Obama budget proposal: More taxes, cuts in spending; Republicans remain unlikely to approve any raise in revenue

Budget raises taxes on wealthy, slows Social Security spending
2013-04-11T00:00:00Z Obama budget proposal: More taxes, cuts in spending; Republicans remain unlikely to approve any raise in revenueThe Associated Press The Associated Press
April 11, 2013 12:00 am  • 

WASHINGTON - Mixing modest curbs on spending with tax increases reviled by Republicans, President Obama proposed a $3.8 trillion budget on Wednesday that would raise taxes on smokers and wealthy Americans and trim Social Security benefits for millions.

Obama's 2014 blueprint combines a $242 billion infusion of new spending for road and rail projects, early education and jobs initiatives - all favored by Democrats - with longer-term savings from programs including Medicare and the military. It promises at least a start in cutting huge annual federal deficits.

The president pitched his plan as a good-faith offer to his GOP rivals since it incorporates a proposal he made to Republicans in December that wasn't radically different from a GOP plan drafted by House Speaker John Boehner. But it follows January's bitterly fought 10-year, $600 billion-plus tax increase that has stiffened GOP resolve against further tax hikes.

"I have already met Republicans more than halfway, so in the coming days and weeks I hope that Republicans will come forward and demonstrate that they're really as serious about the deficit and debt as they claim to be," Obama said.

He was having a dozen Senate Republicans to the White House for dinner Wednesday evening in hopes of building a dialogue on the budget and other topics.

After four years of trillion-dollar-plus deficits in his first term, Obama's plan projects a $973 billion deficit for the current budget year and red ink of $744 billion for the 2014 fiscal year starting in October. By 2016, the deficit is seen as dropping below 3 percent of the size of the economy, a level that many economists say is manageable.

Obama cast his budget as a compromise offer that would bridge differences between Republicans and their desire for reducing government spending and Democrats who want more revenue from taxpayers. But it's difficult to overstate the gulf between Obama and the conservatives who are in the GOP driver's seat in Congress.

While the budget proposal will not prompt any immediate congressional action, it probably will surface this summer when Republicans are expected to demand additional reductions in the deficit in exchange for increasing the nation's borrowing authority.

Obama claims $1.8 trillion in deficit savings over the coming decade, but the budget tables show the savings are actually $1.4 trillion. And $1.2 trillion of that is devoted to reversing automatic, across-the-board spending cuts required because of Washington's inability to follow up a 2011 budget pact with further deficit action.

"This is worse than a status quo budget," said House Budget Committee Chairman Paul Ryan, R-Wis. He said it has about $1 trillion in new taxes, $1 trillion in new spending with deficit reduction of only $119 billion over 10 years under GOP math that sorts through questionable interpretations employed by the White House.

For instance, Obama claims $167 billion in lower war costs - money the administration never intended to spend - and uses that "savings" for road projects and other undertakings it bills as jobs initiatives.

The real cuts include $400 billion scrubbed from health-care programs like Medicare over the coming decade, including cuts in payments to drug companies and higher Medicare premiums for people who are better off.

The administration would modestly cut the annual operating budgets for both the Pentagon and domestic agencies while reprising ideas like higher Transportation Security Administration fees on airline tickets, the end of Saturday mail delivery and higher pension contributions for federal workers.

"He does deserve some credit for some incremental entitlement reforms," said Boehner, R-Ohio. "But I would hope that he would not hold hostage these modest reforms for his demand for bigger tax hikes. Listen, why don't we do what we can agree to do?"

That's not the way it works, countered Gene Sperling, the director of Obama's National Economic Council.

"The offer that is there for Speaker Boehner is not an a la carte menu," Sperling said.

And Rep. Chris Van Hollen, D-Md., said he had reservations about the White House making concessions without getting anything in return. He said, "The president will have to remain firm in his insistence that this is a package deal."

The White House budget claims $580 billion in tax increases on the wealthy over 10 years, including a 28 percent cap on itemized deductions that's never gotten anywhere on Capitol Hill.

The total climbs closer to $1 trillion in tax increases after adding in ideas like a 94 cents-per-pack increase in taxes on cigarettes, changes for corporate foreign earnings, slower inflation adjustments to income tax brackets, elimination of oil and gas production subsidies, an increase in the estate tax, a new "financial crisis responsibility" fee on banks and new taxes on trading of exotic financial instruments known as derivatives.

Republicans predictably slammed Obama's plan for its tax increases, while his Democratic allies generally held their tongues over cuts to Social Security benefits.

On StarNet: Read more budget and political news at azstarnet.com/politics

At a glance

The Social Security cuts would come from a slightly stingier inflation adjustment known as "chained CPI." It would reduce annual cost-of-living increases for a variety of programs by about 0.3 percentage points a year. Once the change was fully phased in, Social Security benefits for a typical middle-income 65-year-old would be about $136 less a year. At age 75, annual benefits under the new index would be $560 less.

Agencies at a glance

Spending levels proposed by President Obama for each federal agency in his fiscal 2014 budget. All totals are in billions of dollars. The 2013 totals do not reflect mandatory spending cuts imposed after Congress and the White House failed to reach agreement on a broader deficit-reduction plan.

Department 2013 2014 Change

Agriculture 155.0 145.8 -5.9%

Commerce 8.7 11.7 34.3%

Defense 679.6 682.9 0.5%

Education 63.5 56.7 -10.8%

Energy 24.1 32.5 35.3%

EPA 8.8 8.0 -9.0%

Health, Human Services 901.2 949.9 5.4%

Homeland Security 69.4 45.2 -34.8%

Housing, Urban Develop. 95.8 47.2 -50.7%

Interior 12.4 12.0 -2.7%

Justice 35.0 30.5 -13.0%

Labor 108.9 72.6 -33.4%

State 57.5 47.3 -17.7%

Transportation 84.6 127.1 50.2%

Treasury 531.8 500.2 -5.9%

Veterans 135.9 149.5 10.0%

Social Security 877.1 926.7 5.7%

NASA 17.7 17.7 -0.1%

Legislative branch 4.6 4.8 4.7%

Judiciary 7.3 7.5 2.7%

Army Corps of Engineers 6.6 4.7 -29.0%

Other agencies 130.7 148.1 13.3%

Total spending 3,767.3 3,796.1 -6.5%

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