Sept 19 (Reuters) - President Barack Obama on Monday called for ${esc.dollar}3.6 trillion in deficit cuts over 10 years, with half of the savings coming from higher taxes on the wealthy and big corporations. [ID:nS1E78I0K3]
Here are highlights of Obama's deficit reduction plan.
TAX INCREASES
The plan would raise nearly ${esc.dollar}1.6 trillion from changes to the U.S. tax code. Of that, ${esc.dollar}866 billion in savings would come from allowing President George W. Bush's tax cuts for individuals making more than ${esc.dollar}200,000 to expire.
An additional ${esc.dollar}710 billion would come from ridding the tax code of special breaks. Obama has proposed limiting deductions for higher-income households and eliminating breaks for oil and gas companies and firms that purchase corporate jets.
The plan would also boost taxes on certain income earned by fund managers often called "carried interest." Hedge fund managers and some others pay a lower capital gains tax rate for managing clients' investments.
In a populist step designed to appeal to voters, Obama would require millionaires to pay higher taxes. He has called that idea the "Buffett Rule" because it is based on a suggestion put forth by billionaire Warren Buffett, an ally of the president. Buffett has written that rich people like himself often pay less in tax than those who work for them because of tax-code loopholes and the low rates he pays on his investment income.
DOMESTIC SPENDING PROGRAMS
Obama's plan includes ${esc.dollar}580 billion in cuts to domestic spending programs. Of that, ${esc.dollar}248 billion will come from savings in the Medicare health program for older Americans with most of the cuts targeting payments mainly to insurance companies and hospitals.
Obama would seek savings of ${esc.dollar}72 billion in the Medicaid health program for the poor.
Administration officials said Obama will pledge to veto any plan that would cut benefits for Medicare recipients unless the wealthy and big corporations are required to pay their "fair share" of taxes.
In a decision that is likely to please many Democrats, Obama is not proposing raising the age at which Americans become eligible for Medicare benefits, currently set at 65.
He also is not proposing any changes to Social Security.
The plan includes ${esc.dollar}250 billion in savings from other mandatory programs, including ${esc.dollar}33 billion in savings from agriculture subsidies, payments, and programs. It also includes ${esc.dollar}42.5 billion in reforms to federal employee benefit programs.
HIGHER MORTGAGE FEES
The plan proposes a 10 basis point increase in "guarantee fees" that Fannie Mae and Freddie Mac charge to mortgage customers, to produce projected savings of ${esc.dollar}28 billion over 10 years. The White House has backed increasing guarantee fees as part of a way to lessen the government's footprint in the U.S. housing finance system.
WINDING DOWN WARS
The plan assumes ${esc.dollar}1.1 trillion in savings from winding down the war in Iraq and moving ahead with planned troop reductions from Afghanistan. Critics have labeled this element of the plan a gimmick because it does not represent new policy but instead reflects drawdowns of U.S. forces that have already been announced.
POSTAL SERVICE RESTRUCTURING
Obama's plan includes a reform of the postal system, which has been facing a funding crisis. "These reforms would provide U.S. Postal Service with over ${esc.dollar}20 billion in cash relief over the next several years and in total would reduce the federal deficit by ${esc.dollar}19 billion over 10 years," according to the plan.
SAVINGS ON INTEREST PAYMENTS
The plan assumes ${esc.dollar}430 billion in savings on interest payments because of the cuts elsewhere in the budget. (Reporting by Caren Bohan, Alister Bull, Kim Dixon, Deborah Charles and Malathi Nayak; editing by Mohammad Zargham)
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