Obama says ending tax breaks required to cut deficit

WASHINGTON Sat Jul 2, 2011 1:33pm EDT

U. S. President Barack Obama listens during the U.S. Coast Guard Academy commencement exercises in Leamy Hall Auditorium in New London, Connecticut May 18, 2011. REUTERS/Larry Downing

U. S. President Barack Obama listens during the U.S. Coast Guard Academy commencement exercises in Leamy Hall Auditorium in New London, Connecticut May 18, 2011.

Credit: Reuters/Larry Downing

WASHINGTON (Reuters) - President Barack Obama pressed his case on Saturday for achieving deficit reduction, in part by ending tax breaks and singling out hedge fund managers, oil companies and billionaires to take the hit.

Obama is locked in a dispute with Republicans over how to bring down the deficit as part of a deal to raise the debt ceiling and prevent Washington from default.

Democrats insist that some tax increases be included in a deficit-cutting package.

Republicans say that would be bad for the economy.

"Now, it would be nice if we could keep every tax break, but we can't afford them," Obama said in his weekly radio and Internet address.

"Because if we choose to keep those tax breaks for millionaires and billionaires, or for hedge fund managers and corporate jet owners, or for oil and gas companies pulling in huge profits without our help - then we'll have to make even deeper cuts somewhere else."

Obama listed a range of areas, some of which are considered top Democratic political priorities, that would face the chopping block if such tax breaks were allowed to continue.

"We've got to say to a student, 'You don't get a college scholarship.' We have to say to a medical researcher, 'You can't do that cancer research.' We might have to tell seniors, 'You have to pay more for Medicare,'" he said.

"That isn't right, and it isn't smart. We've got to cut the deficit, but we can do that while making investments in education, research and technology that actually create jobs."

Senator Dan Coats, delivering the weekly Republican address, said reducing spending was the key.

"The president and Democrats in Congress must recognize that their game plan is not working," he said. "It's time to acknowledge that more government and higher taxes is not the answer to our problem. It's time for bold action and a new plan to address our current crisis."

TIT FOR TAT

Treasury Secretary Timothy Geithner has warned of huge risks if Congress fails to raise the $14.3 trillion debt ceiling by August 2, potentially triggering a default that could send shivers through an already-fragile banking system.

Obama said both sides agreed spending cuts were necessary and said he and Vice President Joe Biden had made progress in getting lawmakers to agree on areas to cut.

"Over the last few weeks, the vice president and I have gotten both parties to identify more than $1 trillion in spending cuts," Obama said.

"But after a decade in which Washington ran up the country's credit card, we've got to find more savings to get out of the red. That means looking at every program and tax break in the budget - every single one - to find places to cut waste and save money."

Fears of a default, which could disrupt everything from debt payments to retirement benefits, rose after Republicans walked out of budget negotiations led Biden last week.

Coats said Obama had to step up to get a deal done.

"Now is the time for decisive leadership from this president," he said. "It's time to cast aside the false safety of political denial and re-election hopes and put the future of our country above all else."

(Editing by Jackie Frank)