we reforming a cultural subsidies, subsidies that a lot of times pay large farms for crops that they don't grow. we make modest adjustments to federal retirement programs. we reduce by tens of billions of dollars the tax money that goes to fannie mae and freddie mac. we also ask the largest fansal firms, companies saved by tax dollars during the financial crisis, to repay the american people for every dime that we spent. and we save an additional one trillion dollars as we end the wars in iraq and afghanistan. these savings are not only counted as part of our plan but part of the budget plan that nearly every republican on the house voted for. finally this plan includes structural reforms to reduce the cost of healthcare in programs like medicare and medicaid. keep in mind we've already included a number of reforms in the health care law which will go a long way towards controlling these costs but, we're going to have to do a little more. this plan reduces wasteful subsidies and erroneous payments while changing some incentives that often lead to excessive health care costs. it makes prescriptions more affordable through faster approval of generic drugs. we'll work with governors to make medicaid for efficient and more accountable and we'll change the way we pay for health care. instead of just paying for procedures, providers will be paid more when they improve results. such steps will save money and improve care. these changes are phased in slowly to strengthen medicare and medicaid over time because while we do need to reduce health care costs i'm not going to allow that to be an excuse for turning medicare into a voucher program that leaves seniors at the mercy of the insurance industry. i'm not going to stand for balancing the budget by denying or reducing health care for poor children or those with disabilities. so we will reform medicare and medicaid but we will not abandon the fundamental commitment that this country has kept for generations. and by the way that includes our commitment to social security. i've said before, social security is not the primary cause of our deficits but it does face long-term challenges as our country grows older and both parties will need to work together on a separate track to strengthen social security for our children and our grandchildren. so the, this is how we can reduce spending. by scouring the budget for every dime of waste and inefficiency, by reforming government spending, and by making modest adjustments to medicare and medicaid. but all these reductions in spending by themselves will not solve our physical problems. we can't just cut our way out of this hole. it's going to take a balanced approach. if we're going to make spending cuts, many of which we wouldn't make if we weren't facing such large budget deficits, then it is only right that we ask everyone to pay their fair share. in the last week speaker of the house, john boehner, gave a speech about the economy and to his credit, he made the point that we can't afford the kind of politics that says, it's my way or the highway. i was encouraged by that. here's the problem. in the same speech he also came out against any plan to cut the deficit that includes any additional revenues whatsoever. he said, i'm quoting him, there is only one option, and that option and only option relies entirely on cuts. that means slashing education, surrendering the research necessary to keep america's technological edge in the 21st century, and allowing our critical public assets like highways and bridges and airports to get worse. it would cripple our competitiveness and our ability to win the jobs of the future and it would also mean asking sacrifice of seniors and the middle class and the poor while asking nothing of the wealthiest americans and biggest corporations. so the speaker says we can't have it my way or the highway and then, basically says, my way. or the highway. that's not smart. it's not right. if we're going to meet our responsibilities, we have it do it together. now i'm proposing real serious cuts in spending. when you include the one trillion dollars in cuts i've already signed into law, these would be among the biggest cuts in spending in our history but they have got to be part of a larger plan that's balanced, a plan that asks the most fortunate among us to pay their fair share just like everybody else. and that's why this plan eliminates tax loopholes that primary i willly two to the wealthiest taxpayers and biggest corporations. tax breaks that small businesses and middle class families don't get. and if tax reform doesn't get done, this plan asks the wealthiest americans to go back to paying the same rates they paid during the 1990s, before the bush tax cuts. i promise it's not because anybody looks forward to the prospects of raising taxes or paying more taxes. i don't. in fact i've cut taxes for the middle class and for small businesses and through the american jobs act we cut taxes again to promote hiring and put more money into the pockets of people but we can't afford the special lower rates for the wealthy, rates by the way that were meant to be temporary. back when these first, these tax cuts, back in 2001, 2003 were talked about, they were talked about as temporary measures. we can't afford them when we're running these big deficits. now, i am also ready to work with democrats and republicans to reform our entire tax code, to get rid of the decades of a accumulated loopholes, special interest carve-outs and other tax expenditures that stack the deck against small business owners and ordinary families who can't afford washington lobbyists or fancy accountants. our tax code is more than 10,000 pages long. if you tack up all the volumes, they're almost five fetal. -- feet tall. that means how much you pay depends how much you make than more well how you can game the system and that is especially true of the corporate tax code. we have one of the highest corporate tax rates in the world but it is riddled with exceptions and special interest loopholes. so some companies get out of paying a lot of taxes while the rest of them have, end up having to foot the bill. and this makes our entire economy less competitive and our country a less desirable place to do business. that has to change. our tax code shouldn't give an advantage to companies with the best-connected lobbyists. it should give a chance to companies that invest in the united states of america and create jobs in the united states of america and we can lower the corporate rate if we get rid of all these special deals. so i am ready, i am eager to work with