On The Money feed
March 04, 2014, 08:30 pm
$3.9T budget busts spending limits
By Erik Wasson
President Obama on Tuesday released a $3.9 trillion election-year budget blueprint that would bust the bipartisan budget ceiling agreed to in December with $56 billion in new stimulus spending.
Obama’s 2015 budget includes $302 billion in infrastructure spending and a series of tax breaks for lower-income workers, as deficit reduction takes a back seat to jobs initiatives Democrats hope will be popular with voters.
The president would pay for the new spending by raising taxes on corporations and wealthy individuals.
While the budget has no chance of passing a divided Congress, the White House hopes to use it to contrast its priorities with those of Republicans ahead of the midterm elections.
For example, the budget assumes passage of immigration reform legislation, something it says would reduce deficits by nearly $1 trillion over 20 years.
“Our budget is about choices. It’s about our values,” Obama said at a Washington, D.C., elementary school, where he unveiled the budget.
“As a country, we’ve got to make a decision if we’re going to protect tax breaks for the wealthiest Americans, or if we’re going to make smart investments necessary to create jobs and grow our economy and expand opportunity for every American.”
Republicans blasted the Obama budget for violating the two-year debt deal and for increasing spending.
“This budget isn’t a serious document; it’s a campaign brochure,” House Budget Committee Chairman Paul Ryan (R-Wis.) said in a statement.
House Appropriations Committee chief Hal Rogers (R-Ky.) called the plan for more 2015 spending dead on arrival.
“It is extremely disappointing that the president’s proposal today blatantly disregards the budget limits for fiscal year 2015 — spending roughly $60 billion in additional funds — and ignores the hard-fought compromise he so recently endorsed,” Rogers said.
Ryan, who plans to release his own plan by early April, slammed Obama for doing nothing on entitlements.
“The president has just three years left in his administration, and yet, he seems determined to do nothing about our fiscal challenges,” Ryan said.
But Senate Budget Committee chief Patty Murray (D-Wash.), who negotiated the December deal and announced Friday that Senate Democrats would not craft their own budget this year, praised Obama’s proposal for increased stimulus spending.
“[W]hile the American people have a budget in place and the certainty they deserve that there won’t be another budget crisis through the end of 2015, we in Congress owe it to them to work together to build on that bipartisan foundation,” she said.
Obama would reverse cuts to the Internal Revenue Service and provide additional funding to help communities prepare for climate change. Money is also targeted toward basic research, elementary education, manufacturing initiatives and job training.
The president would pay for the new spending with a $14 billion cut to crop insurance payments, even though a five-year farm bill was just enacted. He is also seeking $28 billion in revenue from limiting accrual in 401(k) plans.
By 2024, Obama’s budget projects that the deficit would fall to 1.6 percent of the economy, an improvement over the 1.7 percent deficit projected for 2023 in the last blueprint. In 2013, the deficit was 4.1 percent of the economy.
The budget also projects that total deficits by 2024 would add up to $4.9 trillion, down from the $5.2 trillion estimated last year. It assumes $1.8 trillion in increased tax revenue will be taken in over the next decade.
Those projections are rosier than those of the nonpartisan Congressional Budget Office. The gross federal debt would rise to $25 trillion in 2024 under the budget, however, up from $17.9 trillion in 2014.
Obama’s budget withdraws a proposal to reduce Social Security benefits offered in last year’s budget, a recognition that prospects of a “grand bargain” to reduce the deficit are dead, at least for now.
White House Budget Director Sylvia Burwell and National Economic Council Director Gene Sperling all but conceded Tuesday that the White House stimulus spending would not be approved.
But they argued the budget will influence negotiations over how the money under the cap gets spent in the 12 annual spending bills Congress wants to pass by Oct. 1.
“Like last year, this budget influences the choices that will be made throughout the appropriations process,” Burwell said.
The budget seeks to hit high-income households with new taxes, and Sperling emphasized that the middle class would see $40 billion in tax cuts.
The budget imposes the “Buffett Rule” on millionaires, limiting their deductions to 20 percent and requiring them to pay at least 30 percent of their income in taxes, raising $650 billion in the process.
It gets another $131 billion from raising estate and gift taxes, $56 billion from bank taxes, and $52 billion from miscellaneous proposals including a Superfund waste tax.
The budget calls for an end to the “carried interest” provision that allows private investment managers to pay a lower rate on most of their earnings, and to the “Newt Gingrich/John Edwards” loophole that allows individuals to avoid paying Medicare payroll taxes.
Revenue from ending those provisions is used to double the value of the Earned Income Tax Credit for childless workers to $1,000. The minimum age requirement for the credit would fall from 24 to 21, while the maximum age would rise to 65.
These changes are presented in the budget as part of a battle against income inequality, along with raising the minimum wage to $10.10 per hour and extending expired unemployment insurance benefits.
The budget also outlines Obama’s plan to implement cuts to defense imposed by sequestration.
This story was posted at 11:32 a.m. and updated at 8:30 p.m.
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