President Obama has released details of a “balanced”  deficit reduction plan of spending cuts and tax increases that would reduce the deficit by $3.5 trillion over the next decade. The president’s plan is intended to give direction to the Joint Select Committee on Deficit Reduction, which is charged with finding at least $1.2 trillion in additional deficit reduction by November 23. Overall, the president's proposal includes:

• $580 billion in savings from mandatory programs
• $430 billion in savings from lower interest payments on debt
• $1.1 trillion in savings from drawing down war efforts in Iraq and Afghanistan
• $1.5 trillion in new revenue from tax increases and tax reform
• Includes savings and offsets from the American Jobs Act
  
• Assumes $1.2 trillion in deficit reduction from spending caps enacted by the Budget Control Act
• U.S. Postal Service reform
  

Highlights of the President's Deficit Reduction Proposal

General Principles

• Reduces the deficit by roughly $4.4 trillion over 10 years - when adding $1.2 trillion in savings from previously enacted spending caps.
  
• Balance of spending cuts, tax changes, and mandatory program reforms.
• Calls for comprehensive tax reform.
• Institutes the "Buffett Rule" - Individuals earning over $1 million cannot pay a smaller proportion of their income in taxes than individuals with lower incomes.
  

Tax Reform

• Calls on the Super Committee to undertake comprehensive tax reform that follows five principles:
• Lower tax rates
• Cuts corporate and individual tax expenditures
  
• Adheres to the "Buffett Rule"
• Boosts job creation and growth
• Reduces the deficit by at least $1.5 trillion
  
• Allows the 2001 and 2003 tax cuts for high-income earners to expire at the end of 2012.
• Assumes the reinstatement of the 2009 parameters of the estate tax ($3.5 million exemption; 45 percent rate) in 2013.

Spending

• $1.2 trillion spending reduction from discretionary spending caps imposed by the Budget Control Act.
• $1.1 trillion spending reduction from drawing down involvement in the Iraq and Afghanistan wars.
  

Mandatory Programs

• $248 billion in Medicare savings
• $224 billion of the total from reducing overpayments
• No changes would affect beneficiaries until 2017
• $72 billion in savings from Medicaid
• $250 billion in savings from other mandatory programs
• $33 billion from reducing agriculture subsidies and programs
• $42.5 billion in reforms to Federal employee benefit programs
• $4.1 billion from unused government assets
• $92.2 billion from restructuring government operations and liabilities
• $77.6 billion from reducing waste, fraud, and abuse

U.S. Postal Service Reform

• Relieves USPS of nearly $20 billion in retirement and health care obligations
• Pays for upfront solvency relief through $18.5 billion in savings over 10 years
  
• Reduces mail delivery service from 6 to 5 days
• Authorizes increases in postal rates
• Institutes a buyout program for postal employees
  

Job Creation

• Assumes the enactment of the American Jobs Act
• Cost of job creation offset by $479 billion in revenue raisers
• 28 percent cap on itemized deductions and exclusions, including the charitable deduction, for individual taxpayers earning over $200,000 a year ($250,000 for families) - $410 billion over 10 years
• Tax "carried interest" as ordinary income - $13 billion over 10 years
• Repeal oil and gas tax preferences - $41 billion over 10 years
• Modify rules for corporate jet depreciation - $5 billion over 10 years
• Modify rules for dual capacity taxpayers - $10 billion over 10 years