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President Obama unveiled a 10-year budget blueprint Wednesday that calls for nearly $300 billion in new spending on jobs, public works and expanded pre-school education and nearly $800 billion in new taxes, including an extra 94 cents a pack on cigarettes.

But the president’s spending plan would also cut more than $1 trillion from programs across the federal government — for the first time targeting Social Security benefits — in an effort to persuade congressional Republicans to join him in finishing the job of debt reduction they started two years ago.

“Our economy is poised for progress, as long as Washington doesn’t get in the way,” Obama said in announcing his budget plan in the White House Rose Garden. He said his budget represents “a fiscally responsible blueprint for middle-class jobs and growth.”

He said his fiscal year 2014 budget replaces “the foolish across-the-board spending cuts” known as the sequester that are “already hurting our economy.” The plan reduces the deficit and makes necessary investments “because we can do both,” he said. “We can grow our economy, and shrink our deficits.” He added: “The numbers work. There’s not a lot of smoke and mirrors in here.”

Obama challenged Republicans to show they are serious about deficit reduction by reforming the tax code to eliminate loopholes that benefit the wealthiest Americans and biggest corporations.

“If you’re serious about deficit reduction, then there’s no excuse to keep these loopholes open,” he said. “They don’t serve an economic purpose. They don’t grow our economy. They don’t put people back to work. All they do is to allow folks who are already well off and well connected to game the system.” He vowed that he would not “finish the job of deficit reduction on the backs of middle class families or through spending cuts alone that actually hurt our economy short term.”

Obama warned: “When it comes to deficit reduction, I’ve already met Republicans more than halfway.”

Congressional Republicans promptly attacked the plan.

“We don’t need an extreme, unbalanced budget that won’t balance in your lifetime or mine,” Senate Minority Leader Mitch McConnell (R-Ky.) said in a floor speech before Obama’s Rose Garden announcement. “It looks like there’s less than $600 billion worth of reduction in there — and that’s over a decade — all of it coming from tax increases. In other words, it’s not a serious plan. For the most part, just another left-wing wish list.”

House Budget Committee Chairman Paul Ryan (R-Wis.) said in a statement he was “disappointed by the president’s proposal because it merely ratifies the status quo.” House Appropriations Committee Chairman Harold Rogers (R-Ky.) said it was “overstuffed with spending and tax increases that will continue to hinder economic growth.”

But Sen. Mark R. Warner (D-Va.), a member of the Senate banking and budget committees, said he was “encouraged” by the plan. “It cuts the growth in federal spending, makes targeted investments to strengthen the economy, and it passes the test of fairness by including specific, phased-in reforms to entitlement programs,” he said in a statement. 

Noting that Obama’s proposals on entitlement reform “already have drawn fire from both the left and the right,” Warner said the president was doing the right thing by “putting everything on the table.” He called on Republicans and Democrats to “step up,” adding: “A reasonable and bipartisan fix to our fiscal challenges will strengthen our economic competitiveness and could do a lot to encourage growth and job creation.”

In his fifth annual budget request to Congress, Obama walks a fine line between reassuring voters anxious about the sluggish economy and facilitating compromise with a GOP that remains fixated on the dangerously high national debt. 

Obama’s written message to Congress calls a growing economy the “North Star that guides our efforts.” To that end, his budget seeks $50 billion in new cash for roads and public works, $1 billion for 15 new institutes to promote innovation in manufacturing and $77 billion to make free, public pre-school available to 4-year-olds nationwide.

The cost of those initiatives would be covered through spending cuts and new revenues, including placing a $3 million cap on the value of individual retirement accounts and raising the federal cigarette tax from $1.01 to $1.95 per pack.

Meanwhile, the budget continues Obama’s outreach to Republicans by converting the private debt-reduction offer he has been making for months to GOP leaders into a formal proposal. That package proposes to replace the sequester — $1.2 trillion in deep, automatic spending cuts that took effect March 1 — with $1.8 trillion in alternative policies.

