US tax hikes for the rich are on the cards

Graphic showing approval ratings of US President Barack. US President Barack Obama has unveiled a $4 trillion deficit reduction drive and savaged Republican plans that he said would reward the rich and fracture America's social compact .
Obama laid out his vision in a speech at George Washington University, aiming to prepare the ground for short-term budget fights and define his stand on an issue crucial to the US economy and his 2012 reelection chances.
He proposed cutting spending with a "scalpel and not a machete" on health care costs, the military and some bedrock social programs, and decried the vision of budget-cutting Republicans as "deeply pessimistic."
In addition to cuts in discretionary spending, Obama would finance his deficit drive with tax increases for affluent Americans.
But he 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," Obama said.
"It's about the kind of future we want, it's about the kind of country we believe in."
Obama unveiled a plan to achieve $4 trillion in deficit reduction over 12 years or less, saying he was borrowing recommendations from a bipartisan fiscal commission which reported last year.
Officials said the approach would shave deficits as a share of the US economy to 2.5 percent of GDP in 2015 and put them on a path to reach close to 2.0 percent by the end of this decade.
Currently, the US budget deficit is forecast to reach $1.6 trillion this year and cumulative public debt stands at $14.27 trillion.
He also proposed a "debt fail-safe" to trigger spending reductions if the ratio of debt to GDP is not stabilized by the end of the decade and said deficit trimming should be phased in over time to protect the recovery.
The president said every sector of government spending should be "on the table," giving notice that social programs cherished by Democrats would not be immune and proposed a fundamental strategic review to mine for waste in military spending.
Portraying himself as a conciliator amid Washington's fevered political debate, Obama called on Democrats and Republicans to come together to secure a prosperous future for their country.
But he savaged a rival budget and deficit reduction plan put forward by Republican congressman Paul Ryan, which aims to cut 4.4 trillion dollars from the deficit over a decade.
Obama argued Ryan's plan mandated sweeping cuts on health care programs for the poor and the elderly while rewarding the richest Americans with tax cuts.
"The fact is, their vision is less about reducing the deficit than it is about changing the basic social compact in America," Obama said.
"There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires.
"There's nothing courageous about asking for a sacrifice from those who can least afford it and don't have any clout on Capitol Hill," Obama said, criticizing Republican cuts in clean energy, education and transportation.
"They paint a vision of our future that's deeply pessimistic. we are presented with a vision that says the United States of America - the greatest nation on Earth - can't afford any of this."
Ryan, who was in the audience for the speech, delivered an equally hard-hitting assessment of Obama's performance.
"What we heard today was not fiscal leadership from our commander-in-chief. What we heard today was a political broadside from our campaigner-in-chief."
Defense Secretary Robert Gates meanwhile warned through a spokesman that Obama's proposed defense budget cuts would have a serious impact, amid suggestions of tension between the White House and the Pentagon.
"The secretary has been clear that further significant defense cuts cannot be accomplished without reducing force structure and military capability," said Pentagon spokesman Geoff Morrell.
Lining up a tough election-year tussle, Obama said he would refuse to allow tax cuts for the rich passed under president George W. Bush to be extended when they come up for renewal in 2012.
Eric Cantor, the number two Republican in the House of Representatives, slammed the president's approach, saying it lacked details.
"We have spoken to the specifics. Mr. President, we are serious, where are you?"
The specter of the 2012 election also loomed over the speech. Later on Wednesday, Obama's campaign manager Jim Messina told supporters in an email message that the plan formed a "stark contrast" with Republicans, who he said wanted to privatize health care for the elderly.