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President Plans Major Overhaul of Tax, Spending Systems

President Obama's budget plan outlines large-scale changes in tax policy, calling for $318 billion of tax increases over the next 10 years for the wealthiest individuals and families combined with tax cuts for the middle class. Analysts discuss the impact of the changes.

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    Next, the debate over taxes and spending in this budget blueprint. Jeffrey Brown picks up that part of the story.


    And to pick up on some of the big changes we've just been hearing about, we've invited back two economists we heard from earlier this week for a budget preview: Robert Greenstein, director of the Center on Budget and Policy Priorities, and Douglas Holtz-Eakin, former director of the Congressional Budget Office and economic adviser for John McCain's presidential campaign.

    Doug Holtz-Eakin, start on the spending side, the scale of it. Is it viable?

    DOUGLAS HOLTZ-EAKIN, former director, Congressional Budget Office: Well, I think this budget is politically and economically risky, and precisely because it doesn't have enough spending reduction. If you look at what you've got, you've got about $2 trillion in deficit reduction.

    That comes from $1.5 trillion in Iraq and Afghanistan reductions that are largely illusory. They pretend we would have spent $170 billion a year for a long time, and we're not.

    And then a $700 billion increase in revenues from a cap-and-trade program that has never even come close getting through the U.S. Congress. So that's the deficit reduction, not obvious it'll come to fruition.

    And then the rest is about $1 trillion of tax increases on high-income individuals and businesses to fund $1 trillion in tax cuts that are already on the books from the stimulus bill, with "Making Work Pay," Earned Income Tax Credit, things like that.

    So you've got a dynamic where they're counting on things that are either illusory and hard to make happen politically — cap-and-trade and tax increases — to fund things that are already there. They didn't cut spending. And that makes all the deficits that are presented best-guess estimates. The risks are all the upside.