Nearly $600 billion would come from higher taxes on the wealthy, primarily through new limits on itemized deductions for families in the top tax brackets. The budget also would impose a new, minimum tax rate of 30 percent on households earning over $1 million a year, with exemptions to permit large charitable contributions.

But the rest of the package largely calls for replacing the sequester’s indiscriminate cuts to the Pentagon and other agency budgets with the sort of long-lasting entitlement reforms Republicans have long been demanding.

As he has in the past, Obama proposes to slice $400 billion from federal health programs, primarily Medicare, with the bulk of the cuts falling on drug companies and other providers. But Medicare beneficiaries would also take a hit, through higher premiums for couples making more than $170,000 a year and inducements for low-income recipients to use more generic drugs.

And for the first time, Obama formally proposes to slow the growth in Social Security benefits by applying a less-generous measure of inflation to programs throughout the federal government. The change would trim cost-of-living increases by roughly 0.3 percent a year, saving the government about $130 billion over the next decade.

White House officials said the new inflation measure — known as the chained consumer price index, or chained CPI — would not apply to programs for the poor, such as Supplemental Security Income, or SSI, and would be adjusted to reduce the impact on people 77 or older. 

The deficit-reduction plan mirrors an offer Obama made in December to House Speaker John A. Boehner (R-Ohio) in negotiations over the so-called fiscal cliff. At the time, Obama called for $1.2 trillion in new taxes, but the fiscal cliff deal included roughly $600 billion in new revenues over the next decade, with the bulk of the money coming from higher rates on households earning more than $450,000 a year.

Obama’s decision to include chained CPI in his budget proposal has infuriated many Democrats, and a number of liberal lawmakers protested the Social Security cuts Tuesday at the White House. Republicans, meanwhile, who have pressed the president to put the change on the table, have so far dismissed the offer as too “modest” to justify GOP support for higher taxes.

Some rank-and-file Republicans in the Senate have been more open to compromise, and Obama will dine with a dozen of them at the White House Wednesday evening. But as Washington barrels toward another potential showdown over the federal debt limit later this year, White House officials warned that the budget request represents the president’s bottom-line offer for getting federal borrowing under control.

“We don’t view this budget as a starting point in the negotiations. This is an offer where the president came more than halfway toward the Republicans,” a senior administration official told reporters Tuesday, speaking on condition of anonymity to detail the forthcoming document.

“So this is our sticking point,” the official said. “And the question is: are Republicans going to be willing to come to us to do serious things to reduce our deficits?”

While the president’s request falls far short of the austere, no-new-taxes, balanced-budget proposal adopted by House Republicans earlier this year, the White House argues that it represents serious debt reduction. Combined with budget deals enacted as part of the 2011 debt-limit fight, the fiscal cliff talks and other agreements, Obama’s new offer would reduce borrowing by a projected $4.3 trillion over the next decade — close to the sum recommended by independent budget analysts.

The budget proposes to spend $3.78 trillion in the fiscal year that starts in October, and projects a 2014 deficit of $744 billion, or 4.4 percent of the nation’s gross domestic product. The budget gap would narrow steadily over the coming decade, shrinking to $439 billion in 2023, or 1.7 percent of GDP.

The national debt, meanwhile, would continue to grow to $25 billion from today’s $16.8 trillion. But it would be slowly shrinking when measured against a growing economy, falling to 73 percent of GDP by 2023.

All told, Obama calculates that his proposals would reduce projected borrowing by about $1.4 trillion over the next decade, but that figure includes more than $500 billion in savings from ending the wars in Iraq and Afghanistan that the administration never intended to spend.

Subtracting those savings and the president’s proposal to replace the sequester brings total new debt reduction closer to $700 billion over the next decade.

Video: President Obama urged Republican lawmakers to meet him “halfway” on the deficit during a speech on his 2014 budget proposal in White House Rose Garden on Wednesday.

 


William Branigin contributed to this report.

 

Original article on Washington Post

Budget - Budget/Debt Ceiling