Photo by Charles Dharapak
WASHINGTON President Barack Obama is proposing $1.5 trillion in new tax revenue as part of his long-term deficit reduction plan, according to senior administration officials.
The president on Monday will announce a proposal that includes repeal of Bush-era tax cuts for the wealthiest taxpayers, nearly $250 billion in reductions in Medicare spending, $330 billion in cuts in other mandatory benefit programs, and savings of $1 trillion from the withdrawal of troops from Iraq and Afghanistan, the officials said.
The plan includes no changes in Social Security and does not include an increase in the Medicare eligibility age, which the president had considered this summer.
The officials briefed reporters Sunday evening, but spoke on the condition of anonymity in advance of the president's announcement.
All in all, the president's plan is as much an opening bid as it is a political statement designed to draw contrasts with Republicans, who control the House of Representatives.
As such, it was not intended as a compromise and did not include agreements Obama had reached with House Speaker John Boehner during failed deficit reduction negotiations this summer.
The new taxes in particular have little or no chance of passing Congress as proposed. Republicans were already lining up against the president's tax proposal before they even knew the magnitude of what he intended to recommend.
Key features of the proposal:
—$1.5 trillion in new revenue, which would include about $800 billion realized over 10 years from repealing the Bush-era tax rates for couples making more than $250,000. It also would place limits on deductions for wealthy filers and end certain corporate loopholes and subsidies for oil and gas companies.
—$580 billion in cuts in mandatory benefit programs, including $248 billion in Medicare and $72 billion in Medicaid and other health programs. Other mandatory benefit programs include farm subsidies.
—$430 billion in savings from lower interest payment on the national debt.
By adding about $1 trillion in spending cuts already enacted by Congress and counting about $1 trillion in savings from the drawdown of military forces from Iraq and Afghanistan, the combined deficit reduction would total more than $4 trillion over 10 years, senior administration officials said.
Obama backed away from proposing sweeping changes to Medicare, following the advice of fellow Democrats that it would only give political cover to a privatization plan supported by House Republicans that turned to be unpopular with older Americans.
Administration officials said 90 percent of the $248 billion in 10-year Medicare cuts would be squeezed from service providers. The plan does shift some additional costs to beneficiaries, but those changes would not start until 2017, and administration officials made clear as well that Obama would veto any Medicare cuts that aren't paired with tax increases on upper-income people.
The deficit reduction plan represents an economic bookend to the $447 billion in tax cuts and new public works spending that Obama has proposed as a short-term measure to stimulate the economy and create jobs. He's submitting his deficit fighting plan to a special joint committee of Congress that is charged with recommending how to reduce deficits by $1.2 trillion to $1.5 trillion over 10 years.