President Obama(Photo: BRENDAN SMIALOWSKI, AFP/Getty Images)
Story Highlights
- Budget plan drops prior focus on entitlement cuts
- Republicans already have been raising opposition to the plan
WASHINGTON—President Obama released his 2015 budget Tuesday, making the case for $56 billion in increased spending while offering the rosy projection that the nation is now on track to cut deficits to below 2% of the economy over the next decade.
The budget proposal, which faced resistance from Republican lawmakers even before its release, details Obama's wish list for new manufacturing hubs, job training and early childhood education and other domestic programs that would be offset by revising some spending programs and slashing tax benefits for multi-million dollar retirement accounts.
After floating the idea of implementing "chained CPI"—a less generous calculation for annual cost of living increases to Social Security—as well as raising tax revenues in last year's proposal, Obama, as expected, downplayed deficit cutting this year and offered a budget that will be far more palatable to Democrats running for reelection.
Obama would pay for half of his new spending by implementing new rules that would cap tax-preferred saving on retirement funds for individuals who have already accumulated enough to finance an annual income of over $200,000 per year in retirement, or more than $3 million per person.
The rest would be paid for through a series of spending reforms, including reducing subsidies to the Federal crop insurance program ($14 billion), raising TSA passenger fees on commercial air travel ($5 billion), and preventing individuals from collecting unemployment insurance and disability Insurance at the same time ($3 billion).
STORY: Obama budget sets up election year debate
Even before the budget release, Republicans began picking away at a proposal that is predicated on long-term optimism about the state of the U.S. economy.
Obama trumpeted in his budget that the deficit will come in at $514 billion in the current year, the lowest it's been since he took office five years ago, and is projected to be even lower next year.
But Republicans complain that Obama and fellow Democrats are downplaying the independent Congressional Budget Office's calculation that the annual deficit is projected to balloon to over $800 billion by 2022, as Medicare costs are projected to rise. GOP lawmakers charge the president is turning his back on austerity to help fellow Democrats win votes.
"They are more worried about their next election than the next generation," Sen. Rob Portman, R-Ohio, said in a speech last week at the American Action Forum in Washington. "It's hard to imagine a worse abdication of our responsibility to the people we are elected to represent."
But the president's budget says $650 billion can be saved through adopting reforms to the tax code. He is also pointing to a series of changes to Medicare and Medicaid, including encouraging the purchase of generic drugs and stopping companies from blocking consumers' access to generic drugs, that can bring in $402 billion in savings over the next decade.
"Although we have seen a notable and significant decline in health care spending growth over the last few years, in part due to the Affordable Care Act, we know that over the long run, the growth of health care costs continues to be our Nation's most pressing fiscal challenge," Obama wrote in a letter to Congress, included with his budget proposal.
Among the highlights in Obama's budget proposal:
DEFENSE. Obama sets the Pentagon budget set at $495.6, roughly the same level as the last fiscal year. Defense Secretary Chuck Hagel has already outlined plans for reducing the size of the Army by 100,000 soldiers by 2019, shrinking the largest service's troop level to pre-World War II levels.
EXPANDING EITC. Obama wants to expand the earned-income tax credit for 13.5 million low-income Americans by closing tax loopholes benefiting certain fund managers and high-income, self-employed workers. Under Obama's proposal, 7.7 million workers would be eligible for a larger credit and 5.8 million workers would be made newly eligible for the credit. The proposal would cost $60 billion over 10 years.
TRANSPORTATION. The budget includes $302 billion over four years to repair dilapidated roads and bridges. Obama would pay for the projects through $150 billion in temporary revenues that would be generated by ending some tax breaks for businesses as part of a corporate tax reform that would also lower tax rates.
MANUFACTURING HUBS. Obama has already launched four hubs for high-tech manufacturing that connect businesses with research university. His long term vision calls for establishing 45 of these hubs over the next decade, and his 2015 budget includes funding for five more.
EARLY CHILDHOOD EDUCATION. The president repeats his push, included in his 2014 budget, for universal pre-kindergarten and expanding Head Start, which provides early childhood education for low-income families. The proposal would be paid for through an increase in the tobacco tax. Obama also proposes to double the Education Department's current discretionary investment in preschools to $500 million to help support the program. An additional $250 million in grant money would also be made available to the program.
Source: Top Stories - Google News - http://ift.tt/1f24iea
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