Obama’s budget heads to Congress

By MARTIN CRUTSINGER

Associated Press

WASHINGTON — The new budget that President Barack Obama is sending to Congress aims to achieve $4 trillion in deficit reduction over the next decade by restraining government spending and raising taxes on the wealthy. To help a weak economy, Obama’s proposal Monday requests increases in transportation, education and other areas.

While administration officials on Sunday defended the plan as a balanced approach, Republicans belittled the effort as a repeat of failed policies that did too little to attack soaring costs in such programs as Medicare and threatened growth by raising taxes.

The debate is almost certain to go all the way to Election Day in November with gridlock keeping Congress from resolving many pressing issues on expiring tax cuts and across-the-board spending cuts until a lame-duck session at year’s end.

Obama’s spending blueprint for the budget year that begins Oct. 1 projects a deficit for this year of $1.33 trillion. That would mean four straight years of trillion-dollar-plus deficits.

The budget will project a decline in the deficit to $901 billion in 2013 and continued improvements shrinking the deficit to $575 billion in 2018.

Republicans said Obama’s plan was a stark reminder that the Democratic president had failed to meet the pledge he made after taking office in 2009 to cut the deficit in half by the end of his first term.

But Jacob Lew, Obama’s chief of staff, said the administration had to contend with a deep recession and soaring unemployment that had driven the deficits higher than anyone anticipated. He said Obama’s plan would cut the deficit below 3 percent of gross domestic product by 2018, to levels that economists generally view as sustainable.

He said faster deficit cuts now would set back an economy still struggling with high unemployment. Lew, Obama’s former budget chief, also said it was critical that Congress agree to extend a payroll tax cut due to expire at the end of February. Failure to extend it, he said, would cause another hit to the economy.

“I think there is pretty broad agreement that the time for austerity is not today,” Lew said during a series of appearances on Sunday talk shows. “Right now we have an economy that’s taking root … austerity measures right now would take the economy in the wrong way.”

House Republicans are preparing their version of Obama’s budget that will propose sharper reductions in government entitlement programs such as Medicare while avoiding any tax increases.

“We’re taking responsibility for the drivers of our debt,” said the chairman of the House Budget Committee, Rep. Paul Ryan, R-Wis. “So when the dust settles and people see actually what we’re doing, how we’re promoting bipartisan solutions.”

Senate Republican leader Mitch McConnell of Kentucky said Senate Democrats did not want to vote on Obama’s spending plan, so he would once again put it forward for a Senate vote where he predicted it would fail as it did last year.

Lew blamed House Republicans for pushing extreme measures rather than trying to reach consensus with Democrats and avoid the kinds of last-minute crises that roiled financial markets in 2011, such as the summer showdown over raising the government’s borrowing limit.

“Congress didn’t do a great job last year. It drove right to the edge of the cliff on occasion after occasion,” Lew said. “A lot of that was because of the extreme conservative approach taken by House Republicans.”

According to a White House fact sheet, Obama’s budget will adhere closely to the approach he outlined in September in a submission to the congressional “supercommittee” that failed to agree on at least $1.2 trillion in additional spending cuts to keep across-the-board cuts from taking effect next January.

The Obama budget sticks to the caps on annual appropriations approved in August that will save $1 trillion over the next decade. It also puts forward $1.5 trillion in new taxes, primarily by allowing the Bush-era tax cuts expire at the end of this year for families making $250,000 or more per year.

Obama, as he has in the past, also proposed eliminating tax deductions the wealthy receive and would also put in place a rule named for billionaire Warren Buffett that would seek to make sure that households making more than $1 million annually pay at least 30 percent of their income in taxes.

Obama would also impose a new $61 billion tax over 10 years on big banks aimed at recovering the costs of the financial bailout and providing money to help homeowners facing foreclosure on their homes. It would raise $41 billion over 10 years by eliminating tax breaks for oil, gas and coal companies and claims significant savings from ending the wars in Iraq and Afghanistan.

Lew said the budget would cut spending by $2.50 for every $1 in extra taxes it seeks.

“In the long run, we need to get the deficit under control in a way that builds the economy,” Lew said. “We do it in a way that’s consistent with American values so that everyone pays a fair share.”

Among the areas targeted for increases, Obama is proposing $476 billion in increased spending on transportation projects including efforts to expand inner-city rail services.

To spur job creation in the short-term, Obama is proposing a $50 billion “upfront” investment for transportation, $30 billion to modernize at least 35,000 schools and $30 billion to help states hire teachers and fire, rescue and police. Republicans in Congress, opposed to further stimulus spending, have blocked these efforts.

The Obama budget seeks $360 billion in savings in Medicare and Medicaid mainly through reduced payments to health care providers, avoiding tougher measures advocated by House Republicans and the deficit commissions that said restraining health care costs will be critical in the future.

Lew appeared on ABC’s ‘This Week,” CNN’s “State of the Union,” “Fox News Sunday,” NBC’s “Meet the Press” and CBS’ “Face the Nation.” Ryan was on ABC and McConnell was on CBS.