Plan Would Cut War Spending, Increase Taxes on the "Wealthy" and businesses

[5711-Marine]

Obama's First Budget Seeks To Trim Deficit
Plan Would Cut War Spending, Increase Taxes on the Wealthy

By Lori Montgomery and Ceci Connolly
Washington Post Staff Writers
Sunday, February 22, 2009; A01

President Obama is putting the finishing touches on an ambitious first budget that seeks to cut the federal deficit in half over the next four years, primarily by raising taxes on businesses and the wealthy and by slashing spending on the wars in Iraq and Afghanistan, administration officials said.

In addition to tackling a deficit swollen by the $787 billion stimulus package and other efforts to ease the nation's economic crisis, the budget blueprint will press aggressively for progress on the domestic agenda Obama outlined during the presidential campaign. This would include key changes to environmental policies and a major expansion of health coverage that he hopes to enact later this year.

A summary of Obama's budget request for the fiscal year that begins in October will be delivered to Congress on Thursday, with the complete, multi-hundred-page document to follow in April. But Obama plans to unveil his goals for scaling back record deficits and rebuilding the nation's costly and inefficient health care system tomorrow, when he addresses lawmakers and budget experts at a White House summit on restoring "fiscal responsibility" to Washington.

Yesterday in his weekly radio and Internet address, Obama said he is determined to "get exploding deficits under control" and said his budget request is "sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline."

Reducing the deficit, he said, is critical: "We can't generate sustained growth without getting our deficits under control."

Obama faces the long-term challenge of retirement and health programs that threaten to bankrupt the government years down the road, as well as the more immediate problem of deficits bloated by spending on the economy and financial system bailouts. His budget proposal takes aim at the short-term problem, administration officials said, but also would begin to address the nation's chronic budget imbalance by squeezing savings from federal health programs for the elderly and the poor.

Even before Congress approved the stimulus package this month, congressional budget analysts forecast that this year's deficit would approach $1.2 trillion -- 8.3 percent of the overall economy, the highest since World War II. With the stimulus and other expenses, some analysts say, the annual gap between federal spending and income could reach $2 trillion when the fiscal year ends in September.

Obama proposes to dramatically reduce those numbers, said White House budget director Peter Orszag: "We will cut the deficit in half by the end of the president's first term." The plan would keep the deficit hovering near $1 trillion in 2010 and 2011, but shows it dropping to $533 billion by 2013, he said -- still high but a more manageable 3 percent of the economy.

To get there, Obama proposes to cut spending and raise taxes. The savings would come primarily from "winding down the war" in Iraq, a senior administration official said. The budget assumes continued spending on "overseas military contingency operations" throughout Obama's presidency, the official said, but that number is lower than the nearly $190 billion budgeted for Iraq and Afghanistan last year.

Obama also seeks to increase tax collections, mainly by making good on his promise to eliminate some of the temporary tax cuts enacted in 2001 and 2003. While the budget would keep the breaks that benefit middle-income families, it would eliminate them for wealthy taxpayers, defined as families earning more than $250,000 a year. Those tax breaks would be permitted to expire on schedule in 2011. That means the top tax rate would rise from 35 percent to 39.6 percent, the tax on capital gains would jump to 20 percent from 15 percent for wealthy filers and the tax on estates worth more than $3.5 million would be maintained at the current rate of 45 percent.

Obama also proposes "a fairly aggressive effort on tax enforcement" that would target corporate loopholes, the official said. And Obama's budget seeks to tax the earnings of hedge fund managers as normal income rather than at the lower 15 percent capital gains rate.

Overall, tax collections under the plan would rise from about 16 percent of the economy this year to 19 percent in 2013, while federal spending would drop from about 26 percent of the economy, another post-World War II high, to 22 percent.

Republicans, who are already painting Obama as a profligate spender, are laying plans to attack him on taxes as well. Even some nonpartisan observers question the wisdom of announcing a plan to raise taxes in the midst of a recession. But senior White House adviser David Axelrod said in an interview that the proposals reflect the ideas that won the election.

"This is consistent with what the president talked about throughout the campaign," and "restores some balance to the tax code in a way that protects the middle class," Axelrod said. "Most Americans will come out very well here."

The budget also puts in place the building blocks of what administration officials say will be a broad restructuring of the U.S. health system, an effort aimed at covering some of the estimated 46 million Americans who lack insurance while controlling costs and improving quality.

"The budget will kick off or facilitate a focus on getting health care done this year," the senior official said, adding that the White House is planning a health care summit. The event has been delayed by former senator Thomas A. Daschle's decision to withdraw from consideration as health secretary because of tax problems, a move that left Obama without a key member of his health team.

Administration officials and outside experts say the most likely path to revamping the health system is to begin with Medicare, the federal program for retirees and people with disabilities, and Medicaid, which serves the poor. Together, the two programs cover about 100 million people at a cost of $561 billion in 2007. Making policy changes in those programs -- such as rewarding physicians who computerize their medical records or paying doctors for results rather than procedures -- could improve care while generating long-term savings, experts say.

