Then there’s Medicare. Because health care costs keep rising and the baby boom generation is retiring, Medicare we all know is one of the biggest drivers of our long term deficit. That’s a challenge we have to meet by bringing down the cost of health care overall so that seniors and taxpayers can share in the savings.
But here’s the solution proposed by the Republicans in Washington, and embraced by most of their candidates for president. Instead of being enrolled in Medicare when they turn 65, seniors who retire a decade from now would get a voucher that equals the cost of the second cheapest health care plan in their area. If Medicare is more expensive than that private plan, they’ll have to pay more if they want to enroll in traditional Medicare. If health care costs rise faster than the amount of the voucher, as, by the way, they’ve been doing for decades, that’s too bad. Seniors bear the risk. If the voucher isn’t enough to buy a private plan with the specific doctors and care that you need, that’s too bad.
So most experts will tell you the way this voucher plan encourages savings is not through better care at cheaper cost. The way these private insurance companies save money is by designing and marketing plans to attract the youngest and healthiest seniors, cherry picking, leaving the older and sicker seniors in traditional Medicare, where they have access to a wide range of doctors and guaranteed care. But that, of course, makes the traditional Medicare program even more expensive and raise premiums even further. The net result is that our country will end up spending more on health care and the only reason the government will save any money, it won’t be on our books, is because we shifted it to seniors. They’ll bear more of the costs themselves. It’s a bad idea and it will ultimately end Medicare as we know it.
OBAMA: Now, the proponents of this budget will tell us, we have to make all these draconian cuts because our deficit is so large. This is an existential crisis. We have to think about future generations, so on and so on. And that argument might have a shred of credibility were it not for their proposal to also spend $4.6 trillion over the next decade on lower tax rates. We’re told that these tax cuts will supposedly be paid for by closing loopholes and eliminating wasteful deductions. But the Republicans and Congress refuse to list a single tax loophole they are willing to close. Not one. And by the way, there is no way to get even close to $4.6 trillion in savings without dramatically reducing all kinds of tax breaks that go to middle class families. Tax breaks for health care, tax breaks for retirement, tax breaks for homeownership.
Meanwhile, these proposed tax breaks would come on top of more than a trillion dollars in tax giveaways for people making more than $250,000 a year. That’s an average of at least $150,000 for every millionaire in this country, $150,000. Let’s just step back for a second and look at what $150,000 pays for. A year’s worth of prescription drug coverage for a seniors citizen, plus a new school computer lab, plus a year of medical care for a returning veteran, plus a medical research grant for a chronic disease, plus a year’s salary for a firefighter or a police officer, plus a tax credit to make a year of college more affordable, plus a year’s worth of financial aid, $150,000 could pay for all of these things combined. Investment in education, research that are essential to economic growth that benefits all of us.
For $150,000, that would be going to each millionaire and billionaire in this country. This budget says we’d be better off as a country if that’s how we spent it. This is supposed to be about paying down our deficit? It’s laughable. The bipartisan Simpson-Bowles commission that I created, which the Republicans originally were for until I was for it, that was about paying down the deficit. And I didn’t agree with all of the details, I proposed about $600 billion more in revenue, and $600 billion - sorry, it proposed about $600 billion more in revenue and about $600 billion more in defense cuts than I had proposed in my own budget.
But Simpson-Bowles was a serious, honest, balanced effort between Democrats and Republicans to bring down the deficit. That’s why although it differs in some ways my budget takes a similarly balanced approach. Cuts in discretionary spending, cuts in mandatory spending, increased revenue. This Congressional Republican budget is something different altogether. It is a Trojan horse disguised as deficit reduction plans. It is really an attempt to impose a radical vision on our country. It is thinly veiled social Darwinism. It is antithetical to our entire history as a land of opportunity and upward mobility for everybody who is willing to work for it. A place where prosperity doesn’t trickle down from the top but grows outward from the heart of middle class. And by gutting the very things we need to grow an economy that’s built to last. Education and training, research and development, our infrastructure, it is a prescription for decline. And everybody here should understand that because there’s very few people here who haven’t benefited at some point from those investments that were made in the ‘50s, and the ‘60s, and the ‘70s, and the ‘80s. That’s part of how we got ahead.
OBAMA: And now, we’re going to be pulling up those ladders up for the next generation. So, in the months ahead, I will be fighting as hard as I know how for this truer vision of what the United States of America is all about. Absolutely, we have to get serious about the deficit, and that will require tough choices and sacrifice. And I’ve already shown myself willing to make these tough choices when I signed into law the biggest spending cut of any president in recent memory.
