Obama 2015 budget: $3.9 trillion
By: Reid J. Epstein
March 4, 2014 11:32 AM EST
President Barack Obama’s $3.901 trillion budget would raise taxes on the rich, expand tax credits for the poor and middle class — though as of now, it merely serves as a White House wish list.
Although very little of it is expected to become law — or even be seriously considered via legislation on Capitol Hill — the president’s budget still serves as a benchmark for congressional Democrats.
It seeks $651 billion in new revenue from the rich, would formalize in the tax code a rule named for billionaire investor — and Obama supporter — Warren Buffett, cuts the size and pay of the military, and expands or creates a series of social programs the president has long touted.
Unlike last year, when Obama was seeking a fiscal bargain with Republicans and used the budget as an olive branch, this year’s proposal contains few major compromises. Gone is the request for chained CPI, an offer to reduce the the benefit increases for Social Security and other federal social programs.
Obama would instead slap big banks with $56 billion in “financial crisis responsibility fees” and cap the amount “wealthy millionaires” can deduct in charitable donations.
The budget makes another run at universal pre-kindergarten programs, and would shift Head Start toward younger children. It would also create another round of Race to the Top grants aimed at poor school districts.
It would close military bases and reduce the size of the Army to about 440,000 troops — down 23 percent from the Iraq War peak of about 570,000. For the third year in a row, the Pentagon is asking Congress to close some military bases in 2017, to give troops a smaller pay increase and to cut the costs of their salary, benefits and health care.
Other cuts include $14 billion from reforming the federal crop insurance program and eliminating 250 Agriculture Department offices.
Obama’s budget proposal comes as congressional Democrats and Republicans are operating under a two-year bipartisan spending agreement reached in December by Sen. Patty Murray (D-Wash.) and Rep. Paul Ryan (R-Wis.), the leaders of the Senate and House budget committees. Congress is certain not to act on the budget as a whole, but the White House hopes it can push priorities the administration has identified.
Still, the White House would fund 100,000 new public school teachers, the universal pre-kindergarten program he first sought a year ago, investments in manufacturing institutes, National Institutes of Health grants and “a Works Progress Administration-like effort to put thousands of veterans, youth and others to work upgrading the National Park System.”
It includes long-stalled projects like the extension of long-term unemployment insurance, and the creation of 40 new Promise Zones on top of the 15 already in the works. There is funding for expanded background checks for gun purchases. And it calls on the House to “act on comprehensive immigration reform this year.”
There are the pie-in-the-sky liberal issues. One budget subheading reads “ending homelessness,” while others stress the importance of lost-cause cases like gun control and immigration reform.
And, of course, the budget fully funds Obamacare. According to the administration’s calculations, the health care law would reduce federal deficits by $402 billion over the next 10 years.
Fully half of Obama’s new $56 billion suite of programs calls the Opportunity, Growth and Security Initiative would be funded by cutting tax breaks on retirement accounts for the wealthy. Obama’s budget spells it out: The rich don’t need that much money to retire — and so they would lose their tax break on annual income greater than $200,000.
“Tax-preferred savings accounts were intended to help middle class families save for retirement,” the budget reads. “However, under current rules, some wealthy individuals are able to accumulate millions of dollars in these accounts, substantially more than is needed to ensure a secure retirement.”
The budget also restricts to 28 percent the amount wealthy people can reduce their tax liability through charitable donations. It would formalize the Buffett Rule and require “wealthy millionaires” pay at least 30 percent of their income in taxes.
And Obama proposes to raise $276 billion over a decade through changes to the international tax system, creating a new category for international digital transactions and measures to prevent companies from avoiding sales taxes through manufacturing agreements abroad.
At the same time the White House highlighted what it called “middle class tax cuts” in the budget proposal – expanding the earned-income tax credit for 13.5 million childless workers and making permanent existing temporary child tax credits for an additional 16 million families.
Here are department-by-department highlights of what the White House is proposing:
Defense: Cuts at the Pentagon include base closures and reductions in pay and benefits and the end of major vehicle, plane and shipbuilding programs for the Army, Air Force and Navy.
