The President’s speech on deficit reduction is available here, and it’s scheduled to start at 7:30am ET. I have received a fact sheet on the White House deficit reduction plan with a little more detail.

• First, the veto threat is specifically tied to Medicare benefit cuts. But that represents just $24 billion of a $4.4 trillion plan. So if a bill came across with other Medicare and Medicaid or mandatory spending cuts and no revenues, it appears the President would sign it.

• As I noted in the earlier post, the proposal breaks down like this:

o $1.2 trillion from the discretionary cuts enacted in the Budget Control Act.
o $580 billion in cuts and reforms to a wide range of mandatory programs;
o $1.1 trillion from the drawdown of troops in Afghanistan and transition from a military to a civilian-led mission in Iraq
o $1.5 trillion from tax reform
o $430 billion in additional interest savings

They call this a 2:1 ratio of spending solutions to revenue solutions, but that’s a pretty charitable reading of the situation. The $1.1 trillion from ending wars is an artifact scheduled to happen already. The interest savings are just savings, not cuts to programs (maybe at a macro level, holders of US debt will receive less government money and spend less sometime in the future).

• Their comparisons of what would happen “if we did nothing” seem off to me. They appear to be comparing this to current policy rather than current law. Because under current law, all the Bush tax cuts expire, the Medicare doc fix doesn’t get done, the AMT isn’t patched, and you’re in primary balance on the deficit quickly.

They say this is a big improvement over what would happen “if we did nothing,” but that’s only true relative to current policy.

• Under the mandatory health savings, the fact sheet says, “Within this total, 90 percent of the savings, or $224 billion, comes from reducing overpayments in Medicare.” That sounds like more of the same cuts to Medicare Advantage that we saw in the Affordable Care Act. “Overpayments” could also mean payments for prescription drugs, leading the way for bargaining. The $72 billion in Medicaid “savings” are completely unspecified.

• Here’s how the other mandatory savings are described. There are no additional discretionary cuts in the plan (that includes defense):

Included within these savings are:
$33 billion in savings from agriculture subsidies, payments, and programs
$42.5 billion in reforms to Federal employee benefit programs, including programs for civilian employees and military personnel.
$4.1 billion from the disposal of unused government assets.
$92.2 billion from restructuring government operations and reducing government liabilities.
$77.6 billion from improving Federal program management and reducing waste and abuse.

There’s a bit of hand-waving here. But the cut to federal employee benefit programs is real and would be damaging. That probably translates into higher pension contributions.

• Capping itemized deductions at 28% is in here, and it was also the main pay-for for the American Jobs Act. Since those pay-fors are really a tax trigger for the Super Committee, that’s not actually double-counting.

• I’m having a hard time figuring out how the expiration of the Bush tax cuts, the cap on itemized deductions and the “Buffett rule” work together; they all seem to be doing a similar job. I’ll have more on this.

Anyway, this is an open thread for the President’s speech.

David Dayen

David Dayen