Who will pay?
When it comes to cutting the national debt, that's what the whole fight is about.
Republicans want to reduce the nearly $15 trillion national debt entirely through spending cuts, which by definition would have the biggest impact on those who get the most federal money: Medicare and Medicaid recipients, government workers, and the beneficiaries of hundreds of government programs. Congressional Democrats want to limit cuts in aid to the retired and the needy, while raising taxes on the wealthy to bring down the debt. Now, President Obama has finally shown his hand, with a White House debt cutting plan that would shave more than $3 trillion off the debt over the next 10 years, in addition to about $1 trillion in savings that came from the controversial debt deal finalized over the summer.
Nearly half of Obama's debt paydown would come from new taxes on high-income Americans and corporations, and from fewer deductions for such taxpayers. Those would kick in starting in 2013. Determined Republican opposition to any tax hikes means there's virtually no chance Obama's debt plan will pass in the form he's presented it. But the plan represents Obama's opening bid in debt negotiations that could last for years. And if Obama wins re-election in 2012, he'll have a stronger hand to push Congressional negotiators toward his version of a debt reduction. Here's who would bear the biggest costs if Obama got his way:
Wealthy taxpayers. The biggest part of Obama's plan, in terms of dollars, is a return to higher tax brackets for households with income higher than $250,000 per year, as would have happened if the Bush tax cuts of 2001 and 2003 had expired as planned at the end of 2010. That would push tax rates up by about four percentage points for high earners. Obama would also cut the deductions for charitable donations and mortgage interest for high earners, and raise estates taxes. These measures alone would raise about $1.3 trillion over 10 years.
Wall Street. There are two proposals that would hit big banks. First, Obama wants financial firms with assets of more than $50 billion to pay fees meant to reimburse the government for losses associated with the bank bailouts of 2008, under the unpopular TARP program. Many banks paid back their TARP loans with interest, but some firms, like AIG, haven't. Total TARP losses are now projected to be about $48 billion, and the new Obama fees would be in effect until that money has been recouped. Obama also wants to raise the fees that mortgage agencies Fannie Mae and Freddie Mac charge private lenders to guarantee mortgages they issue. That would raise another $28 billion.
Tax cheats. You'd think that the government was already tough on tax evaders, but apparently not. Obama says better enforcement could net $30 billion.
Big Oil. Obama loves "green" energy, but oil firms are another frequent target of his. So he'd repeal tax breaks for oil and gas companies that are worth $41 billion, and change accounting rules that benefit oil companies and other types of firms, saving another $52 billion. Also on Obama's list: Ending a coal industry subsidy worth $2 billion.
Big Pharma. Two different measures would make it easier for patients in government healthcare programs to get generic drugs instead of more-expensive proprietary brands. Savings: $6.2 billion.
Federal workers and retirees, including veterans. Federal workers would pay a bit more toward their own pension. For members of the military and veterans who participate in the government's TRICARE program, there would be a new fee for a certain type of coverage after the age of 65, plus higher co-pays for some drugs. Total savings for all changes affecting government workers: About $39 billion.
Farmers. Agricultural subsidies have been losing support in Washington, especially with crop prices rising and the value of farmland booming. Obama would cut about $6 billion worth of subsidies and payments to farmers, many of them corporate operations.
Wealthy Medicare recipients. Obama's proposal would barely touch the popular Medicare program. One common idea, for instance, is raising the eligibility age, yet it's notably absent from Obama's debt reduction plan. But he's still calling for wealthier seniors to pay higher premiums to participate in Medicare Part B and Part D. That wouldn't start until 2017, and it would be limited to the top 25 percent of recipients, for a savings to the government of $20 billion.
Corporate jet owners. Obama has complained that corporate jet owners don't pay their fair share, and he's putting their money where his mouth is. Under Obama's plan, corporate jet owners would pay an extra $100 per flight to use airspace controlled by the FAA. Obama would also eliminate special depreciation rules for companies that purchase aircraft. Total savings: $16 billion.
Air travelers. Obama would raise the Aviation Passenger Security Fee from $2.50 to as high as $7.50 by 2017. Instead of charging travelers "per emplanenement," there would only be one fee on every one-way trip. Overall, the new fee structure would raise about $25 billion in additional revenue. The corporate jet still looks good by comparison, if you can snag a ride.