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U.S. President Barack Obama unveiled his 2014 budget Wednesday, aiming to rein in the deficit by raising taxes on the affluent and curbing government spending on programs including Social Security and Medicare.
The blueprint, which continued the Democratic preference for taxing the rich, also included "some difficult cuts" Obama said he didn't like. He made the concession to win over some rank-and-file Republicans in the budget battle which could be coupled with a fight to hike the debt-ceiling later this year.
BALANCED APPROACH
Obama proposed 3.78 trillion dollars in spending for the 2014 fiscal year and a 1.8 trillion deficit reduction over the next decade.
"Nothing shrinks the deficits faster than a growing economy," he said at the White House as he introduced his plan.
In the new budget outlined on Wednesday for the fiscal year starting October 1, Obama stuck to his balanced stance to reduce the red ink and put forward a fiscal mix of new investments in infrastructure and education along with deficit reduction through tax increases and spending cuts.
According to the budget coming two months late to the Capitol Hill, the federal deficit would be 744 billion dollars for fiscal year 2014, or 4.4 percent of the gross domestic product (GDP). By 2023, the ratio of deficit to GDP would fall further to 1.7 percent.
In the budget, Obama proposed a total of 1.8 trillion dollars in deficit reduction over 10 years, mainly through a combination of nearly 600 billion additional tax revenues and 1.2 trillion dollars in spending savings.
A 28 percent cap would be applied to itemized deductions for top earners, and the so-called Buffett Rule, the idea of requiring millionaires to pay no less than 30 percent of their income, was once again incorporated.
U.S. President Barack Obama (R) delivers a speech on the 2014 budget plan, as Jeffrey Zients, acting director of the Office of Management and Budget (OMB), stands by in the Rose Garden of the White House in Washington D.C., capital of the United States, April 10, 2013. (Xinhua/Zhang Jun)
FIX THE ENTITLEMENT PROGRAM
Obama also sought to turn off the across-the-board " sequestration" cuts which have already kicked in from March 1 after the White House and the Congress failed to reach an agreement on a substitute plan.
As an attempted compromise to draw Republicans to the table, Obama for the first time offered to change the way the cost-of- living is calculated for social security benefits. By switching to the less generous "chained CPI", the federal government will reduce its payment to future social security beneficiaries and in this way cut deficits by about 230 billion dollars over the next 10 years, according to the budget.
"These measures will only become law if congressional Republicans agree to meet me in the middle by eliminating special tax breaks and loopholes so millionaires and billionaires do their fair share to cut the deficit," Obama stated in the budget.
By the administration's calculation, the proposed 1.8 trillion savings over 10 years, together with about 2.5 trillion dollars in spending cuts agreed since mid-2011, would bring the total deficit reduction to more than 4.3 trillion dollars.
THREE VERSIONS
The president's budget came after the Democratic-controlled Senate and the Republican-led House of Representatives have each passed separate and starkly different budget resolutions. Both plans have little chance of winning approval in the deeply polarized Congress. And the version Obama outlined just added a third bid for a possible grand bargain.
Obama's plan may draw criticism from both parties as Democrats dislike cuts to entitlement programs and the Republicans oppose any additional tax increase beyond the tax hikes which took effect in January.
In their budget plan, Senate Democrats call for limiting tax breaks for wealthy people to raise additional revenue, while House Republicans want to get rid of tax breaks as a way to lower the overall rates and simplify the tax code.
"House Republicans passed a balanced budget that will help foster a healthier economy and to help create jobs. Unfortunately, the president's budget never comes to balance," House Speaker John Boehner commented in a statement.
He said Obama does deserve some credit for the "incremental entitlement reforms" he outlined in his budget. "But I would hope that he would not hold hostage these modest reforms for his demand for bigger tax hikes."
Nonetheless, Boehner said he was hopeful in the coming weeks the two sides would have an opportunity, through the budget process, to come to "some agreement."
