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Obama's trillion-dollar timebomb

By Jonathan Mann, CNN
Obama says tax cuts should only be extended to families making less than $250,000.
Obama says tax cuts should only be extended to families making less than $250,000.
STORY HIGHLIGHTS
  • Bush-era tax cuts due to expire at end of year; Americans' taxes to rise sharply
  • Tax cuts estimated to have cost U.S. government $1.7 trillion in revenue
  • Many urging Obama to extend cuts to spur economic recovery
  • Obama says cuts will only be extended for households earning less than $250,000

(CNN) -- There's a trillion-dollar timebomb in Washington that's been ticking for nearly 10 years and it's about to explode.

"We don't have more time for any more games," President Barack Obama said this week.

The countdown started with a sweeping set of tax cuts championed a decade ago by then-president George Bush.

The cuts saved millions of American taxpayers a lot of money. Rich Americans, who pay the most taxes, got the biggest savings but over the long term, all Americans will get the bill: $1.7 trillion in revenue that the government didn't collect, had to borrow and will ultimately have to pay back.

To keep the official cost down, the cuts were only enacted for 10 years. Unless President Obama and Congress can agree on a long-term plan, the cuts expire at the end of the year and Americans will see their taxes suddenly snap back up again.

Video: Pelosi: Tax cuts are coming
Video: Some Democrats, Obama divided
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Many economists say that would be a big blow to the U.S. economy, still inching away from recession.

Adding to the pressure, this is campaign season in the United States, with voters going to the polls in November to elect a new set of lawmakers for Congress. It's a bad time to talk about higher taxes.

Republicans are campaigning to extend the Bush tax cuts, arguing that they will both help America's families make it through tough times and spur the recovery by the entire U.S. economy.

President Obama says rich Americans don't need money that could be better spent elsewhere and plans to extend the the tax cuts only to families making less than $250,000.

Obama's Democrats -- down dramatically in the polls and facing a tough re-election campaign -- are split.

In the weeks ahead, the Democrats and some Republicans have to agree on a plan the president will support.

If they can't agree, almost every American who sends tax money to Washington will have to send more. The tax cuts they've grown accustomed to over the last decade will simply expire. Or to put it another way, they'll explode.