Obama announces debt plan built on taxes on rich

In a blunt rejoinder to congressional Republicans, President Barack Obama called for $1.5 trillion in new taxes Monday, part of a total 10-year deficit reduction package totalling more than $3 trillion. He vowed to veto any deficit reduction package that cuts benefits to Medicare recipients but does not raise new revenues.

"We can't just cut our way out of this hole," the president said.

The president's proposal would predominantly hit upper income taxpayers but would also reduce spending in mandatory benefit programmes, including Medicare and Medicaid, by $580 billion. It also counts savings of $1 trillion over 10 years from the withdrawal of troops from Iraq and Afghanistan.

The deficit reduction plan represents an economic bookend to the $447 billion in tax cuts and new public works spending that Obama has proposed as a short-term measure to stimulate the economy and create jobs. And it gives the president a voice in a process that will be dominated by a joint congressional committee charged with recommending deficit reductions of up to $1.5 trillion.

His plan served as a sharp counterpoint to Republican lawmakers, who have insisted that tax increases should play no part in taming the nation's escalating national debt. Obama's plan would end Bush-era tax cuts for top earners and would limit their deductions.

"It's only right we ask everyone to pay their fair share," Obama said from the Rose Garden at the White House.

In issuing his threat to veto any Medicare benefits that aren't paired with tax increases on upper-income people, Obama said: "I will not support any plan that puts all the burden for closing our deficit on ordinary Americans."

Responding to a complaint from Republicans about his proposed tax on the wealthy, Obama added: "This is not class warfare. It's math."

Key features of Obama's plan:

$1.5 trillion in new revenue, which would include about $800 billion realized over 10 years from repealing the Bush-era tax rates for couples making more than $250,000. It also would place limits on deductions for wealthy filers and end certain corporate loopholes and subsidies for oil and gas companies.

$580 billion in cuts in mandatory benefit programmes, including $248 billion in Medicare and $72 billion in Medicaid and other health programmes. Other mandatory benefit programmes include farm subsidies and federal employee benefits. Administration officials said 90 per cent of the $248 billion in 10-year Medicare cuts would be squeezed from service providers. The plan does shift some additional costs to beneficiaries, but those changes would not start until 2017.

$430 billion in savings from lower interest payment on the national debt.

$1 trillion in savings from drawing down military forces from Iraq and Afghanistan.