Obama sends budget plan to Congress

Last updated 07:58 05/03/2014
Barack Obama
US PRESIDENT: Barack Obama.

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President Barack Obama has sent the United States Congress a US$3.9 trillion (NZ$4.6t) budget that would funnel money into road building, education and other economy-bolstering programmes, handing Democrats a playbook for their election-year themes of creating jobs and narrowing the income gap between rich and poor.

However, the November election and gridlock between the Democratic-run Senate and Republican-led House mean much of Obama's proposal will go nowhere. Many of them were in earlier budgets and ignored.

The blueprint for fiscal 2015, which begins October 1, is laden with populist proposals designed to fortify Obama's social goals. It includes new spending for pre-school education and job training, expanded tax credits for 13.5 million low-income workers without children and more than US$1t in higher taxes over the next decade, mostly for the wealthiest Americans.

"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 told students at an elementary school in the nation's capital.

With an eye in part on job creation, money would be spent to upgrade roads and railways, Veterans Affairs hospitals and national parks. Additional funds would be aimed at clean energy research, creating 45 public-private manufacturing institutes for spurring innovation and training workers whose companies have closed or moved.

To help pay for those initiatives and others and trim federal deficits as well, Obama relies in part on higher revenue.

He would raise US$651 billion by limiting tax deductions for the nation's highest earners and with a "Buffett tax" - named for billionaire Warren Buffett - slapping minimum levies on the highest-earning people.

Taxes would also be raised on large estates, financial institutions, tobacco products, airline passengers and managers of private investment funds.

"The president has offered perhaps his most irresponsible budget yet," said the Republican leader of the House, Speaker John Boehner, who has participated in two failed rounds of deficit-reduction talks with Obama since 2011.

"American families looking for jobs and opportunity will find only more government in this plan."

"The President's budget is yet another disappointment because it reinforces the status quo," said House Budget Committee Chairman Paul Ryan, a Republican. "It would demand that families pay more so Washington can spend more."

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The Republican recipe for accelerating economic growth includes cutting taxes or overhauling the entire tax code, and they criticise higher spending as wasteful.

Obama's budget claims to obey overall agency spending limits that were enacted in December after a bipartisan compromise was reached between Ryan and Senator Patty Murray, a Democrat, the heads of the House and Senate budget committees.

Yet Obama was proposing an additional package of US$55b in spending priorities, half for defence and half for domestic programmes.

Without that extra money, Pentagon spending be US$496b, the same as this year. The Pentagon plans to shrink the Army from 490,000 active-duty soldiers to as few as 440,000 over the coming five years - the smallest since just before World War II.

The White House released fewer budget documents than normal, making it hard to determine exact costs and details of some of those additional spending proposals.

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

The President's spending plan also takes credit for reducing accumulated deficits over coming decade by US$2.2t. But nearly one-third of that comes from claimed savings from the end of the US war in Iraq and the gradual withdrawal of forces from Afghanistan.

Critics argue that those savings are fictional because with the ending of US involvement in those conflicts, no one had been expecting that money to be spent on combat.

- AP

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