Obama vows tax hikes to reduce trillion dollar budget deficit

US President Barack Obama has unveiled a finance package aimed at reducing the budget deficit by 4 trillion dollars by 2023. Officials said the plan would shave deficits as a share of the US economy to 2.5 per cent of GDP in 2015 and put them on a path to reach close to 2.0 per cent by the end of this decade. 

Barack Obama, le 13 avril 2011. Reuters/Kevin Lamarque

In addition to cuts in discretionary spending, the plan will be financed with tax increases for affluent Americans. But Obama warned he would not allow investments in education, broadband and clean energy to be starved.

"The debate about budgets and deficits is about more than just numbers on a page, more than just cutting and spending," he said. "It's about the kind of future we want, it's about the kind of country we believe in."

Currently, the US budget deficit is forecast to reach 1.6 trillion dollars this year and cumulative public debt stands at 14.27 trillion dollars.

The president warned that every sector of government spending would be scrutinised including some of the social programs cherished by Democrats. He also proposed a fundamental strategic review to mine for waste in military spending.

Following the speech at George Washington University, Republicans in the Congress said they would fight any effort to raise taxes as part of a plan to rein in the rampant US deficit and surging debt.

Top Senate Republican Mitch McConnell said the party had made it clear that a lack of revenue is not part of the problem and they would not discuss tax increases.

McConnell warned that foreign countries were watching the US closely. "They want to know whether America is going to get its act together, or whether America is going to become another Greece," he said.

Pentagon Chief Robert Gates also expressed concern that the president's proposed major cuts to defense spending would require scaling back military forces, missions and capabilities.

The White House has not given details of what weapons programs or forces might have to be cut to meet the goal of reducing the trillion dollar budget deficit. It is believed some savings will be made with the scheduled withdrawal of the remaining US troops from Iraq by the end of the year as well as a planned drawdown of nearly 100,000 forces in Afghanistan starting in July.