In fact, if you adjust for the economy, the Congressional Budget Office says the overall spending next year will be lower than any year under Ronald Reagan. And I’m willing to make more of those difficult spending decisions in the months ahead, but I’ve said it before and I will say it again. There has to be some balance. All of us have to do our fair share.
I’ve also put forward a detailed plan that would reform and strengthen Medicare and Medicaid. By the beginning of the next decade, it achieves the same amount of annual health savings as the plan proposed by Simpson-Bowles -- the Simpson-Bowles Commission, and it does so by making changes that people in my party haven’t always been comfortable with.
But instead of saving money by shifting costs to seniors, like the congressional Republican plan proposes, our approach would lower the cost of health care throughout the entire system. It goes after excessive subsidies to prescription drug companies, it gets more efficiency out of Medicaid without gutting the program, it asks the very wealthiest seniors to pay a little bit more, it changes the way we pay for health care not by procedure or the number of days spent in a hospital, but with new incentives for doctors and hospitals to improve their results. And it slows the growth of Medicare costs by strengthening an independent commission, a commission not made up of bureaucrats from government, or insurance companies, but doctors and nurses and medical experts and consumers who will look at all the evidence and recommend the best way to reduce unnecessary health care spending, while protecting access to the care that the seniors need.
We also have a much different approach when it comes to taxes, and approach that says if we’re serious about paying down our debt, we can’t afford to spend trillions more on tax cuts for folks like me, for wealthy Americans who don’t need them and weren’t even asking for them, and that the country cannot afford. At a time when the share of national income flowing to the top 1 percent of people in this country has climbed to levels last scene in the 1920s, those same folks are paying taxes at one of the lowest rates in 50 years. As both I and Warren Buffett have pointed out many times now, he’s paying a lower tax rate than his secretary. That is not fair. It is not right. And the choice is really very simple.
If you want to keep these tax breaks and deductions in place, or give even more tax breaks to the wealthy, as the Republicans in Congress propose, then one of two things happen. Either it means higher deficits or it means more sacrifice from the middle class.
Seniors will have to pay more for Medicare. College students will lose some of their financial aid. Working families who are scraping by will have to do more because the richest Americans are doing less.
I repeat what I’ve said before. That is not class warfare. That is not class envy. That is math.
If that’s the choice that members of Congress want to make, then we’re going to sure every American knows about it. In a few weeks, there will be a vote on what we call the Buffett Rule. It’s a simple concept. If you make more than $1 million a year -- not that you have $1 million, if you make more than $1 million annually, then you should pay at least the same percentage of your income in taxes as middle class families do.
On the other hand, if you made under $250,000 a year, like 98 percent of American families do, then your taxes shouldn’t go up. That’s the proposal.
Now, you’ll hear some people point out that the Buffett Rule alone won’t raise enough revenue to solve our deficit problems. Maybe not, but it’s definitely a step in the right direction. And I intend to keep fighting for this kind of balance and fairness until the other side starts listening, because I believe this is what the American people want.
I believe this is the best way to pay for the investments we need to grow our economy and strengthen the middle class. And, by the way, I believe it’s the right thing to do.
This larger debate that we’ll be having and that you will be covering in the coming year about the size and role of government, this -- this debate has been with us since our founding days. And during moments of great challenge and change, like the ones that we’re living through now, the debate gets sharper, it gets more vigorous. That’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 or where we stand, we have 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 those liberties possible. We have to think about our fellow citizens, with whom we share a community. We have to think about what’s required to preserve the American dream for future generations.
And this sense of responsibility to each other and our country, this isn’t a partisan feeling. This isn’t a Democratic or a Republican idea. It’s patriotism. And if we keep that in mind, and uphold our obligations to one another, and to this larger enterprise that is America, then I have no doubt that we will continue on our long and prosperous journey as the greatest nation on earth.
Thank you. God bless you. God bless the United States of America.
Thank you. Thank you, everyone. Thank you.
Thank you. Thank you.
Republicans have been sharply critical of your budget ideas as well. What can you say to the American who just want both sides to stop fighting and get the work done on their behalf?
OBAMA: Well, I completely understand the American people’s frustrations, because the truth is that these are imminently solvable problems.
I know that Christine Lagarde is here from the IMF. And she’s looking at the books of a lot of other countries around the world. The kinds of challenges they face fiscally are so much more severe than anything that we -- that we confront if we make some sensible decisions.
So the American people’s impulses are absolutely right. These are solvable problems if people of good faith came together and were willing to compromise.
The challenge that we have right now is that we have, on one side, a party that will brook no compromise, and -- and this is not just my assertion. We had presidential candidates who stood on stage and were asked, “Would you accept a budget package, a deficit reduction plan, that involved $10 of cuts for every dollar in revenue increases?” A 10-1 ratio of spending cuts to revenue.
