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President Obama's Plan to Reduce the Federal Budget, Spending

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President Obama's Plan to Reduce the Federal Budget, Spending
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On April 13, 2011, President Obama announced his four-part plan to reduce the federal budget, and therefore deficit in a speech the Wall Street Journal called "Mr. Obama's most substantive step into the debate over the country's fiscal future."

Wrote the New York Times, "... he used his budget speech to clearly distance himself from Republican plans to heap tax benefits on the rich while casting adrift the nation’s poor, elderly and unemployed. Instead of adapting the themes of the right to his own uses, he set out a very different vision of an America that keeps its promises to the weak and asks for sacrifice from the strong."

Below is the portion of the President's speech in which he clearly outlined his four-part budget plan.

President Obama's Remarks on Budget Reduction Plan, Fiscal Policy
April 13, 2011

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.

FIRST STEP -Keep Annual Domestic Spending Low

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.

SECOND STEP - Find Savings in Defense Budget

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.

THIRD STEP - Reduce Health Care Spending

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.

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