"the right wing papers will use this to once again call him a socialist while still pocketing their subsidy."
Why on earth would right-wing papers get a subsidy? Or, more accurately, why would papers that disagree with whomever controls the pursestrings at the moment get a subsidy? You don't even have to cut off a paper the payer doesn't like, just reduce their payout.
And why wouldn't Obama support it? Why wouldn't any President support it? Taking possession of the fourth branch of government is supposed to not be at all tempting to him? Are you still laboring under the delusion that he's something other than a politician or something? But, hey, even if you still think that's true, Bush III (hopefully only figuratively, but hey, who knows, Jeb's name keeps getting tossed about) or President Palin is only two or six years away from the Presidency, you know. You think they're going to resist this?
That's why this is so dangerous; he who pays the piper calls the tunes, and the tune calling need not be anything so crass as "Play X again"... it can be subtle nodding and gently manipulated suggestions from plants in the crowd. There is absolutely, positively no such thing as a free press sponsored by public funds directed by the government. Yes, I include all current press sponsored by public funds as well.
(Edit: If it makes you feel better, pretend I didn't say that Obama isn't more than a politician. I'm sorry I'm too cynical to believe in the myth; just pat me on the head and move on.)