to hear other ideas from all ends of the political spectrum.

And though I'm sure the criticism of what I've said here today will be fierce in some quarters and my critique of the House Republican approach has been strong, Americans deserve and will demand that we all make an effort to bridge our differences and find common ground.

This larger debate that we're having -- this larger debate about the size and the role of government -- it has been with us since our founding days. And during moments of great challenge and change, like the one that we're living through now, the debate gets sharper and it gets more vigorous. That's not a bad thing. In fact, it's a good thing.

As a country that prizes both our individual freedom and our obligations to one another, this is one of the most important debates that we can have.

But no matter what we argue, no matter where we stand, we've always held certain beliefs as Americans.

We believe that in order to preserve our own freedoms and pursue our own happiness, we can't just think about ourselves. We have to think about the country that made these liberties possible. We have to think about our fellow citizens with whom we share a community. And we have to think about what's required to preserve the American dream for future generations.

This sense of responsibility -- to each other and to our country -- this isn't a partisan feeling. This isn't a Democratic or a Republican idea. It's patriotism.

The other day I received a letter from a man in Florida. He started off by telling me he didn't vote for me and he hasn't always agreed with me. But even though he's worried about our economy and the state of our politics, here's what he said.

He said, "I still believe. I believe in that great country that my grandfather told me about. I believe that somewhere lost in this quagmire of petty bickering on every news station, the American dream is still alive."

"We need to use our dollars here rebuilding, refurbishing and restoring all that our ancestors struggled to create and maintain. We as a people must do this together, no matter the color of the state one comes from or the side of the aisle one might sit on."

I still believe -- I still believe as well. And I know that if we can come together and uphold our responsibilities to one another and to this larger enterprise that is America, we will keep the dream of our founding alive in our time, and we will pass it on to our children, we will pass on to our children a country that we believe in.

Thank you, God bless you, and may God bless the United States of America.


Thank you.


BLITZER: It is a long speech by the president of the United States. It's a speech outlining his vision of how to reduce the long- term debt of the United States, which simply is exploding every single year.

He offered some -- offered several specific plans, including raising taxes on the wealthiest American families making more than $250,000 a year, and would get higher taxes than they have right now going back to the Clinton era tax rates as opposed to the Bush era tax rates.

And he really tore into the GOP's proposal last week to how to reduce the national debt, saying it would end Medicare effectively as we know it.

Let's bring in some of our reporters and our analysts to digest what we've just heard from the president.

Ed Henry, you are over at the White House. It is a political season right now, and the president minced no words going after Paul Ryan's Republican plan last week, basically saying this is -- this would change America as we know it -- very strong words from the president.

But one specific point -- he said that Ryan's plan would cut some $4 trillion in the nation's debt over the next 10 years. Ryan says it would cut more than $6 trillion. Is the White House explaining that discrepancy?

HENRY: No, they are not getting into the details yet. We're going to have a briefing in a couple of hours where maybe we will dig down deeper.

But I think it is interesting that he did pull back on at least one line in the prepared text. He was going to call the Ryan plan radical, that these were radical steps to cut the deficit. He took out that word "radical," and interesting Paul Ryan was near the front row there watching these remarks and maybe the president pulled back to be a gentleman. But also, he has to work with the Republicans who run the House now.

And I think that is the most critical point to underline which is that the president, also for the first time, set some sort of a framework and deadline to actually get a deal done, saying that starting in early May, he is sending vice president essentially to Capitol Hill to start working out a deal, and set a goal, a deadline -- whatever you want to call it -- of the end of June for some sort of a global budget deal. But, I think, obviously, as we always say in these budget stories, the devil will be in the details, because even as the president was saying at one point, we need to act boldly, stop kicking the can down the road. He spoke about broad areas, but he did not give specifics about really where these cuts are going to come from, how he's going to get to the $4 trillion or the $6 trillion that the Republicans talk about. Whatever the bottom line number is, the president spoke about broad parameters, cut the defense spending, but where? Maybe make some tax changes, where?

And he also, very interesting, was saying, look, I'm not going to hurt the middle class, I'm not going to hurt senior citizens. Well, if you're not going to hurt those groups of people, where are the cuts coming out of, Wolf?

BLITZER: And, Dana Bash, the president was very firm saying that he will never ever allow those Bush era tax rates to continue in business. "I refuse to renew them again for the wealthiest Americans, and those families making more than $250,000 a year." That sets a stage for a huge battle.

As you know, next year, he renewed the tax cuts for the next two years, but it sets a stage for a huge battle in the coming -- in the coming years, because the Republicans are making it firm --- they did today, the Republican leadership -- no new taxes, they will not increase tax rates on anyone, including the wealthiest.

BASH: Oh, that is right. I mean, I think that the Republicans would say that President Obama, then-Senator Obama campaigned on that and said that every single time he got in front of a microphone, when he was running for president and then, of course, agreed to a compromise to do just that -- to extend the Bush era tax cuts but just for two years.

Regardless, this is going to be the political issue, the dividing line between Democrats and Republicans going into the next election. The question is whether or not they can come up with a tax reform that will kind of put that aside, if you will, that will really just change the tax code that will make those kinds of rhetorical debates irrelevant. Whether they can do that, Wolf, in the next 18 months is very unclear and I think people, if you gave them some truth serum, they would say unlikely.