Obama's budget request would create "running room for health reform," the official said, by reducing spending on some health programs so the administration would have money to devote to initiatives to expand coverage. The biggest target is bonus payments to insurance companies that run managed-care programs under Medicare, known as Medicare Advantage.

The Bush-era program has attracted nearly a quarter of Medicare beneficiaries to private health insurance plans that cover a package of services such as doctor visits, prescription drugs and eyeglasses. But the government pays the plans 13 to 17 percent more than it pays for traditional fee-for-service coverage, according to the Medicare Payment Advisory Commission, which advises Congress on Medicare financing issues.

Officials also are debating whether to permit people as young as 55 to purchase coverage through Medicare. That age group is particularly vulnerable in today's weakened economy, as many have lost jobs or seen insurance premiums rise rapidly. The cost would depend on whether recipients received a discount or were required to pay the full price.

In addition to the substantive proposals, Obama's team boasts of improving the budget process itself. For years, budget analysts complained that former president George W. Bush tried to make his deficits look smaller by excluding cost estimates for the war in Iraq and domestic disasters, minimizing the cost of payments to Medicare doctors and assuming that millions more families would pay the costly alternative minimum tax. Obama has banned those techniques, the senior official said.

Staff writer Shailagh Murray contributed to this report.

[Dredly]

So just to make sure I understand this correctly

1. We are losing hundreds of thousands of jobs a month, so we are going to raise taxes on businesses.

2. We are going to increase the amount of taxes on the wealthy, and we are "capping" C level incomes for any company that benefits from the stimulus and bailouts to 200 - 250k / year.

3. We are charging more on gains while 99% of the people are losing all their money on the market and 401K's are dropping like rocks...

We just spent over 1.2 Trillion (our annual deficit) in the last month on bullshit spending with more coming... and we are going to do what to huh?


maybe someone should teach Obama how to do basic math?

[andrewjs18]

So just to make sure I understand this correctly

1. We are losing hundreds of thousands of jobs a month, so we are going to raise taxes on businesses.

2. We are going to increase the amount of taxes on the wealthy, and we are "capping" C level incomes for any company that benefits from the stimulus and bailouts to 200 - 250k / year.

3. We are charging more on gains while 99% of the people are losing all their money on the market and 401K's are dropping like rocks...

We just spent over 1.2 Trillion (our annual deficit) in the last month on bullshit spending with more coming... and we are going to do what to huh?


maybe someone should teach Obama how to do basic math?

the people wanted change and now it's coming.

Liberals and Democrats still really think he's paving a bright future, honestly. They're only rebuttal is that we can't have anymore years like Bush then they keep going back to how bad Bush was, but forget to mention the years of the 'good' Bush terms.

How about we get rid of Welfare? I bet that'll save millions or billions per state yearly. How about making people WORK for a living to get ahead in life? Why is it that people who are fortunate to be wealthy and own a business always have to take the brute force of a bat?

I don't own a business and I'm damn sure not wealthy, so it's not a bias opinion.

[5711-Marine]

I don't own a business and I'm damn sure not wealthy, so it's not a bias opinion.

neither am I but he is damn near killing any aspiration to achieve more.

[Morel42]

the people wanted change and now it's coming.

Liberals and Democrats still really think he's paving a bright future, honestly. They're only rebuttal is that we can't have anymore years like Bush then they keep going back to how bad Bush was, but forget to mention the years of the 'good' Bush terms.

How about we get rid of Welfare? I bet that'll save millions or billions per state yearly. How about making people WORK for a living to get ahead in life? Why is it that people who are fortunate to be wealthy and own a business always have to take the brute force of a bat?

I don't own a business and I'm damn sure not wealthy, so it's not a bias opinion.

1) Raised taxes (more accurately letting the Bush Tax cuts expire) have been expected since Obama started running. Hell, They were expected when people realized that a Democrat was going to win no matter which Democrat.

2) Capital Gains tax doesn't apply if your portfolio took a loss.

3) Even I can't help shake my head at the deficit figures mentioned..

4) Good Bush Years can be argued back and forth forever here and we'll never agree on them (and I think we have argued forever lol)

5) I'm all for welfare reform.. However if you just stop payments instantly, you'll see entire economies and the food industry collapse in 48 hours.

6) I do own a business and my effective taxes haven't changed nor do I expect them to change in the next 4 years. You have to structure your company properly an wisely in order to minimize your tax exposure. Re-investing, cost management, and incorporating provides a huge amount of completely legal and ethical means to shield your assets. A quick estimation in my head is around a 25% base tax burden for my self, and a 10% tax burden on my company. Which is FAR below which I would be responsible for in any other industrialized country. And before anyone mentions Ireland. When the US passes a Federal Sales Tax, then you can mention any country in the EU

7) If you think raised taxes will keep anyone from wanting to be rich.. Send me some of whatever your smoking..

8) If the sole reason you start a business is to get rich, that business will most likely fail. If you start something because you want to see something be built, and you do it because you enjoy it, you increase the chances you'll be a success ten fold.