democrats and republicans to reform the tax code to make it simpler, make it fairer, and make america more competitive. but any reform plan will have to raise revenue to help close our deficit. that has to be part of the formula. and any reform should follow another simple principle. middle class families shouldn't pay higher taxes than millionaires and billionaires. that's pretty straightforward. it's hard to argue against that. warren buffett's secretary shouldn't pay a higher tax rate than warren buffett. there's no justification for it. it is wrong that in the united states of america, a teacher or a nurse or a construction worker who earns $50,000, should pay higher tax rates than somebody pulling in $50 million. anybody who says we can't change the tax code to correct that, anyone who assigns some pledge to protect every single tax loophole so long as they live, they should be called out. they should have to defend that unfairness. explain to somebody who is making $50 million a year, in the financial markets, should be paying 15% on their taxes when a teacher making $50,000 a year, is paying more than that, paying a higher rate. they ought to have to answer for that. and if their pledge to keep that kind of unfairness in place, they should remember the last time i checked, the only pledge that really matters is the pledge we take to uphold the constitution. we're already hearing the usual defenders of these kind of loopholes saying this is just class warfare. i reject the idea that asking a hedge fund managetory pay the same tax rate as a plumber or a teacher is class warfare. i think it is just the right thing to do. i believe the american middle class who have been pressured relentlessly for decades believe it's time that they were fought for as hard as lobbyists and some lawmakers fought to protect special treatment for billionaires and big corporations. nobody wants to punish success in america. what's great about this country is our belief anyone can make it and everyone should be able to try. the idea that anyone can open a business or have an idea and make us millionaires or billionaires. this is the land of opportunity. that's great. all i'm saying is, that those who have done well, including me, should pay our fair share in taxes to contribute to the nation that made our success possible. we shouldn't get a better deal than ordinary families get. and i think most wealthy americans would agree, if they knew this would help us grow the economy and deal with the debt that threatens our future. it comes down to this. we have to prioritize. both parties agree that we need to reduce the deficit by the same amount, by $4 trillion. so what choices are we going to make to reach that goal? either we ask the wealthiest americans to pay their fair share in taxes, or we're going to have to ask seniors to pay more for medicare. we can't afford to do both. either we gut education and medical research, or we've got to reform the tax code so that most profitable corporations have to give up tax loopholes that other companies don't get. we can't afford to do both. this is not class warfare. it's math. the money is going to have to come from someplace. and if we're, if we're not willing to ask those who have done extraordinarily well to help america close the deficit, and we are trying to reach that same target, $4 trillion, then the logic, the math says everybody else has to do a whole lot more. we've got to put the entire burden on the middle class and the poor. we've got to scale back on the investments that have always helped our economy grow. we got to settle for second rate roads and second rate bridges and second rate airports and schools that are crumbling. that's unacceptable to me. that's unacceptable to the american people and it will not happen on my watch. i will not support, i will not support any plan that puts all the burden for closing our deficit on ordinary americans. and i will veto any bill that changes benefits for those who rely on medicare but does not raise serious revenues by asking wealthiest americans or biggest corporations to pay their fair share. we are not going to have a one-sided deal that hurts the folks who are most vulnerable. but none of the changes i'm proposing are easy or politically convenient. it's always more popular to promise the moon and leave the bill for after the next election, or the election after that. that has been true since our founding. george washington grappled with this problem. he said, towards the payment of debts there must be revenue. that to have revenue, there must be taxes. and no taxes can be devised which are not more or less inconvenient and unpleasant. he understood that dealing with the debt, these are his words, always a choice of difficulties. but he also knew that public servants weren't elect to do what was easy. they weren't elect to do what was politically advantageous. it's our responsibility to put country before party. it's our responsibility to do what's right for the future and that's what this debate is about. it's not about numbers on a ledger, not about figures on a spreadsheet. it is about the economic future of this country and about whether we will do what it takes to create jobs and growth and opportunity while facing up to the legacy of debt that threatens everything we built over generations and it's also about fairness. about whether we are in fact in it this together and we're looking out for one another. we know what's right. it's time to do what's right. thank you very much. [applause] thank you. jenna: the president ending it is time to do what's right talking about deficit reduction and job growth. we're glad you're joining us on monday morning. this is setting off the discussion for the entire week about what to do with the economy. i'm jenna lee. jon: i'm jon scott. we heard the president's plan to reduce the deficit but what might all of it mean to you? jenna: that is always a good questionable. let's drill down with simon constable, columnist with "the wall street journal" and author of the wall street guide of 50 economic indicators that matter. there are so many different sides of this. including adjustments to medicare that the president mentioned but obviously the lightning rod is the discussion about taxes and the issue of fairness. what's your takeaway as far as how this tax proposal by the president would affect our economy right now and job growth. >> first of all i got to say this is a campaign speech. that's what we just heard. it was a campaign speech and it's designed clearly designed to sort of rouse his base up, the left