BLITZER: It was a kind of speech, Gloria, that you would expect to hear on the campaign trail -- at least many paragraphs of the speech are very, very political going forward. Obviously, the president is getting ready for his reelection campaign.

BORGER: You know, it was interesting to me because I think it was a very political speech. I think the president laid down some markers. He took on the Ryan budget frontally, said, you know, it would end Medicare as we know it. We know that seniors in the midterm elections went for the Republicans because the Republicans were saying that the Democrats wanted to cut Medicare. So, it was clear that's where the president is going to stand on that issue. But the other interesting thing to me, Wolf, and I think this maybe the one area where we can find some compromise is -- yes, he wants to end the tax cuts for the wealthy, yes, as Dana says, that's going to be a point in the next election. But this whole notion of tax reform is going to be very important, I think, here, because if you can lower the tax rates on everyone, including the wealthy, in exchange for getting rid of some of those sacrosanct deductions we have in this country, charitable, home mortgage, whatever, then there may be a way to kind of finesse the tax issue. And it may be a way to end this debate between the wealthy and the middle class -- class warfare as we call it -- but say, wait a minute, what if we simplify the tax code? And what if we end up lowering rates on everyone in exchange for certain things?

So, that's a real area that's ripe for some compromise and some deal-making here.

BLITZER: We did hear the president, Christine -- Christine Romans, we heard the president say he's ready for tax reform, eliminating some of those deductions like homeownership, charitable contributions, but -- it was an important "but" -- he said only for the wealthiest, the people who really itemize --

ROMANS: Right.

BLITZER: -- those kinds of tax deductions as opposed to the middle class who basically don't necessarily itemize those kinds of deductions, that's once again raising taxes on the rich, the Republicans are going to go --

ROMANS: Right.

BLITZER: -- are going to strongly oppose it, but the president is laying out a clear difference between him and whoever the Republican challenger is going to be for the presidency.

ROMANS: And, look, there's at lot of support for just an overhaul of the tax code and real tax reform. In that way, exactly as Gloria and Dana pointed out, that way, you get away from the whole debate about extending those Bush era tax cuts.

Now, a point, Wolf, about, quote-unquote, "Bush era cuts." There are budget hawks who study this for a living, who don't call them Bush era tax cuts anymore. They call them Bush-Obama tax cuts and they are very, very concern that it's going to be difficult to raise taxes. The president, as you said, you know, laying it down, saying he is going to raise taxes on the rich indeed.

But just -- just raising taxes on the rich alone will not solve our problems. We need a holistic approach, everything's got to be on the table.

One quick point, Wolf, that -- we haven't talked about this yet, the debt failsafe, the president is saying that if we don't meet our deficit reduction targets by 2014, automatically by law, you'd have to see spending cuts and tax code changes, tax increases that would automatically kick in if we don't meet those goals. So, a debt failsafe is something that the budget hawks are also very, very interested in, forcing Congress to do it, forcing Congress to balance things.

BLITZER: And that's one of the points, as you know, Christine, because the president clearly did not make a lot of Republicans happy with many of these proposals. But he also didn't make some of the more liberal members of his own Democratic Party happy with some of these proposals. They're going to hate some of this as well. So, he's going to be criticized from his liberal Democratic Party base, as well as from the Republicans, the conservatives and some conservative Democrats who are going to be critical of him as well. They don't support raising taxes either.

So, there is a lot to digest here. We're going to have complete analysis, coverage. The Republicans, we're told, are going to be responding in detail at 4:00 p.m. Eastern. We'll, of course, have that for you. Much more coming up later here in "THE SITUATION ROOM," at 5:00 p.m. Eastern.

Randi -- let me throw it back to Randi Kaye right now at the CNN Center.

Randi, a lot to digest right now from the president of the United States. And what's fascinating to me, Randi, I have to say, is he basically said at the end -- you know what? This is my opening bargaining positions. These are ideas that I have. I know you're not going to accept it, you're not going to accept it all. This is what you would like to see. You have other ideas, so let's talk, let's talk about how we can cut defense spending, let's talk about taxes, let's talk about other cutting -- spending measures.

But he's basically saying, at the end, you know, let's have a conversation about this and we'll see how that conversation goes.

KAYE: Yes. I was going to say, it will be interesting to see if that conversation goes the same way the conversation over the shutdown showdown went. So, it will be interesting days and weeks ahead, Wolf.

You mentioned "THE SITUATION ROOM" coming up today at 5:00 p.m. Eastern. Any guests that we should know about?

BLITZER: Well, the chief adviser to the president Gene Sperling is going to be joining us. And we've got a lot of specific questions. Gene Sperling is a very smart guy. We're going to go into the details -- some of the questions that the president did not answer in the speech. We're going to go point by point with Gene Sperling.

And we're also going to speak with Jeb Hensarling. He's one of the Republican leaders in the House of Representatives. We're going to pinpoint him on some of these areas as well.

So, we will get their reaction, all of our analysts, a lot more coming up in "THE SITUATION ROOM."

Randi, back to you. KAYE: All right. Wolf, we thank you for being with us, and we'll see you then at 5:00 p.m. Eastern. Thank you.

And we'd like to see what you think about the president's speech that you just watched. So, go to and click on "President Obama." Join the live chat and share your thoughts. And we will share some of your comments later on in the show.