Obama Unveils $3.7 Trillion Budget
The Washington Post reports:
President Obama rolled out a $3.7 trillion budget blueprint Monday that would trim or terminate more than 200 federal programs next year and make key investments in education, transportation and research. The plan is aimed at boosting the nation's economy while reducing record budget deficits.
In a news conference at a Baltimore County middle school, Obama cast the document as a responsible alternative to the deep spending cuts that Republicans will urge in a vote this week on the House floor. Obama's plan would trim domestic spending by hundreds of billions of dollars over the next decade, striking hard at programs long favored by Democrats to make room for targeted increases in energy and medical research, corporate research and development and a new network to bring high-speed Internet access to 98 percent of Americans.
However, Obama also would rely heavily on new taxes, to a degree unacknowledged by administration officials in recent days. His budget request calls for well over $1.6 trillion in fresh revenue over the next decade, much of it through higher taxes on the wealthy and businesses.
Households with income of more than $250,000 a year would immediately see new limits on the value of their itemized deductions. And starting in 2013, they would lose the lower tax rates and other breaks that were enacted during the George W. Bush administration and recently extended.
The president proposes to hit businesses with an array of proposals he has offered in the past, including an end to subsidies for oil and gas companies, new taxes on hedge fund managers and a $30 billion fee on financial institutions aimed at repaying taxpayers for the federal TARP bailout.
The cuts target defense, heating assistance and community development grants and include a scale-down of the Pell grant program for college and vocational students.
The announcement was Obama's opening argument in what is likely to be months of debate with congressional Republicans who want to see deeper cuts.
He cast the reductions as necessary but also said that more funding for scientific research, innovation and education were essential to keep American competitive with other nations.
"It would mean cutting things that I care deeply about," Obama said. "But if we're going to walk the walk when it comes to fiscal discipline, these kinds of cuts will be necessary,"
He said that "while we are absolutely committed to working with Democrats and Republicans to find further savings ... we can't sacrifice our future in the process."
Obama described his education initiatives as "investments in the future" and said he would fight for more funding.
Although Obama seeks an overhaul of the corporate tax code to lower the 35 percent rate on corporate profits, his budget does not make that costly adjustment. Instead, it offers previous proposals to eliminate tax breaks for corporations that do business overseas, reaping $129 billion in new revenue through 2021.
Obama also directs Congress to develop a plan to pay for a new, multi-year transportation bill, a measure traditionally funded by increasing the federal tax on gasoline. "Bipartisan financing" for the transportation trust fund is likely to add another $328 billion to the revenue tally, raising total tax hikes in Obama's budget request to nearly $2 trillion through 2021.
The request drops one major proposal from previous budgets: Obama's plan to develop a system of tradeable vouchers for greenhouse gas emissions. The measure, which passed the House, came under fierce attack from the GOP and the industry and was never taken up by the Senate.
Obama's deficit-reduction strategies would do little to improve the immediate budget outlook. Obama projects that the deficit will hit a record $1.6 trillion this year - which, at nearly 11 percent of the economy, would be the largest since World War II. The bigger wave of red ink is caused in part by the recent bipartisan tax deal, which reduced payroll taxes this year for virtually every working American.
The annual deficit would recede to $1.1 trillion next year, as Obama's latest policies began to take effect - the fourth straight year of trillion-dollar deficits. Obama projects that the deficit would fall rapidly thereafter, settling around $600 billion a year through 2018, when it would once again begin to climb as a growing number of retirees tapped into Social Security and Medicare.
All told, Obama estimates that the nation would have to borrow an additional $7.2 trillion through 2021 under his policies, an improvement from previous projections that exceeded $9 trillion. His plan calls for annual deficits - and therefore annual borrowing - to stabilize at about 3 percent of the economy for much of the decade. The national debt would then level off at about 76 percent of economy, nearly double the debt burden the nation carried before the recent recession.
However, those figures are based on the assumption that the economy will grow 4 percent in 2012 and 4.5 percent in 2013 - well above most private and governmental projections.
Click here to read more.
