Obama deficit plan includes raising $1.5 trillion from tax overhaul

President Obama on Monday will put forward a plan to slash more than $3 trillion from the nation’s deficits by winding down the wars in Afghanistan and Iraq, raising taxes on wealthier Americans, closing tax loopholes, and cutting the cost of Medicare and other government health programs, senior White House officials said.

Obama, who is to lay out his proposal in a Rose Garden speech at 10:30 a.m., will also issue a specific warning to congressional Republicans: If they pass a bill that cuts programs for poor and elderly Americans without asking profitable corporations and others to sacrifice, he will veto it.

“In his remarks, the president will make clear he’s not going to support any plan that asks everything of some Americans and nothing of others,” said a senior White House aide, speaking on condition of anonymity in a conference call with reporters on Sunday. “He will say that he’ll veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share.”

Obama will present his recommendations to a congressional “super committee” that is considering a deficit reduction package of its own. The 12-member committee, an outgrowth of the debt ceiling negotiations over the summer, is charged with putting out a bill that will go to Congress for an up-or-down vote. The committee must complete its work by Nov. 23.

Obama hopes his proposal will form the basis of a deficit-cutting package that Congress ultimately approves.

His plan for lopping $3 trillion from the deficit is on top of the approximately $1 trillion in spending cuts that he signed into law in August, after reaching a deal with Republican congressional leaders to lift the nation’s debt ceiling.

Breaking down the numbers Sunday night, White House advisors said they would reach the deficit target by:

-- Raising $1.5 trillion through an overhaul of the tax code. About $800 billion of that would come from the expiration of the Bush-era tax cuts for upper-income Americans. The other $700 billion consists of revenue increases achieved by closing loopholes, limiting deductions for those earning more than $250,000 a year, and getting rid of tax breaks for oil and gas companies. As part of any changes to tax law, the White House wants lawmakers to follow a principle it calls the Buffett rule: No one earning more than $1 million should be taxed at a lower rate than middle-income households.

-- Saving $1 trillion by wrapping up the Iraq and Afghanistan wars. Obama’s aim is to steadily withdraw U.S. forces from Afghanistan and transfer combat responsibilities to the Afghans by 2014.

-- Cutting $580 billion from various federal programs, including the major healthcare entitlement programs -- Medicare and Medicaid.

Administration officials said the plan includes $240 billion in savings from Medicare and $72 billion from Medicaid and other health programs. While the proposal does not call for immediate benefit cuts, officials indicated that after 2017, some Medicare beneficiaries would be asked to pay more.

Obama has previously shown interest in means-testing: asking high-income seniors to pay more for their medical care.

The White House plan rules out lifting the Medicare eligibility age from 65 to 67, as some Republicans have suggested. Other savings would come from what one senior White House official called “overpayments,” signaling the White House wants to ask medical providers and drug makers to help reduce costs.

Changes in Medicare benefits carry enormous implications for the 2012 election. Over the past week, congressional Democrats have privately urged the White House to leave Medicare benefits intact.

Curbing Medicare benefits could undercut an argument Democratic candidates hope to make in next year’s elections. Democratic strategists believe the party’s candidates can gain traction by highlighting Republican efforts to convert Medicare into a voucher program.

Were Obama to come out in favor of benefit reductions, the argument might lose some of its potency.

Obama appears to have rejected requests from fellow Democrats to rule out any cuts in Medicare benefits. But aides said he intends to draw a firm line: No such cuts without accompanying revenue increases from the well-to-do.

“There are Medicare beneficiary adjustments in this plan,” a senior White House aide said. “But what the president is saying is he’s not doing those if Republicans are unwilling to ask the wealthiest Americans and biggest corporations to pay their fair share.”

As the nation has endured a financial crisis and recession, total debt has soared.

When George W. Bush began his second term in 2005, the debt amounted to about $7.6 trillion. This year it passed the $14 trillion mark.

If Congress adopts Obama’s plan, that number would start shrinking, White House aides said.

“This would bring the country to a place where by the middle of this decade, current spending is no longer adding to our debt – that debt will be falling as a share of the economy,” a White House aide said. “And deficits on a year-by-year basis will be a sustainable level so that we maintain that.”

peter.nicholas@latimes.com

Noam N. Levey contributed to this article