[eXceLon]

Seems reasonable enough to me.

At least Obama seems to recognize that deficits are a problem that need to be controlled, unlike the recent Republican administration that took the position that "deficits don't matter".

He also seems to recognize that solving the problem is going to require compromise on both the spending and tax sides, given that so many others on both sides like to stubbornly cling to the idea that spending is sacred and can't be cut (Democrats) or that taxes should never go up (Republicans). People are going to have realize that they can't get everything they want all the time. It's going to require sacrifice, and it's going to suck.

7) If you think raised taxes will keep anyone from wanting to be rich.. Send me some of whatever your smoking..

This is one of the oddest things I regularly hear from anti-tax Republicans. As though anyone ever turned down the opportunity to be a millionaire instead of a working class stiff because they'd pay a higher overall tax rate. Give me a break.

I came from a poor family, and went to college and got myself an education and a decent middle-class job. I'm not about to go back to flipping burgers like I did in school because I detest the idea of paying a higher tax rate. That just doesn't make any sense.

By the way, those "rich" people making $200K+ who were going to be "punished" by Obama's tax policies? They voted for Obama.

[andrewjs18]

1) Raised taxes (more accurately letting the Bush Tax cuts expire) have been expected since Obama started running. Hell, They were expected when people realized that a Democrat was going to win no matter which Democrat.

2) Capital Gains tax doesn't apply if your portfolio took a loss.

3) Even I can't help shake my head at the deficit figures mentioned..

4) Good Bush Years can be argued back and forth forever here and we'll never agree on them (and I think we have argued forever lol)

5) I'm all for welfare reform.. However if you just stop payments instantly, you'll see entire economies and the food industry collapse in 48 hours.

6) I do own a business and my effective taxes haven't changed nor do I expect them to change in the next 4 years. You have to structure your company properly an wisely in order to minimize your tax exposure. Re-investing, cost management, and incorporating provides a huge amount of completely legal and ethical means to shield your assets. A quick estimation in my head is around a 25% base tax burden for my self, and a 10% tax burden on my company. Which is FAR below which I would be responsible for in any other industrialized country. And before anyone mentions Ireland. When the US passes a Federal Sales Tax, then you can mention any country in the EU

7) If you think raised taxes will keep anyone from wanting to be rich.. Send me some of whatever your smoking..

8) If the sole reason you start a business is to get rich, that business will most likely fail. If you start something because you want to see something be built, and you do it because you enjoy it, you increase the chances you'll be a success ten fold.

On the welfare topic....how come I don't get free food or free health care? I work and don't even have health care..where do I sign up? I haven't seen a doctor in over a year and yet I get up 5X/week, put on my khakis and polo and deal with ignorant little kids in the Philly SD...And to know that I can't go see a doctor at the end of the day is complete and utter BS...

fuck the welfare reform..make them get jobs to pay for things in life with money they worked for.....just the other day, in Walmart, I saw a lady using her Access card to buy a bag of Doritos...hmn....

[billamj]

Just one question for me. Who defines "wealthy" and at what level does it begin? Oops, guess that is technically two questions. Bottom line to me is that some of the definitions of wealthy that I've heard are a family of four making > $80k. That ain't wealthy in my book.

[5711-Marine]

Just one question for me. Who defines "wealthy" and at what level does it begin? Oops, guess that is technically two questions. Bottom line to me is that some of the definitions of wealthy that I've heard are a family of four making > $80k. That ain't wealthy in my book.

Al Gore said if you averaged 50K a year for 20 years you're a millionaire...

[The_Game]

fuck the welfare reform..make them get jobs to pay for things in life with money they worked for.....just the other day, in Walmart, I saw a lady using her Access card to buy a bag of Doritos...hmn....

I'm working two jobs at just a few dollars over minimum wage while trying to go to college to get a degree so I can get a "good" job in a few years.

If it weren't for having access to food stamps, I wouldn't be able to eat. As it stands, I'm not even breaking even. Every month I go further into debt. My fiancee is working full-time, making more than I am, but her student loans just came due, so she's as bad off as I am. She worked through school, I worked through school (then took a year and a half off just to work!) and it just wasn't enough. Neither of us have seen a penny from our families to keep us going. Shit, my dad just bought my brother, in high school, a brand new laptop, and they're going to Florida for a week or two, and I asked him for a small short-term father-son loan (A whopping $100 to pay my electric bill which is due on Thursday or my electric gets shut off, and I don't have it.) and got the "I don't have any money, sorry" line.

Not everyone who's getting help is sitting on their ass 24/7 or leeching off someone.


And as for you judging the food someone buys, there's a fixed amount you get every month based on need, deposited to the account, whether or not you use it, so you might as well spend a buck or two on something non-essential now and then. I've had many a day rushing in to work that I just run into the closest store and grab a sub or something from the deli and use my EBT card to pay for it because there just wasn't time between class and work to stop at home for food.


Edit: And if you're over 21, there's no free health care. That's only for children. No cash assistance unless you have kids under 18, either.