Spending and tax outline proposes dramatic health care overhaul - vows to slash deficit, projected at $1.75 trillion in '09.
NEW YORK (CNNMoney.com) -- President Obama on Thursday pulled back the curtain on his first detailed vision of the federal budget for the next 10 years.
His outline includes an ambitious plan to reform health care, half of which would be paid for in great part by increasing the tax bite on high-income Americans.
Obama has said repeatedly that his first fiscal plan would have a two-pronged mission: to reduce the $1 trillion-plus deficit and make big investments in the future.
The administration estimates that the deficit for fiscal year 2009 will reach $1.75 trillion, or 12.3% of U.S. gross domestic product. That's a record in dollar terms and is the highest as a share of GDP since World War II.
Obama's promise: reduce the deficit he inherited to $533 billion by 2013.
"We will each and every one of us have to compromise on certain things we care about, but which we simply cannot afford right now. That's a sacrifice we're going to have to make," Obama said.
"What I won't do is sacrifice investments that will make America stronger, more competitive and more prosperous in the 21st century," he said.
Obama's outline also reveals how much more money he and his economic team are setting aside to stabilize the financial system. Their estimate: $250 billion. That would be on top of the $700 billion already authorized by Congress under the Troubled Asset Relief Program.
The document the White House delivered to Congress on Thursday is only a broad-stroke preview of the president's formal 2010 fiscal budget request, which is expected out in April. Lawmakers will spend the next several months debating and amending final legislation.
The Obama outline touches on the full scope of the federal government's spending and revenue collection efforts. Some of the highlights include:
Create a $634 billion health care reserve fund: The purpose of the fund would be "dedicated [to] financing reforms to our health care system," according to the budget outline. Among the fund's goals would be to aim for universality of coverage and reduce the growth in insurance premiums.
It would be paid for in two ways. The first, expected to raise $318 billion over 10 years, would limit how much of a deduction high-income taxpayers may take. Instead of reducing their tax liability by their top income tax rate, they wouldn't be allowed to reduce their bill by any more than 28%. So for every $100 in deductions, they would reduce their tax liability by $28.
The second way Obama proposes to pay for the fund is to achieve healthcare savings by, among other things, reduce payments to private insurance companies offering Medicare and reduce prescription drug prices. The administration estimates these efforts could save $316 billion over 10 years.
The budget outline also notes the $634 billion fund is "not sufficient to fully fund comprehensive reform" but is a first step in the process.
Let tax cuts expire for families making more than $250,000: The president's budget would allow the 2001 and 2003 tax cuts to expire for high income tax filers to help reduce the deficit. The White House estimates doing so could raise $640 billion over 10 years, although Obama's desire to extend those same cuts for lower and middle income families is estimated to increase the deficit by more than $900 billion during the same period.
Make permanent a number of tax breaks from stimulus: The president's budget seeks to make permanent the Making Work Pay credit worth up to $400 per worker ($800 per working family). It also seeks to make permanent the expansion of the child tax credit and the newly enlarged college credit now called the American Opportunity Tax Credit.
Commits more money for renewable energy efforts: Obama's budget will call on Congress to create a cap-and-trade program in which companies would have to pay for permission to emit greenhouse gases. Revenue from the program is intended to pay for a $150 billion renewable energy fund among other things.
His outline includes an ambitious plan to reform health care, half of which would be paid for in great part by increasing the tax bite on high-income Americans.
Obama has said repeatedly that his first fiscal plan would have a two-pronged mission: to reduce the $1 trillion-plus deficit and make big investments in the future.
The administration estimates that the deficit for fiscal year 2009 will reach $1.75 trillion, or 12.3% of U.S. gross domestic product. That's a record in dollar terms and is the highest as a share of GDP since World War II.
Obama's promise: reduce the deficit he inherited to $533 billion by 2013.
"We will each and every one of us have to compromise on certain things we care about, but which we simply cannot afford right now. That's a sacrifice we're going to have to make," Obama said.
"What I won't do is sacrifice investments that will make America stronger, more competitive and more prosperous in the 21st century," he said.
Obama's outline also reveals how much more money he and his economic team are setting aside to stabilize the financial system. Their estimate: $250 billion. That would be on top of the $700 billion already authorized by Congress under the Troubled Asset Relief Program.
The document the White House delivered to Congress on Thursday is only a broad-stroke preview of the president's formal 2010 fiscal budget request, which is expected out in April. Lawmakers will spend the next several months debating and amending final legislation.
The Obama outline touches on the full scope of the federal government's spending and revenue collection efforts. Some of the highlights include:
Create a $634 billion health care reserve fund: The purpose of the fund would be "dedicated [to] financing reforms to our health care system," according to the budget outline. Among the fund's goals would be to aim for universality of coverage and reduce the growth in insurance premiums.
It would be paid for in two ways. The first, expected to raise $318 billion over 10 years, would limit how much of a deduction high-income taxpayers may take. Instead of reducing their tax liability by their top income tax rate, they wouldn't be allowed to reduce their bill by any more than 28%. So for every $100 in deductions, they would reduce their tax liability by $28.
The second way Obama proposes to pay for the fund is to achieve healthcare savings by, among other things, reduce payments to private insurance companies offering Medicare and reduce prescription drug prices. The administration estimates these efforts could save $316 billion over 10 years.
The budget outline also notes the $634 billion fund is "not sufficient to fully fund comprehensive reform" but is a first step in the process.
Let tax cuts expire for families making more than $250,000: The president's budget would allow the 2001 and 2003 tax cuts to expire for high income tax filers to help reduce the deficit. The White House estimates doing so could raise $640 billion over 10 years, although Obama's desire to extend those same cuts for lower and middle income families is estimated to increase the deficit by more than $900 billion during the same period.
Make permanent a number of tax breaks from stimulus: The president's budget seeks to make permanent the Making Work Pay credit worth up to $400 per worker ($800 per working family). It also seeks to make permanent the expansion of the child tax credit and the newly enlarged college credit now called the American Opportunity Tax Credit.
Commits more money for renewable energy efforts: Obama's budget will call on Congress to create a cap-and-trade program in which companies would have to pay for permission to emit greenhouse gases. Revenue from the program is intended to pay for a $150 billion renewable energy fund among other things.
