You asked, the White House answered

Melody Barnes, President Obama's domestic policy director, answers MSN Money readers' questions about the budget

By MSN Money Partner Apr 15, 2011 8:34AM

Obama's budget proposals
Image: Washington, D.C. (© Corbis)On Wednesday, MSN Money readers were invited to ask questions about the President's budget proposals via Facebook or by commenting in an article. We received more than 250 submissions. We selected five for Melody Barnes, director of the Obama administrations Domestic Policy Council to answer. Her responses are below:


Reader: With the Baby Boom generation retiring, how do we as a nation address the dual problems of Social Security and Medicare costs exploding, to the point of potentially eclipsing the entire federal budget within the next decade?   - from "cniht"


Barnes: The President has offered a comprehensive framework to cut $4 trillion from our deficit.  It is a balanced plan that asks for shared sacrifice in order to provide shared opportunity for all Americans. The President’s framework would put us on a track toward  paying down the national debt as a share of the economy while providing us with the resources we need to keep our commitments -- including to America’s seniors.   


It’s true that rising health care costs are one of the key drivers of our long-term deficit.  That’s why the President took action by enacting the Affordable Care Act. The Affordable Care Act will both reduce costs and improve quality and, according to the Congressional Budget Office, it will reduce the deficit by more than $200 billion this decade and over $1 trillion in the next.   


In the President’s new plan, we take another, important step forward. By reforming our health programs, the President’s framework would save an additional $340 billion by 2021, $480 billion by 2023, and at least an additional $1 trillion in the subsequent decade.  It does so by making Medicaid more flexible and efficient, reducing Medicare’s excessive spending on prescription drugs and lowering drug premiums and setting a more ambitious target for reducing long-term Medicare cost growth. The President opposes any plan that would simply shift costs to seniors and the vulnerable by undermining Medicare and Medicaid.     


The President does not believe that Social Security is in crisis nor is a driver of our near-term deficit problems. But, in the context of an aging population, Social Security faces long-term challenges that are better addressed sooner than later. The President supports bipartisan efforts to strengthen Social Security that strengthen the program and do not privatize it, improve retirement security for the vulnerable while protecting people with disabilities and current beneficiaries and does not slash benefits for future generations.    


Reader: How can you justify financing the wars in Iraq and Afghanistan, including giving billions every time a disaster happens in any part of the world, when our own people are suffering? The programs for our children, elderly, the poor and needy get cut, but the money continues to flow to other countries. We can no longer afford to save the world. - Ricky Dee


Barnes: The President’s framework would cut the deficit, while making the investments in America we need to win the future and not threaten economic growth. As the President said Wednesday, restoring fiscal sustainability requires a comprehensive approach that looks at all parts of the budget.


Foreign aid makes up about 1 percent of our entire federal budget.  Cutting it cannot be the answer to our fiscal challenges. To put this in perspective:  Two-thirds of the budget is spent on Medicare, Medicaid, Social Security and national security.  Another 20 percent is spent on programs like unemployment insurance, student loans, veterans’ benefits, and tax credits for working families.  The remaining 12 percent, after interest on the debt, is for everything else -- all of our national priorities.  


That’s why the President proposes cutting spending across the budget -- including in the tax code -- in order to put us on a sustainable fiscal course.    


Reader: I applaud your efforts in trying to address an obstacle that most politicians tend to avoid, but how can this be done without it being done on the backs of those who are most vulnerable -- the middle and lower income families of this country?   - Ken


Barnes: The President is committed to reducing the deficit but doing so in a way that is fair and consistent with our values.  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.  


That’s why, as a first step, the President has said that we can’t afford to continue the upper-income tax cuts. Those tax cuts were unfair and unaffordable at the time they were enacted, and they remain so today.  Allowing them to expire avoids adding $1 trillion to the deficit.   


From there, the President laid out a comprehensive and balanced approach that will cut the deficit by $4 trillion over the next 12 years and begin paying down the debt as a share of the economy.  It’s a balanced framework that protects our Nation’s key commitments to the middle class and vulnerable Americans.    


Reader: If you are going to raise taxes on the rich, you need to make sure to close all the loopholes in the tax code, otherwise it won't matter if you raise the highest tax bracket to 90% as they will find their way to weasel out of paying most of it. - Mark

Reader: How much money would the Treasury save by not providing tax rebates to people who pay no taxes? - Pepper


Barnes: As part of his fiscal framework, the President has proposed comprehensive tax reform that will produce a tax system which is fairer, has fewer loopholes, less complexity and is not rigged in favor of those who can afford lawyers and accountants to game it.


 The President’s Budget is an important down payment on that reform. It includes a proposal to cut back tax expenditures for the wealthiest Americans -- raising $320 billion over the next ten years -- and a measure that would eliminate the loophole that allows hedge fund managers to pay taxes at the same rate as school teachers.  These are the types of proposals that should be on the table as we reform the tax code.