Obama submits budget design, sets up tax fight
WASHINGTON — President Barack Obama sent Congress a $4 trillion budget that would raise taxes on corporations and the nation’s top earners, spend more on infrastructure and housing, and stabilize, but not eliminate, the annual budget deficit.
The spending blueprint challenges Republicans to make choices between defending current tax rates for the wealthy and Obama’s proposals to boost spending for the middle class, the Pentagon and companies that build domestic infrastructure.
It also plays to the president’s Democratic base with proposals to increase spending for programs such as education, child care and expanding Social Security benefits for same-sex couples.
In remarks Monday morning, Obama said he’d reject any budget from Congress that locks in the “mindless austerity” of existing budget caps and cuts funding for his priorities.
“We would be making a critical error if we avoided making these investments,” the president told government workers at the Department of Homeland Security on Monday.
The budget sets the terms Democrats want for the political debate heading into the 2016 elections. Addressing income inequality has become a mantra for Democrats from Obama to Hillary Clinton, a possible candidate for the party’s presidential nomination, and some of the Republican contenders have taken up the issue, as well.
The proposed budget for the fiscal year starting Oct. 1, released Monday morning in Washington, backs up Obama’s recent talk about directing assistance to the middle class, administration
officials said.
Congressional Republicans were out with criticism as soon as the budget documents arrived at the Capitol.
Rep, Tom Price and Sen. Mike Enzi, the chairmen of the House and Senate budget committees, called Obama’s proposals a “wish list.”
House Speaker John Boehner, an Ohio Republican, criticized Obama for not having a plan to bring the budget in balance.
“It contains no solutions to address the drivers of our debt, and no plan to fix our entire tax code to help foster growth and create jobs,” Boehner said in a statement.
Obama’s plan includes $2.1 trillion in new revenue over the next 10 years.
It projects a 2016 deficit of $474 billion. The shortfall would represent 2.5 percent of gross domestic product, a level that many economists regard as sustainable, down from a projected 3.2 percent in fiscal 2015. It wouldn’t rise above 2.6 percent of GDP in any year for the next decade under the president’s budget.
In fiscal 2017, the nominal deficit would narrow to $463 billion, or 2.3 percent of GDP. It would grow in each of the following years, from $479 billion in fiscal 2018 to a high of $687 billion in fiscal 2025.
Those figures are substantially less that the record $1.4 trillion deficit in 2009, the year Obama took office and the U.S. began pulling out of the worst recession since the Great Depression.
On the tax front, Obama wants to raise the top rate on capital gains and dividends to 28 percent from 23.8 percent and impose levies on asset transfers at death, closing what the White House calls the “largest capital gains loophole” in the tax code.
He’s also offering a $38 billion increase for national security programs over current budget caps and $37 billion more in discretionary spending for domestic programs. His proposal to relax those spending limits would put discretionary spending for fiscal 2016 at $1.091 trillion, which is $74 billion above the limits.
Those discretionary appropriations are what Obama and Congress must agree on to keep the government running past the start of the fiscal year Oct. 1.
INFRASTRUCTURE
The proposed budget envisions a nearly a half-trillion dollars in transportation construction that would seek to upgrade the nation’s roads, bridges and ports by imposing new taxes on overseas earnings by U.S. companies.
The six-year, $478 billion infrastructure plan would provide a 33 percent increase in funding for big, new public works projects. The nation’s transportation trust fund is set to run out of money this summer, but if this program is passed by Congress it will increase funding for transit by 75 percent and finance construction jobs across the country.
About half of the new spending would be paid for by a new 14 percent tax on nearly $2 trillion of foreign earnings that currently escape immediate taxation. Officials said the proposal would raise about $238 billion in one-time revenues for the federal government to use to finance a new transportation trust fund. An additional $240 billion would come from the federal tax on gasoline and other revenue sources.
In addition, the president’s proposal would impose a new, permanent 19 percent tax on foreign earnings. That would be lower than the 35 percent tax that companies are supposed to pay, but manage to avoid, on their earnings in other countries.
AGRICULTURE
The Agriculture Department would lose roughly $300 million this year under the president’s spending plan, receiving $23.5 billion in discretionary funding.
The White House is proposing a new, single federal agency in charge of food safety, consolidating the functions at USDA and the Food and Drug Administration into a new entity within the Department of Health and Human Services.
The current system, in which the Agriculture Department oversees the safety and inspections of meat and processed eggs and the FDA oversees the safety of most other foods, now suffers from “fractured oversight and disparate regulatory approaches,” the budget says.
