Obama looks to taxes

WASHINGTON – President Barack Obama will call Wednesday for shrinking the nation’s long-term deficits by raising taxes on wealthier Americans and requiring them to pay more into Social Security, drawing a barbed contrast with a Republican plan to save money by deeply slashing Medicare, Medicaid and other domestic spending.

Obama will offer some spending cuts, including trims in Pentagon spending, but at heart, Wednesday’s speech seems likely to provide Americans with a crisp choice between higher taxes or fewer benefits that is likely to color the national debate straight through the 2012 election.

The debate has little middle ground and poses substantial political risk for both sides. Democrats hope to repeat the experience of 2005, in which President George W. Bush’s proposal to privatize parts of Social Security proved to be a staggering miscalculation that cost his party heavily in the following year’s election. They believe that voters will not accept a Republican proposal, put forward by Rep. Paul Ryan, R-Wis., that would replace guaranteed Medicare benefits with a limited voucher.

Republicans – at least some of them – argue that the country is in a different place than it was six years ago, when the economy appeared to be on a never-ending roll. Now, they say, voters have awakened to the reality that the government’s fiscal house must be put in order. Americans concerned about runaway government spending are prepared to rework the long-standing social contract between the government and themselves rather than accept higher taxes, they say.

Even Ryan, however, recognizes that his plan could backfire politically.

“Everyone tells me that I’m giving our political adversaries this massive political weapon to use in the next campaign,” he told the Chicago Tribune editorial board Monday. “Yeah, we are. But you know if you don’t start fixing these things …”

Obama would end tax breaks for Americans earning more than $250,000 a year, trim Pentagon spending, lift a cap on the amount of income that is assessed for Social Security, and save on Medicare and Medicaid through improvements in health care delivery, according to administration officials.

Apart from showing voters he is committed to cutting the deficit – a popular position – Obama has another purpose in rolling out his plan this week. Aides said he is thinking ahead to a vote on lifting the nation’s debt ceiling and wants to win over wavering voters by meeting one of their priorities: deficit reduction.

The debate over the debt ceiling is shaping up to be even thornier than last week’s battle over the 2011 budget, which nearly forced a government shutdown. Many Republicans and some Democrats see the debt as a symbol of governmental excess, shunning arguments that failing to increase the limit would trigger economic bedlam.

Obama’s address comes as the House prepares to vote on Ryan’s plan to slash spending by $5.8 trillion over the next decade.

Much of the projected savings in that plan would be reached by wiping the new health care law off the books, a move Republicans say will eliminate billions of dollars of new spending to help approximately 32 million uninsured Americans get health care coverage over the next decade.

In other areas, Ryan would also cut more than $700 billion over the next decade from federal support for Medicaid by converting the program serving poor people into a block grant administered by states.

And beginning in 2022, Ryan would privatize the Medicare program by giving seniors a subsidy to help them shop for commercial insurance. The nonpartisan Congressional Budget Office estimates the switch would save the federal government money, but would dramatically expand how much seniors pay for health care out of their own pockets.

Democrats have assailed his plan, charging that its tax breaks would largely offset its deficit reduction.