01/14/2013 06:05 pm ET Updated Jan 14, 2013

Obama Looks To Cut GOP's Spending Advantage By Declaring Debt Nearly Stabilized

WASHINGTON -- President Barack Obama's first priority during his Monday press conference was to position himself for the debt ceiling showdown in February. But he also moved aggressively in his remarks to reduce the Republican Party's leverage in the ongoing fight over cutting federal spending.

So far, Republicans have been able to make their push to cut discretionary spending an open-ended campaign. Obama wants to cauterize that area of debate and move on to the long-term debt issues, which revolve mostly around mandated entitlement spending.

That could cut into the GOP's advantage. Obama has held the upper hand on tax policy, winning over the country to his position that the wealthy should pay a little more. But polls have also shown that large numbers of Americans continue to lean toward spending cuts as a preferred way to reduce the annual deficit and the long-term debt.

On entitlements like Medicare, Social Security and Medicaid, the politics are much tougher for the GOP. Each program is in need of reform, but the Republican Party has struggled to fight the perception that its preferred changes are not the ones that will preserve the programs. Obama and the Democrats are likely to have the upper hand in any debate over entitlements.

For example, a mid-December poll by ABC News and The Washington Post found that while a majority of respondents thought that taxes on the wealthy should rise and government spending should be reduced, 47 percent thought that deficit reduction should focus more on spending cuts. Only 41 percent thought higher taxes should be the bigger component.

In his remarks to the press on Monday, Obama made clear that once Congress resolves how to replace the $1.2 trillion in spending cuts required by sequestration, he will have all but hit the $4-trillion-in-deficit-reduction target that he laid out in the recent presidential campaign.

Once that threshold is achieved, Obama said, the debt will be stabilized for the next 10 years.

"For nearly two years now, I've been fighting for such a plan, one that would reduce our deficits by $4 trillion over the next decade, which would stabilize our debt and our deficit in a sustainable way for the next decade," Obama said.

The president said that he and Congress have already reduced the deficit by $2.5 trillion over the past two years, a new figure that he had not cited before. Obama said the government cut $1.4 trillion in 2011, using a figure similar to one cited by the Center for Budget and Policy Priorities, a liberal economic think tank. He then pointed to the $600 billion tax hike in the "fiscal cliff" deal and another almost $500 billion in interest payment savings.

The $2.5 trillion figure doesn't include the sequester cuts, a mechanism put in place under the debt ceiling deal, to be triggered if the so-called super committee could not reach a grand bargain on budget, tax and entitlement measures. The sequester was scheduled to hit at the beginning of 2013 but was postponed two months in the fiscal cliff deal.

"There will be more deficit reduction when Congress decides what to do about the $1.2 trillion in automatic spending cuts that have been pushed off until next month," Obama said.

According to the Center for Budget and Policy Priorities, $1.2 trillion in deficit reduction over the next decade would save an additional $200 billion in interest payment savings. That would get Obama to right around $3.9 trillion.

The budget center's Richard Kogan argued in an essay last week that once the president hits his target, the debt won't "grow faster than the economy and risk eventual economic problems," holding instead at around 73 percent of the gross domestic product (GDP).

That "will not permanently solve our fiscal problems; policymakers will need to enact additional deficit reduction for the long term," Kogan wrote. But it would shift the focus to health care and entitlements.

"In ensuing decades, the aging of America's population and projected increases in per-capita health care costs -- which are likely to rise faster than per-capita GDP -- will put considerable pressure on federal health and retirement programs, returning the budget to an unsustainable path of rising debt as a share of the economy," Kogan wrote. "Nevertheless, by stabilizing the debt for the next decade, an additional $1.4 trillion in deficit savings would give experts and policymakers time to figure out how to slow the growth of health care costs throughout the U.S. health care system without impairing the quality of care."

Obama said on Monday that he is "open to making modest adjustments to programs like Medicare."

The president also said he'd like to raise taxes further on upper-income Americans, beyond the rate increases just passed in the fiscal cliff deal.

"And I've also said that we need more revenue through tax reform, by closing loopholes in our tax code for the wealthiest Americans," he said. "If we combine a balanced package of savings from spending on health care and revenues from closing loopholes, we can solve the deficit issue."

It's not clear how much more congressional Republicans want to fight over cutting discretionary spending versus entitlement spending. Conservative House members certainly want to keep paring away at the size of government, as evidenced by their 2012 budget, which would cut spending by $5 trillion over 10 years. (To be specific, the federal budget would still increase but by $5 trillion less than current spending projections.)

But House Speaker John Boehner (R-Ohio) has signaled that he wants to move on to the entitlement debate as well.

"Think of it this way," Boehner told The Wall Street Journal. "We already have an agreement [capping] discretionary spending for 10 years. And we're already in our second year of it. This whole discussion on the budget over the next several months is going to be about these entitlements."



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