Not one of them raised their hand. Think about that.
Ronald Reagan, who, as I recall, is not accused of being a tax- and-spend socialist, understood repeatedly that when the deficit started to get out of control, that for him to make a deal, he would have to propose both spending cuts and tax increases. He did it multiple times. He could not get through a Republican primary today.
So let’s look at Bowles-Simpson. Essentially, my differences with Bowles-Simpson were I actually proposed less revenue and slightly lower defense spending cuts. The Republicans want to increase defense spending and take in no revenue, which makes it impossible to balance the deficit under the terms that Bowles-Simpson laid out, unless you essentially eliminate discretionary spending, you don’t just cut discretionary spending, everything we think of as being pretty important, from education, to basic science and research, to transportation spending, to national parks, to environmental protection. We’d essentially have to eliminate them.
I guess another way of thinking about this is -- and this bears on your reporting -- I think that there is oftentimes the impulse to suggest that, if the two parties are disagreeing, then they’re equally at fault and the truth lies somewhere in the middle. And an equivalence is presented, which reinforces, I think, people’s cynicism about Washington generally.
This is not one of those situations where there is an equivalence. I’ve got some of the most liberal Democrats in Congress who were prepared to make significant changes to entitlements that go against their political interests and who said they were willing to do it. And we couldn’t get a Republican to stand up and say, we’ll raise some revenue, or to even suggest that we won’t give more tax cuts to people who don’t need it.
And so I think it’s important to put the current debate in some historical context. It’s not just true, by the way, of the budget. It’s true of a lot of the debates that we’re having out here.
Cap and trade was originally proposed by conservatives and Republicans as a market-based solution to solving environmental problems. The first president to talk about cap and trade was George H. W. Bush. Now you’ve got the other party essentially saying we shouldn’t even be thinking about environmental protection, let’s gut the EPA.
Health care, which is in the news right now, there’s a reason why there’s a little bit of confusion in the Republican primary about health care and the individual mandate since it originated as a conservative idea to preserve the private marketplace and health care, while still assuring that everybody got coverage, in contrast to a single payer plan. Now, suddenly, this is some socialist overreach.
So as all of you are doing your reporting, I think it’s important to remember that the positions I’m taking now on the budget and a host of other issues, if we had been having this discussion 20 years ago, or even 15 years ago, it would have been considered squarely centrist positions. What’s changed is the center of the Republican Party, and that’s certainly true with the budget.
SINGLETON: (OFF-MIKE) for continuation of United States leadership (OFF-MIKE) and underscore the need for a lower deficit and lower debt.
How can you (ph) respond to that claim? OBAMA: Well, look, she’s absolutely right. It’s interesting when I travel around the world at these international forums -- and I’ve said this before -- the degree to which America is still the one indispensable nation, the degree to which, even as other countries are rising and their economies are expanding, we are still looked to for leadership, for agenda-setting, not just because of our size, and not just because of our military power, but because there is a sense that, unlike most superpowers in the past, we try to set out a set of universal rules, a set of principles by which everybody can benefit.
And that’s true on the economic front as well. We continue to be the world’s largest market , an important engine for economic growth. We can’t return to a time when, by simply borrowing and consuming, we end up driving global economic growth.
I said this a few months after I was elected at the first G-20 summit. I said the days when Americans using their credit cards and home equity lines finance the rest of the world’s growth by taking in imports from every place else, those days are over.
On the other hand, we continue to be an extraordinarily important market and foundation for global economic growth. We do have to take care of our deficits.
I think Christine has spoken before, and I think most economists would argue as well, that the challenge, when it comes to our deficit, is not short-term discretionary spending, which is manageable. As I said before, and I want to repeat, as a percentage of our GDP, our discretionary spending, all the things that the Republicans are proposing cutting, is actually lower than it’s been since Dwight Eisenhower.
There has not been some massive expansion of social programs, programs that help the poor, environmental programs, education programs. That’s not -- that’s not our problem. Our problem is that our revenue has dropped down to between 15 percent and 16 percent, far lower than it has been historically, certainly far lower than it was under Ronald Reagan, at the same time as our health care costs have surged and our demographics mean that there’s more and more pressure placed on financing our Medicare, Medicaid and Social Security programs.
So at a time when the recovery is still gaining steam, and unemployment is still very high, the solution should be pretty apparent. And that is, even as we continue to make investments in growth today -- for example, putting some of our construction workers back to work, rebuilding schools and roads and bridges, or helping states to rehire teachers at a time when schools are having a huge difficulty retaining quality teachers in the classroom, all of which would benefit our economy, we focus on a long-term plan to stabilize our revenues at a irresponsible level and to deal with our health care programs in a irresponsible way.