The administration also is proposing $61 billion for crop insurance to address what it calls climate-driven increases in extreme weather events such as drought and excessive moisture.
The budget also steps up spending on the National Flood Insurance Program, adding $184 million to help communities and businesses in areas that pose flood risks.
IRS
The White House budget would increase Internal Revenue Service spending by 18 percent, providing a boost for an agency that has seen its funding levels decline by more than 10 percent since 2010.
The proposal calls for $12.9 billion for the IRS in fiscal 2016, compared with the $10.9 billion that Congress appropriated for the agency through fiscal 2015. It would provide more than $650 million for tax-enforcement activities and invest additional money in new digital services such as an online tax-filing status and online payment options.
IRS Commissioner John Koskinen warned agency employees last month that he may need to shut down the organization for a few days this summer because of budget constraints. Fiscal 2015 legislation reduced the IRS appropriations by $346 million compared with fiscal 2014.
EDUCATION
Obama’s education budget seeks new funds to provide for students at both ends of the spectrum.
The president is seeking $70.7 billion in discretionary funds for education, a 5 percent increase over the 2015 budget of $67.1 billion.
The budget includes a proposal to make community college free for students who keep their grades up and make progress toward graduation, a plan that’s estimated to cost $60 billion over 10 years.
His budget would also aim at the other end of the educational spectrum, putting an additional $1 billion into Head Start, setting aside $750 million for universal preschool and expanding access to child care for 1.1 million more children under the age of 4 by 2025, according to a fact sheet released by the White House.
The president is also requesting $125 million for a grant contest to “redesign” high school, with a special focus on schools that emphasize science, technology, engineering and mathematics and that attract students underrepresented in those fields.
EPA
The Environmental Protection Agency would see a jump in spending of nearly 9 percent next year, to $8.6 billion, reflecting new aid to states to help them meet requirements for slashing greenhouse gas emissions from power plants.
The EPA’s discretionary spending would rise by $700 million under Obama’s request, after remaining essentially flat in previous years.
The agency’s Clean Power Plan regulations, proposed last year, are the domestic centerpiece of the administration’s efforts to reduce carbon pollution linked to climate change. The budget reflects the administration’s promise to make billions of dollars available to states to help them meet the new requirements, which for some could mean closing or modifying older coal-fired power plants. Republicans have vowed a fight to prevent the new rules from going into effect this summer.
HOMELAND SECURITY
Obama’s plan strongly backs the Department of Homeland Security, urging a 9 percent increase in DHS’s budget that would include an increase in airport security and additional funds for the White House complex.
Under the president’s proposal, the Transportation Security Administration’s aviation security efforts would rise by 18 percent, from the current $4.9 billion to $5.8 billion.
Other DHS law enforcement agencies would see increases under Obama’s plan, including Immigration and Customs Enforcement, whose budget would rise 9 percent and Customs and Border Protection, which would see an 11 percent increase.
To address a series of recent security lapses at the White House, the budget would give the Secret Service $1.8 billion, an 18 percent increase over the agency’s current $1.5 billion budget. More than $8 million of that would go to security improvements at the White House complex.
IMMIGRATION
Obama wants to spend $1 billion to help curb illegal immigration from three Central American countries.
The administration first proposed financial aid to Honduras, El Salvador and Guatemala last year after more than 51,000 children from those countries were caught crossing the border alone.
The U.S. Agency for International Development will be responsible for providing Congress with a strategy “to address the key factors in the countries in Central America,” according to Obama’s proposed State Department budget. The request said the money would be spent on helping improve border security and economic and social development and making improvements to law enforcement and judicial systems in those countries.
The State Department budget request also includes $142 million to help Mexico bolster its southern border.
OTHER PROPOSALS
Several proposals are aimed at constituencies important to Democratic candidates — tripling the child tax credit for families with kids under the age of 5, and creating a $500 “second earner” tax credit for families in which both spouses work.
Obama is also calling for a change to the Social Security Act to allow same-sex couples to get spousal benefits, even if they live for now in a state that doesn’t recognize the marriage. The cost: $14 billion over 10 years.
In an effort to expand access to retirement plans for about 1 million U.S. workers, Obama proposes requiring employers to offer plans, such as 401(k)s, to employees with at least three years and 500 hours annually of service.
The Department of Housing and Urban Development would receive $41 billion, a 17.8 percent increase from the $34.8 billion the agency has this fiscal year. Increases in the budget would go to fund more neighborhood redevelopment projects, and expansions of job training for public housing residents and programs to house the homeless.