President Barack Obama proposed Monday an economic plan that will reduce the nation's deficit by $4 trillion and level the playing field between government-sponsored enterprises and the private sector.
The Obama plan uses a combination of tax increases for the nation's wealthiest individuals, strategic cuts to social programs like Medicare and a proposed increase in guarantee fees at Fannie Mae
and Freddie Mac
"Increasing the g-fees is designed to make sure that if there are any losses from the emergency actions we took to put out the financial fires in 2008 that we recover those losses in the form of a fee," explained Treasury
secretary Timothy Geithner, during a White House press conference.
The President's speech arrived the same day that Edward DeMarco, director of the Federal Housing Finance Agency, suggested the GSEs should increase their guarantee fees to allow private capital to more easily compete with Fannie and Freddie. The administration is calling for an increase of guarantee fees by 10 basis points, to come next year. "We also will be considering a number of other changes to guarantee fee pricing that are consistent with private sector pricing discipline while mindful of the unique circumstances associated with conservatorship," DeMarco said Monday, during the American Mortgage Conference underway in North Carolina.
Jim Vogel with FTN Financial
studied the plan and found the administration wants a 10-basis point increase in guarantee fees at Fannie Mae and Freddie Mac by next year. He added, the "FHFA is going to look for creative ways to gradually raise fees in 2012 with a combo of fewer discounts, geographic differentiation, and a reduction of cross-product subsidies." The Treasury Department believes the change could result in savings of $28 billion over a period of 10 years.
The President claims his deficit-reduction plan cuts $2 in spending for every new dollar in revenue, while carving back on large expenses such as agricultural subsidies and spending on the wars in Iraq and Afghanistan.
The President vowed to veto any bill that would cut into Medicare and other social security programs without first closing tax loop holes for the nation's wealthiest Americans and corporations.
Obama said his plan proposes raising the tax rate for the nation's wealthiest Americans to levels maintained in the 1990s, adding that "this is not class warfare. It's math."
Obama said the reductions would be added to $1 trillion in cuts already signed into law. "They will be the largest cuts in history," the President told a crowd gathered for his speech Monday.
The President reiterated several times that he believes tax cuts alone will not solve the nation's debt crisis. This statement highlighted the President's well-known political differences with a majority of the House of Representatives.
The President said he is willing to work with Republicans to reform the entire tax code, but continues to push for what's become the Warren Buffet plan for raising taxes on wealthier Americans.
Write to: Kerri Panchuk
Additional reporting by Jon Prior.