The White House

Office of the Press Secretary

For Immediate Release
April 13, 2011

FACT SHEET: The President's Framework for Shared Prosperity and Shared Fiscal Responsibility

The President believes that we need a comprehensive, pro-growth economic strategy that invests in winning the future, lays the foundation for strong private-sector job growth and ensures that shared prosperity will keep the American dream alive for generations to come. A key component of that strategy must be a commitment to fiscal responsibility and to living within our means. Today, the President is laying out a comprehensive, balanced deficit reduction framework to cut spending, bring down our debt and increase confidence in our nationfs fiscal strength, while supporting our economic recovery and ensuring we are making the investments we need to win the future.

$4 Trillion in Deficit Reduction: The President is setting a goal of reducing our deficit by $4 trillion in 12 years or less. This deficit reduction would be phased in over time to protect and strengthen our economic recovery and the recovering labor market.

Debt on a Declining Path, Backed Up By An Across the Board gDebt Failsafeh Trigger: The Presidentfs framework would require that, by the second half of the decade, our nationfs debt is on a declining path as a share of our economy. To enforce this requirement, the President is calling on Congress to enact:

Balance Between Spending Cuts and Tax Reform: The Presidentfs framework would seek a balanced approach to bringing down our deficit, with three dollars of spending cuts and interest savings for every one dollar from tax reform that contributes to deficit reduction. This is consistent with the bipartisan Fiscal Commissionfs approach.

Shared Sacrifice from All, Including the Most Fortunate Americans: The President believes strongly that, as we make difficult choices to live within our means, we cannot afford to make our deficit problem worse by extending the Bush tax cuts for the wealthiest Americans.

Bipartisan, Bicameral Negotiations on a Legislative Framework: The President has asked Majority Leader Reid, Speaker Boehner, Minority Leader Pelosi and Minority Leader McConnell to each designate four Members from their caucuses to participate in bipartisan, bicameral negotiations led by the Vice President, beginning in early May. The goal of these negotiations is to agree on a legislative framework for comprehensive deficit reduction.

Policy Highlights. The policy highlights in the Presidentfs framework build on the down-payment included in his FY 2012 Budget. They include:

 

DETAILS OF THE PRESIDENTfS FRAMEWORK FOR
SHARED PROSPERITY AND SHARED FISCAL RESPONSIBILITY

 

1. A Fiscally Responsible Economic Strategy to Invest in Competitiveness and Growth

The President believes that, if we are going to promote economic recovery, invest in our long-term competitiveness and meet our values of dignity for retirees, protection for the most vulnerable and opportunity for all Americans, a comprehensive, balanced deficit reduction framework must be part of our overall economic growth strategy.

The question is not whether we need to bring down long-term deficits and debt to build economic confidence and promote investment in the United States; instead it is how to best do so consistent with a pro-growth economic strategy. The framework the President outlined today charts a course to achieve deficit reduction and support economic growth, with a balanced approach and an enforceable backstop to ensure that we achieve our economic and fiscal goals.

2. A Deficit Reduction Goal and Enforceable Debt Failsafe

The framework the President announced today offers a balanced approach to maintaining our economic recovery while living within our means. It centers on the following goal:

Achieving $4 trillion in deficit reduction over 12 years or less. The President believes that this goal is achievable over a 12 year period, consistent with the goals of promoting economic growth that benefits the middle class and strengthening the health and economic security of our nationfs seniors, people with disabilities and most vulnerable. The Administration projects that this framework will reduce deficits as a share of our economy to about 2.5% of GDP in 2015, and put deficits on a declining path toward close to 2.0% of GDP toward the end of the decade.

Deficit reduction should be phased in over time to ensure that fiscal policy does not undermine the momentum of our economic recovery. Our economy has created 1.8 million private sector jobs over the last 13 months and the pace of job growth has accelerated in recent months. While long-term deficit reduction is a crucial component of the Presidentfs economic strategy, this goal cannot be used as an excuse to undermine the near-term policies and investments we need to continue our economic recovery.

Deficit reduction efforts should be held accountable by a gDebt Failsafeh trigger: The President is confident that, with a robust economic recovery and bipartisan agreement on deficit reduction, we will put our debt as a share of the economy on a declining path by the second half of the decade. However we must provide a strong incentive for Congress to act on a deficit reduction framework and renew confidence that we will hit this goal. Therefore, the President is calling for: 

3. Discretionary Spending

Non-Security Savings Equal to the Fiscal Commissionfs, While Investing In Our Future:

Additional Discipline on Security Spending While Keeping America Safe:

4. Health Care

Medicare and Medicaid Savings of $480 Billion by 2023 and At Least an Additional $1 Trillion over the Subsequent Decade, Providing Better Care at Lower Costs:

The Presidentfs framework proposes specific reforms to strengthen Medicare and Medicaid over the long term, including:

A major contrast with the House Republican approach. The Presidentfs framework rejects plans that would end Medicare as we know it or transform Medicaid into a dramatically underfunded block grant, putting at serious risk not only seniors but also the most vulnerable children and people with disabilities. Some of the major problems with the House Republican approach include:

5. Other Mandatory Spending

Outside of health care, comprehensive deficit reduction must include savings in other mandatory programs.

The Presidentfs Budget includes measures to reform agricultural subsidies, shore up the federal pension insurance system, restore solvency to the federal unemployment insurance trust fund, and enact anti-fraud measures.

Building on these efforts, the Presidentfs framework includes a target of $360 billion in savings from other mandatory programs by 2023.

The Fiscal Commission and other bipartisan efforts have put forward additional proposals that should be considered as part of a comprehensive deficit reduction effort to meet this target.

Reforms to mandatory programs should protect and strengthen the safety net for low-income families and other vulnerable Americans.

6. Tax Reform

The President is calling on Congress to undertake comprehensive tax reform that produces a system which is fairer, has fewer loopholes, less complexity, and is not rigged in favor of those who can afford lawyers and accountants to game it.

He believes we cannot afford to make our deficit problem worse by extending the Bush tax cuts for the wealthiest Americans.

He also supports efforts to build on the Fiscal Commissionfs goal of reducing tax expenditures so that there is enough savings to both lower rates and lower the deficit. Reform should be designed to ask more of those who can afford it while protecting the middle class and promoting economic growth.

In addition, as he explained in the State of the Union, the President is continuing his effort to reform our outdated corporate tax code to enhance our economic competitiveness and encourage investment in the United States. By eliminating loopholes, reducing distortions and leveling the playing field in our corporate tax code, we can use the savings to lower the corporate tax rate for the first time in 25 years without adding to the deficit.

7. Social Security

The President does not believe that Social Security is a driver of our near-term deficit problems or is currently in crisis. But he supports bipartisan efforts to strengthen Social Security for the long haul, because its long-term challenges are better addressed sooner than later to ensure that it remains the rock-solid benefit for older Americans that it has been for past generations. The President in the State of the Union laid out his principles for Social Security reform which he believes should form the basis for bipartisan negotiations that could proceed in parallel to deficit negotiations:

April 13, 2011 12:51 PM EDT