Obama's election-year budget: Rallying Democrats with a focus on jobs, economy, income gap

WASHINGTON – President Barack Obama’s election-year budget seeks to rally fellow Democrats with new help for the working poor and fresh money for road-building, education and research. It also pulls back from controversial cuts to Social Security that had been designed to lure Republicans to the bargaining table.

Otherwise, Tuesday’s $3.9 trillion submission for the 2015 budget year, which begins in October, looks a lot like Obama’s previous plans. It combines proposals for more than $1.1 trillion in tax increases on the wealthy with an array of modest initiatives such as job training funds, money to rehabilitate national parks and funding for early childhood education.

“Our budget is about choices. It’s about our values,” Obama said at a Washington elementary school. “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.”

Obama’s previous budgets have mostly gone nowhere, and that’s where Tuesday’s submission appears to be headed as well. Instead, Congress is likely to adhere to last year’s mini budget deal as it looks ahead to midterm elections this fall.

Said Paul Ryan, the Republican chairman of the House Budget Committee: “This budget isn’t a serious document; it’s a campaign brochure.”

The president unveiled his budget eight months before congressional elections in which Republicans are expected to gain seats in the House and have a chance of seizing control of the Senate. GOP control of Congress in the final two years of his presidency would leave his agenda in tatters.

Obama’s submission purports to adhere to the budget limits negotiated in December by Ryan, R-Wis., and Sen. Patty Murray, D-Wash. But it also proposes a $55 billion “Opportunity, Growth, and Security” fund that would supplement the 2015 limit on agency operating budgets set by the Ryan-Murray agreement. Half of the additional money would be for defence and half for domestic programs. And the increase would continue into the future. All told, Obama proposes $304 billion above existing limits on agency operating budgets over the coming five years, an almost 6 per cent increase.

This includes extra spending for the Pentagon for readiness, repair of deteriorating military bases and the purchase of aircraft. On the domestic front, the plan promises grants to states for preschools, new research financed by the National Institutes of Health and modernization of aviation safety systems, among other initiatives.

The White House also is dropping a proposal to reduce the annual inflation increases for people on Social Security. This proposed “chained CPI” change is seen as a no-brainer by budget hawks, and was a key request of Republicans in previous, failed rounds of budget talks. But it was widely panned by most Democrats and allies including the AFL-CIO. The White House says it remains on the table if Republicans want to pursue a “grand bargain” on the budget that would include tax increases.

The Obama budget projects a 2015 deficit of $564 billion and a shortfall this year of $649 billion. If those come true, it would mark three straight years of annual red ink under $1 trillion, following four previous years when deficits exceeded that mark every time.

Overall, the 2015 budget projects a $250 billion increase in spending over the record $3.65 trillion expected for the current year. Spending actually dropped to $3.46 trillion in the 2013 fiscal year completed last Sept. 30.

Republicans instead want Obama to join them in taking on expensive benefit programs like Medicare and Social Security, whose growth is driving future deficits and squeezing other priorities like defence, education, transportation and research. Medicare costs are projected to almost double over the coming decade, from $513 billion this year to $947 billion in 2024, but funding for non-defence programs appropriated by Congress would increase by less than inflation.

“The president has just three years left in his administration, and yet he seems determined to do nothing about our fiscal challenges,” said Ryan, who was Mitt Romney’s vice-presidential running mate in the 2012 national election.

But many Republicans complained that the $496 billion proposed for Department of Defence core operations — a freeze at current levels — falls woefully short. The proposal would shrink the Army from 490,000 active-duty soldiers to 440,000-450,000 over the coming five years, take away helicopters and other equipment from the National Guard, cut purchases of the much-criticized littoral combat ship by almost 40 per cent and retire the Air Force’s A-10 attack aircraft.

Obama also requests $79 billion for overseas military operations related to Afghanistan and Iraq, but he says a more detailed request will follow, so that figure is likely to change.

In a move aimed at narrowing the gap between America’s rich and poor, Obama’s budget devotes $60 billion over the coming decade to expand the earned income tax credit, boosting the maximum amount available to childless people from $500 to $1,000. The administration says it would help 13.5 million workers. It would lower the age at which people can claim the credit from 24 to 21 and permit older workers to claim it through age 67 instead of 65 now.

Most of the expansion of the tax credit would be for people who owe no income taxes and would receive the credit as a payment.

The plan relies on tax increases and modest spending cut such as curbing payments to Medicare providers to bring the budget deficit to sustainable levels of below 2 per cent of the size of the economy by 2023.

Obama’s budget would raise taxes by more than $1 trillion over the next decade through a mix of tax cuts for the working poor and increases on the rich. He also claims $456 billion over that period in revenue from immigration reform as new immigrants pay taxes. There’s another $248 billion claimed by repealing a host of business tax breaks, but the budget promises to devote that revenue to lowering corporate tax rates.

The largest tax increase would limit deductions for high-income taxpayers, raising $600 billion over the next decade. Obama has proposed that tax hike in every one of his budgets, only to have it die in Congress.

In fact, the vast majority of Obama’s tax proposals are reruns. Of the 175 or so tax provisions, only 28 are new. Taxes would also be raised on large estates, financial institutions would pay $56 billion over a decade through a “financial crisis responsibility fee,” smokers would pay 94 cents more a pack in cigarette taxes and managers of private investment funds would see their income taxed as wages instead of investments.

The budget also contains a four-year $302 billion plan to boost spending on highways, rail projects and mass transit. Both the administration and House Republicans propose using one-time revenue from a tax on the overseas profits of U.S. companies to finance a renewal of surface transportation programs after they expire at the end of September; the administration claims $150 billion for such purposes. But the money is contingent on a broader overhaul of the corporate tax code, which may be a stretch in an election year.

There are lots of other initiatives sprinkled throughout, including a 10-year, $66 billion plan to fund preschool for all 4-year-olds, $30 million in the upcoming year to hire young people and veterans to repair and improve national parks and a “New Career Pathways” initiative to try to help as many as 1 million unemployed workers get new jobs.

And NASA would put aside $15 million — a small amount — to begin work on a new robotic mission to Europa, the moon on Jupiter where many scientists think there may be life. NASA won’t say how much the project will eventually cost but it’s likely to be significant.

The president’s spending plan also takes credit for reducing accumulated deficits over coming decade by $2.2 trillion. Nearly one-third of that comes from claimed savings from the end of the U.S. war in Iraq and the gradual withdrawal of forces from Afghanistan.


Associated Press writers Alan Fram and Nedra Pickler contributed to this report.