And that’s exactly what I’m proposing. And what we’ve proposed is, let’s go back for folks who are making more than $250,000 a year to levels that were in place during the Clinton era, when wealthy people were doing just fine and the economy was growing a lot stronger than it did after they were cut. And let’s take on Medicare and Medicaid in a serious way, which is not just a matter of taking those costs of the books, off the federal books, and pushing them on to individual seniors, but let’s actually reduce health care costs, because we spend more on health care, with not as good outcomes, as any other advanced developed nation on earth. And that would seem to be a sensible proposal.
But the problem right now is not the technical means to solve it, the problem is our politics. And that’s part of what this election and what this debate will need to be about, is, are we, as a country, willing to get back to common-sense, balanced, fair solutions that encourage our long-term economic growth and stabilize our budget? And it can be done.
One last point I want to make, Dean, that I think is important, because it goes to the growth issue.
If state and local government hiring were basically on par to what our current recovery -- on par to past recoveries, the unemployment rate would probably be about a point lower than it is right now. If the construction industry were going through what we normally go through, that would be another point lower.
The challenge we have right now, part of the challenge we have in terms of growth, has to do with the very specific issues of huge cuts in state and local government and the housing market still recovering from this massive bubble. And that -- those two things are huge headwinds in terms of growth.
I say this because if we, for example, put some of those construction workers back to work, or we put some of those teachers back in the classroom, that could actually help create the kind of virtuous cycle that would bring in more revenues just because of economic growth, would benefit the private sector in significant ways, and that could help contribute to deficit reduction in the short term, even as we still have to do these important changes to our health care programs over the long term.
SINGLETON: Mr. President, you said yesterday that it would be unprecedented for a Supreme Court to overturn laws passed by an elected Congress. That is exactly what the court’s done during its entire existence.
If the court were to overturn the individual mandate, what would you do or propose to do for the 30 million people who wouldn’t have health care after that ruling?
OBAMA: Well, first of all, let me be very specific.
We have not seen a court overturn a law that was passed by Congress on an economic issue like health care, that I think most people would clearly consider commerce. A law like that has not been overturned, at least since Lochner. Right? So we’re going to back to the ‘30s, pre-New Deal. And the point I was making is that the Supreme Court is the final say on our Constitution and our laws, and all of us have to respect it. But it’s precisely because of that extraordinary power that the court has traditionally exercised significant restraint and deference to our duly-elected legislature, our Congress. And so the burden is on those who would overturn a law like this.
Now, as I said, I expect -- I expect the Supreme Court actually to -- to recognize that and to abide by well-established precedents out there. I have enormous confidence that, in looking at this law, not only is it constitutional, but that the court is going to exercise its jurisprudence carefully because of the profound power that our Supreme Court has.
As a consequence, we’re not spending a whole bunch of time planning for contingencies. What I did emphasize yesterday is, there is a human element to this that everybody has to remember. This is not an abstract exercise.
I get letters every day from people who are affected by the health care law right now, even though it’s not fully implemented, young people who are 24 or 25, who say, you know what? I just got diagnosed with a tumor.
First of all, I would have not gone to get a checkup if I hadn’t had health insurance. Second of all, I wouldn’t have been able to get it treated had I not been on my parent’s plan. Thank you, and thank Congress for getting this done.
I get letters from folks who have just lost their job, their COBRA is running out. They’re in the middle of treatment for colon cancer, or breast cancer, and they’re worried when their COBRA runs out, if they’re still sick, what are they going to be able to do? Because they’re not going to be able to get health insurance.
And the point I think that was made very ably before the Supreme Court, but I think that most health care economists who have looked at this have acknowledged, is there are basically two ways to cover people with pre-existing conditions, or assure that people can always get coverage even when they have bad illnesses. One way is the single payer plan. Everybody is under a single system like Medicare.
The other way is to set up a system in which you don’t have people who are healthy, but don’t bother to get health insurance, and then we all have to pay for them in the emergency room. That doesn’t work. And so, as a consequence, we’ve got to make sure that those folks are taking their responsibility seriously, which is what the individual mandate does.
So I don’t anticipate the court striking this down. I think they take their responsibilities very seriously.
But I think what’s more important is for all of us, Democrats and Republicans, to recognize that, in a country like ours, the wealthiest and most powerful country on Earth, we shouldn’t have a system in which millions of people are at risk of bankruptcy because they get sick, or end up waiting until they do get sick, and then go to the emergency room, which involves all of us paying for it.
SINGLETON: Mr. President, you’ve been very, very generous with your time. And we appreciate very much you being here.
OBAMA: Thank you so much, everybody.