The administration wants to shrink the Army to about 440,000 troops – down from its Iraq War peak of about 570,000 – cut all of the Air Force’s A-10 Warthog attack jets, cancel the Army’s Ground Combat Vehicle program, truncate the Navy’s Littoral Combat Ship, and make other divestitures and restrictions to cope with its shrinking cash flow.
The budget’s “combat force structure overview” painted a picture of how much the overall force would shrink in FY 2015 as compared with the previous year. The Army would field six fewer brigade combat teams and two fewer combat aviation brigades; the Navy would have five fewer warships; and the Air Force would wind up with four fewer combat-coded squadrons, for a reduction of about 183 aircraft.
Health Care: Obama would fully fund the Affordable Care Act and add $14.6 billion over the next 10 years to expand the ranks of primary care providers to help care for the newly insured.
The administration proposed more than $350 billion in cuts to Medicare providers, slightly more than similar cuts proposed last year. The largest is a $117 billion bite out of the pharmaceutical industry by cutting prescription drug payments in the health insurance program for seniors.
The proposal would also increase the “means testing” of premiums for higher-income seniors to save more than $50 billion and would take almost $31 billion more from the private Medicare Advantage plans.
Education: The “Opportunity, Growth and Security” initiative provides an additional $56 billion to help states bolster preschool programs; provide $200 million for teacher professional development around education technology; provide wraparound services to communities to boost high-school graduation rates and college enrollment rates; and eliminate the achievement gap through a new $300 million Race to the Top competition.
The new Race to the Top grant would try to spread high-quality teachers and coursework among underserved students.
Energy: The Environmental Protection agency, which is responsible for carrying out the bulk of Obama’s climate agenda, would see a 3.7 percent cut in its budget.
The cuts would come primarily from programs like a fund for state and local water programs. Obama also once again calls for the repeal of more than $4 billion in tax incentives for the oil, gas and other fossil energy industries.
Transportation: The budget calls for $91 billion in mandatory and discretionary money for transportation — up $14 billion from last year’s request. Much of the increase is directed at making the Highway Trust Fund whole and additional infrastructure spending.
The budget would also boost transit spending from just under $9 billion to roughly $14 billion, with rail requested at about $5 billion. The Federal Railroad Administration’s $5 billion would more than three times the $1.6 billion it actually received in fiscal 2014, but less than the $6.6 billion the administration requested last year.
Technology: Obama would inject new funds for labs at the National Institute of Standards and Technology that work on cybersecurity and research centers at the National Institutes of Health for biomedicine study. Meanwhile, the administration wants to commit more than $200 million — more, if possible — to a new effort to train teachers on how best to incorporate high-speed Internet in their classrooms.
Many of the White House proposals are sure to face tough fights on Capitol Hill. One White House proposal, to expand and make permanent a widely supported research tax credit, has long stalled in Congress. And a provision to levy fees on some companies that use wireless spectrum — which could net almost $5 billion by 2024, according to the budget — has never won lawmaker or industry support.
Trade: The Office of the U.S. Trade Representative would get a 5 percent increase in funding, to $57 million, as it pursues a full slate of potential trade agreements, including proposed pacts with 11 Asia-Pacific countries and the European Union.
Obama also recommends hiring an additional 2,000 Customs and Border Protection officers to boost the work force to a historic high of 25,775, which the administration says will help speed the flow of goods and people across borders and improve seizures of illegal items such as drugs, guns and counterfeit goods.
Housing: The administration does not expect the Federal Housing Administration to need another taxpayer bailout this year.
For the first time in its history, FHA needed a $1.7 billion infusion of taxpayer cash at the end of fiscal 2013 to cover a shortfall in the fund it uses to insure mortgages. Republicans jumped on the bailout as evidence the government was playing too big of a role in the housing market.
FHA, however, has recently taken steps to raise more funds and to reduce the amount of loans it insures, and the president’s budget proposal shows the administration does not project the need for another bailout at the end of this fiscal year.