Obama’s ’15 budget sent to Congress

President Barack Obama joins teacher Graciela Segovia and her preschool class Tuesday during circle time at Powell Elementary School in Washington, D.C. Obama sent a $3.9 trillion budget request Tuesday that included increased spending for education, among other areas.
President Barack Obama joins teacher Graciela Segovia and her preschool class Tuesday during circle time at Powell Elementary School in Washington, D.C. Obama sent a $3.9 trillion budget request Tuesday that included increased spending for education, among other areas.

WASHINGTON - President Barack Obama sent Congress a $3.9 trillion budget request with increased spending for employment, education and job-training programs to boost the economy, financed partly by trimming tax breaks for upper-income families and some businesses.

The sixth budget of Obama’s presidency, for fiscal 2015 and released eight months before the November midterm elections,would enhance tax-credit programs for some families and childless workers and pump about $302 billion over four years into infrastructure projects such as roads and bridges. It would allocate $25 billion less for weapons and research than projected a year ago.

“The budget is not just about numbers; it’s about our values,” Obama said at a Washington elementary school Tuesday. “It’s a road map for creating jobs,” while it “adheres to the spending levels” agreed to by Congress in a budget deal signed into law in January.

The election-year spending blueprint was immediately rejected by Republicans in Congress, who said they will offer their own plan.

“This budget isn’t a serious document; it’s a campaign brochure,” House Budget Committee Chairman Paul Ryan, R-Wis., said in an emailed statement. “The president has just three years left in his administration, and yet he seems determined to do nothing about our fiscal challenges.”

Obama’s plan includes $56 billion in what the White House calls “additional investments,” split evenly between defense and domestic priorities and including education, research and development.

The $56 billion would be offset with spending cuts or tax increases. For example, the administration would limit crop insurance subsidies to save $14 billion over 10 years. It proposes to raise airline security fees by $5 billion, cap tax-preferred savings accounts like IRAs and block those receiving disability benefits from also collecting unemployment benefits.

The White House emphasized $598 billion in tax increases for the wealthy over 10 years that includes adopting the so-called Buffett Rule, which would impose a “fair share tax” on upper-income families to collect a projected $53 billion over a decade.

Obama also called on Congress to raise about $100 billion in revenue over the next decade through new taxes and restrictions on U.S. multinational companies.

The changes would affect digital goods, deductions for “excessive” interest and so called hybrid arrangements that can lead to income that isn’t taxed in any country, according to the budget. In all, the budget plan seeks to raise $276 billion over the next decade from international tax changes - 75 percent more than was sought last year.

The budget projects a $649 billion deficit this year. The shortfall is projected to shrink in each of the next three years to a low of $413 billion in 2018 before rising again.

The deficit-to-gross domestic product ratio is projected at 3.7 percent this year, dropping to 3.1 percent next year, a level most economists consider manageable.

The president’s fiscal projections assume total acceptance of the entire package by Congress, which never happens. In addition, the projected deficits and their share of the economy don’t take into account recessions or wars, which can skew the budget.

After two years of focusing on deficit reduction, the president is taking a detour to pump new money into core Democratic programs that may help rally the party in the November elections.

“At a time when our deficits are falling at the fastest rate in 60 years, we’ve got to decide if we’re going to keep squeezing the middle class, or if we’re going to continue to reduce the deficits responsibly while taking steps to grow and strengthen the middle class,” Obama said Tuesday.

The president told the Democratic National Committee Friday that his budget will create jobs in manufacturing, energy and infrastructure, and “we’ll pay for every dime of it by cutting unnecessary spending, closing wasteful tax loopholes.”

As part of a $302 billion plan for transportation and public-works projects, the budget includes a four-year fix to patch a gap between receipts from the 18.4 cents per-gallon federal gas tax and planned spending from the Highway Trust Fund, which covers roads, bridges and transit spending.

The Transportation Department projects the Highway Trust Fund will run out of money before the end of September without new revenue.

The transportation projects would be funded by a one-time tax repatriation of offshore earnings. Republican House Ways and Means Committee Chairman Dave Camp had a similar proposal in a tax plan unveiled last week.

It’s not a permanent fix, though, and the budget is silent on how to address a long term shortfall between gas taxes and road funding that widens as automakers increase the fuel efficiency of their fleets.

The White House, as it did last year, also proposed $66 billion to provide 4-year-olds from low- and moderate-income families with access to preschool, to be paid for with increased taxes on tobacco that the administration said would raise $78 billion over 10 years. Congress took no action on those plans last year.

The president’s plan calls for automatic enrollment in individual retirement accounts costing $14.7 billion over a decade, and expansion of child care and dependent tax credits for $9.6 billion over 10 years.

Obama proposes to double the earned-income tax credit for low-wage workers to benefit childless adults, or those who do not have custody of their children, to $1,000annually, and to pay for it by closing separate tax breaks for self-employed professionals and money-fund managers.

The president also is proposing a $143 billion package of incentives for manufacturing research and clean-energy programs to create jobs. Of that amount, $108 billion would be earmarked for a research and experimentation tax credit.

Also included in the budget are the spending plans for the Pentagon and for the Department of Health and Human Services, which runs Medicare, Medicaid and the insurance expansion in Obama’s health-care law.

The proposed $496 billion Pentagon budget reflects what Defense Secretary Chuck Hagel calls a choice to field a smaller but more modern force rather than a larger one less prepared for combat. The Army would shrink from 490,000 active-duty soldiers to 440,000-450,000 over five years - the fewest since 1940.

The budget retains a commitment to NATO and to building a missile-defense system in Europe. Land-based missile interceptors would be deployed in Romania in 2015 and in Poland in 2018, under the Pentagon plan. The overall missile-defense budget would be $8.5 billion.

The Health and Human Services Department budget calls for just over $1 trillion. Budget officials said that is a new milestone for the department, reflecting an aging population adding to the Medicare rolls, as well as expanded coverage for younger people through the health law.

Another $60 billion for tax credits to finance private coverage under the healthcare law was included in the Treasury Department’s budget, since those benefits are delivered through the Internal Revenue Service.

House Republicans said Tuesday that they plan to write an alternative budget, but the Senate has no plans to do so, said Sen. Patty Murray of Washington, chairman of that chamber’s Budget Committee.

Ryan, the House budget chairman, is looking to revamp almost 100 anti-poverty programs that he said encourage people to remain on welfare.

“For too long, we have measured compassion by how much we spend instead of how many people get out of poverty,” said Ryan, the Republican vice presidential nominee with Mitt Romney in 2012. “We need to take a hard look at what the federal government is doing and ask, ‘Is this working?’”

That stance is a counterweight to Obama and congressional Democrats who are making the battle against income inequality a centerpiece of the 2014 election, illustrated by proposals to raise the federal minimum wage to $10.10 an hour from $7.25 and extend long term unemployment benefits.

Information for this article was contributed by Roger Runningen, Derek Wallbank, Kathleen Miller, Jonathan D. Salant, Richard Rubin and Jim Efstathiou Jr. of Bloomberg News; by Jackie Calmes of The New York Times; and by Robert Burns, Ricardo Alonso-Zaldivar, Martin Crutsinger and Lauran Neergaard of The Associated Press.

Front Section, Pages 1 on 03/05/2014

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