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Obama speech: His four-part plan to cut $4 trillion from federal deficits

Obama's plan to cut federal deficits over the next 12 years relies on tax increases for the wealthy as well as budget cuts. But he rejects Republican plans for reforming Medicare.

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Obama also called for changes in some mandatory spending programs, such as agricultural subsidies and the federal pension insurance system. In that category, his plan projects savings of $360 billion by 2023.

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And on Social Security, a particularly sensitive issue among his Democratic base, Obama did not offer specific reforms, just a repeat of his call “to strengthen Social Security for future generations.” He stated that while the program is “not the cause of our deficit, it faces real long-term challenges in a country that’s growing older.”

The White House's budget projections earlier this year suggested that cumulative annual federal deficits over the next 10 years (to 2021) would amount to $7.2 trillion. The nonpartisan Congressional Budget Office last month said the White House's figures might underestimate the 10-year deficits by $2.3 trillion.

A 'fail safe' debt trigger

Obama’s deficit-reduction framework aims to put the nation’s accumulated debt, currently at $14 trillion, on a “fail-safe trigger,” so that by the second half of the decade, it is on “declining path” as a share of US gross domestic product. To do that, he is calling on Congress to enact a “debt fail safe” that will trigger across-the-board spending reductions and revenue increases via the tax code, if the projected ratio of debt to GDP has not begun to decline by 2014.

Until Wednesday’s address, the president had held back on putting forth his own proposals on deficit reduction, waiting for his fiscal commission and then the House Republicans to go first. The debate will be fully joined after Congress’s Easter recess, when a bipartisan group of senators known as the Gang of Six will unveil its proposal. Both the Gang of Six and the Obama administration say their plans borrow heavily from the fiscal commission.

Obama stressed the need for bipartisanship in addressing the nation’s unsustainable fiscal path, and announced that in early May, Vice President Joe Biden would begin regular meetings with congressional leaders of both parties aimed at reaching a deficit-reduction plan by the end of June.

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