New Obama plan promises to raise taxes, worry Democrats

Neil Munro White House Correspondent
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President Barack Obama will use a Rose Garden appearance Monday morning to broadcast his call for a deficit reduction package that would combine $1.5 trillion in various tax increases, $1.1 trillion in savings from the withdrawal of most U.S. troops from Afghanistan, and a $320 billion cut from federal medical spending.

The plan portrays the president as a fiscally conservative Washington consensus-maker and also as a populist eager to make the wealthy paid their “fair share.” It will likely serve as a campaign-trail pitch to his left-of-center base, and also to the independent voters in swing-states that he needs to win the 2012 campaign. Since 2008, he’s lost much support from swing-voters displeased by the stalled economy and the high deficits.

The proposal is the White House’s wish list for the bipartisan congressional Joint Committee on Deficit Reduction created in the August debt ceiling negotiations.

In Washington, Obama’s plan will have limited appeal, in part because many legislators in both parties already fear their political divides will prevent the 12-member panel from reaching its goal of cutting $1.5 trillion from the federal government’s 10-year spending plans. The president’s plan asks legislators to shrink the 10-year deficit by twice what is already required, partly through massive tax increases during a recession. GOP legislators have said they will not accept tax cuts, and Democratic legislators say they oppose any cuts to federal medical programs.

The $1.5 trillion in extra taxes would include an estimated $866 billion from setting higher tax rates on the wealthy, and $410 billion from curbing tax-deductions by people who earn more than $250,000 per year. The plan also calls for increased taxes on the oil and gas industries.

The plan would cut $580 billion from entitlement programs, including $32o billion from Medicare and Medicaid programs and $33 billion from agriculture programs.

The “President’s Plan for Economic Growth and Deficit Reduction lives up to a simple idea: as a Nation, we can live within our means while still making the investments we need to prosper – from a jobs bill that is needed right now to long-term investments in education, innovation, and infrastructure … and it says that everyone – including millionaires and billionaires – has to pay their fair share,” said today’s White House statement.

The plan highlights the different campaign-trail incentives facing Obama and his Democratic allies on the Hill. It will also spur the GOP’s internal deliberations over whether to accept bipartisan cuts in entitlement programs — or instead wait for a GOP president to craft far-reaching reforms of his or her own.

Rep. Nancy Pelosi, leader of the Democrats in the House, immediately praised the tax-raising portion of Obama’s emerging plan.

“I am very encouraged by the President’s focus on the need for tax reform that calls on all Americans to contribute their fair share,” she said in a statement from her office. “The Joint Select Committee on Deficit Reduction and the entire Congress must seriously consider the President’s proposals as we craft a balanced approach that addresses the number one concern of Americans — jobs.”

But Pelosi also distanced herself from Obama’s pending proposal to cut the medical programs.

Democratic legislators want those programs to remain untouched, partly to give them a sharp campaign-trail contrast with their Republican rivals. “While we await the specific details of the President’s full proposal, we remain committed to strengthening Medicare and Medicaid,” Pelosi added.

In May, Hill Democrats used the threat of GOP cuts to medical programs to help a Democrat win a special election in New York’s 26th Congressional District. “The results provide clear evidence that Democratic senators and senate candidates will be able to play offense across the country by remaining focused on the Republican effort to end Medicare and force seniors to pay thousands more for health care costs,” said Washington Sen. Patty Murray, chair of the Democratic Senatorial Campaign Committee, in a post-election statement.

In a nod towards his left-wing base, Obama also promises to veto any GOP bill that cuts Medicare but not raise taxes on wealthier Americans. “The President will veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share,” said a morning statement from the White House. The White House’s health-care cuts would begin after 2017, and 90 percent would be taken from medical providers, such as doctors and hospitals, according to White House officials. The plan would not raise the eligibility age for Medicare.

Republicans are also somewhat divided by the prospect of cuts to medical entitlement programs. For example, Senate Republican leader Mitch McConnell has endorsed reducing Medicare spending for wealthier retirees, while House Speaker John Boehner has called for structural reform of the programs rather than cuts.

The danger for the GOP, say consultants, is that any GOP support for program changes — no matter how modest or distant — would fuel Democratic attack-ads intended to stampede retirees toward the Democratic camp in November 2012.

Obama’s calls to trim Medicare and Medicaid, said one Democratic consultant in New York, are merely a lure to entice the GOP into a self-defeating compromise over health spending.

But those calls also reduce Democrats’ ability to portray the GOP as dangerous to retirees, he said.

The Sept. 14 special election in New York’s 9th Congressional District underlined that danger to Democratic legislators’ re-electability. In that House race, a GOP newcomer claimed the historically secure Democratic seat despite Democratic attack ads that claimed he would “cut benefits for medicare and Social Security.” The Republican, Bob Turner, won by a 54–46 margin.

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