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Obama to lay out plan for long-term deficit reduction

April 11, 2011 12:00:00 AM PDT
A new battle is brewing on Capitol Hill. Last week, legislators had to come up with a budget for the rest of the fiscal year. This week, the fight will be over how to lower the long-term deficit.

President Barack Obama is expected on Wednesday to lay out his plan for long-term deficit reduction.

On the table are spending cuts, possibly to Medicare and Medicaid, and tax increases to the wealthy, which is something Republicans have opposed.

The president must also convince Congress to raise the country's debt ceiling.

If the debt ceiling is not raised, the U.S. could be in danger of defaulting on financial obligations.

"If we default on America's debt with this debt ceiling, it will have a dramatic negative impact on America's economy. It will spin us into a second recession," said Sen. Dick Durbin (D-Ill.).

Republicans said they won't support raising the debt ceiling unless bigger steps are taken toward deficit reduction.

"We've had our nation's first trillion-dollar deficit, second trillion-dollar deficit, third trillion-dollar deficit, highest in the nation's history. At some point you got to quit spending money you don't have," said Rep. Jeb Hensarling (R-Texas).

The U.S. is expected to hit its borrowing limit on May 16.

Both houses of Congress are expected to pass the 2011 spending deal, which includes $38 billion in cuts, by midweek once aides finish writing the legislation.