wing of the democratic party. this was not really a conciliatory speech with the republicans in congress designed to bring congress together. it was more of that. on what this will do to the economy it all depends how it is executed there are some good stuff that could really work like lowering the corporate tax rate. just a nominal reduction in the corporate tax rate, even if you eliminate lots of loopholes could actually spur some new factories being built here in the u.s. that could be good but raising taxes in general, especially coming down to levels that from what i understand are actually quite low, and not really quote, millionaires, could actually push us into, into a worse state than we're already in. we're in a pretty bad state now. remember the first half of the year, that was the high point. we're now looking at this half, much, much, much slower growth. this could tip us into recession if we do see these tax increases go through. jenna: one of the, well, one of the issues is issue of semantics as we work through some of the details. the president mention ad hedge fund manager not paying as much as a plumber as far as the tax rate. if you talk to the hedge fund manager, talk to republican they will call the hedge fund manager a job creator. >> yeah. jenna: as you take a look at the jobs plan, there is a payroll tax cut involved in that. there are some issues, i should say incentives to boost hiring. how does that come out in the wash when we look at potentially higher taxes for millionaires? >> let's go back to that, that hedge fund manager and plumber example, the hedge fund manager being called by the republicans a job creator and should the hedge fund manager be paying a lower tax rate than the plumber for his income for doing his job, no? but the key here is, what is his income from doing his job and what is his income from investments? the design of the 15% dividend tax was designed to basically spur investment in plants and equipment. so you put your money to work for a long time to create jobs. we've got to be very careful what is income from doing your job and what is investment. and that line needs to be drawn very clearly and i think there has been some muddying of that line such that you get some people who go and do their job and manage to get all of their day-to-day pay. jenna: let me stop you there, simon. so we're clear on this, what is the exactly the president's plan proposing? make sure income tax is same level as the income tax that plumber earns? >> yes. jenna: as far as the investment you're saying raising the investment tax to keep more money out. economy? >> absolutely. it lowers the returns dramatically. when you look attic maing an investment in a plant or some equipment or a new factory, you're thinking about the aft tax return. if that rate is higher than clearly less opportunities for you to invest properly. if it's lower there are more. jenna: speaking of investments really quick here, simon, we have only 30 seconds or so. the markets are down 200 points today. what is behind that? >> that has to be greece. that has got to be european problems. i don't think or obama is today, market looking at this proposal anything other than than a campaign sheet and opening gambit in negotiation. that has nothing to do with him i see. jenna: similar themes? we're talking about debt. we'll keep talking about it. >> yeah. jenna: simon, we always appreciate you coming by. thank you, simon constable from "the wall street journal". >> thank you. jon: a fox news alert. remember the case of jose padilla, sometimes called jose padilla? the chicago man who was convicted of plotting to set off a dirty bomb in the united states? his sentence, his 17-year sentence has been thrown out by a federal appeals court. but get this. the court said, 17 years for the crime for which he was convicted, is too lenient. they say, a much stricter, tougher sentence should be imposed. we'll get back to you in just a bit with more information on the case against jose padilla and theries of the day's news ♪ [ country ] [ man ] ♪ gone, like my last paycheck ♪ gone, gone away ♪ gone, like my landlord's smile ♪ ♪ gone, gone away ♪ my baby's gone away with dedicated claims specialists... and around-the-clock service, travelers can help make things better quicker. will your auto and home insurer... be there when you need them most? for an agent or quote, call 800-my-coverage... or visit travelers.com. jenna: some new information now for you. british police say they arrested seven people as part of an anti-terror operation. the six men and one woman are in custody after a bust overnight in the central city of birmingham. police are searching their homes and at least one business looking for anymore clues about any sort of potential terrorist threat. greg palkot with terrors live from london. greg? >> reporter: hey, jenna, it is being dubbed the most significant counterterrorism operation in the u.k. so far this year. the police are certainly treating it as a pretty big deal. the folks they are holding in custody right now are suspected of, in their words, the police words, commissioning preparing and incity greating a -- incity gating a act of terror. they are not saying what the plot is but it was close to happening. they went on to say and this is a quote, it was necessary to take action to insure public safety. it is reported that the police believed that the terror plot was involved with some kind of al qaeda-inspired terrorism, islamic militancy. there is new report that actually said these folks were believed to be islamic militants. certainly in another quote they were tied to international cases rather than local cases although we have to underscore here, jenna, there are no ties to any u.s. potential targets as of yet. those arrested we do know also however were british passport holders. the u.k., like the u.s., has a big problem with homegrown terror. the biggest attack here on this soil was in 2005 against the london transport system and that killed 52 people. we know birmingham, the city where they were arrested has a big muslim population. there have been terror arrests in that city in the past few years. finally the jenna, the threat of terror remains high. it is at the third highest level, the threat risk level, that is substantial level. that translates according to the authorities as an attack is a strong possibility. from our own research in the past couple weeks, related to the 10th anniversary of 9/11. we've been talking to security officials. they have told us directly that they feel they thwarted half a dozen very serio