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Obama presents $3.8 trillion budget

WASHINGTON — President Barack Obama on Monday sent Congress a federal budget for the coming fiscal year that projects a near-record $1.27 trillion deficit, saying he would create a bipartisan commission to find ways to bring down spending.

"We simply cannot continue to spend as if deficits don't have consequences, as if waste doesn't matter, as if the hard-earned tax dollars of the American people can be treated like Monopoly money, as if we can ignore this challenge for another generation. We can't," Obama said.

But despite the president's call for a new commitment to stemming the tide of red ink, the immensity of the challenge was immediately clear.

Republicans denounced the $3.8 trillion spending blueprint for the fiscal year beginning Oct. 1. They dismissed the deficit reduction panel as a political ploy, saying they would not participate.

"We've already discussed it with many members of our caucus, and there's no enthusiasm at all for this kind of commission — precisely because it's a cover for their desire to significantly increase taxes," said Rep. Tom Price, R-Ga., chairman of the House Republican Study Committee.

Beyond politics, actual federal spending is determined primarily by Congress, not the White House — regardless of the party in power. And the bulk of Obama's budget — like those of his predecessor, George W. Bush — involves spending on programs that congressional Democrats and Republicans have both been reluctant to curb — Social Security, Medicare and defense.

Together, those three account for about 60 percent of the new Obama budget.

Reflecting that reality, Obama proposed a freeze on the overall level of discretionary spending, though not on national security functions or on entitlement programs such as Social Security, Medicare and Medicaid

In other areas, both the president's proposed spending increases and his calls for reductions or increased revenues are likely to spark controversy.

The budget contains a $100 billion jobs package that includes small business tax cuts and infrastructure and clean energy investments. It would raise public school funding by 6 percent and increase the Pell Grant for needy college students to almost double what it was when Obama took office.

The president proposed cutting NASA's budget and turning away from its goal of returning men to the moon — proposals likely to spark resistance in politically critical Florida.

Equally controversial was the call for saving $2.5 billion by cutting production of the C-17 cargo plane. The Pentagon has long maintained that it has enough of the planes, but Congress has restored funding to keep the production line open and running anyway.

At $3.8 trillion, the overall price tag reflects growth of 3 percent over current spending for the fiscal year ending Sept. 30.

In addition to the $1.27 trillion deficit projected for fiscal year 2011, the administration now projects the current-year deficit will hit a record $1.6 trillion, a figure that added to the long-term concern of deficit hawks and fueled GOP attacks on Democrats as reckless spenders.

The Making Work Pay tax credit provides families with up to $800 a year and individuals up to $400 a year through small increases in their weekly pay. Extending the tax credit through 2011 would save them $61 billion.

Other tax proposals would:

• Raise the top two income tax rates for individuals, from 33 percent and 35 percent, to 36 percent and 39.6 percent, respectively. Unless Congress intervenes, those rates will rise Jan. 1 when Bush's tax cuts expire.

• Limit the itemized tax deductions high earners can claim for charitable donations, mortgage interest and state and local taxes.

• Increase the top capital gains tax rate from 15 to 20 percent for families making more than $250,000 a year and individuals making more than $200,000.

• Make the research and experimentation tax credit permanent, saving businesses about $83 billion over the next decade.

• Eliminate capital gains taxes on the sale of some small business stocks, as long as they are held for at least five years.

• Repeal a widely ignored law that taxes the personal use of company-issued cell phones like other fringe benefits, saving taxpayers $2.8 billion over 10 years.

Fast facts

Tax credit offers pay increases

The Making Work Pay tax credit provides families with up to $800 a year and individuals up to $400 a year through small increases in their weekly pay. Extending the tax credit through 2011 would save them $61 billion.

Other tax proposals would:

Raise the top two income tax rates for individuals, from 33 percent and 35 percent, to 36 percent and 39.6 percent, respectively. Unless Congress intervenes, those rates will rise Jan. 1 when Bush's tax cuts expire.

Limit the itemized tax deductions high earners can claim for charitable donations, mortgage interest and state and local taxes .

Increase the top capital gains tax rate from 15 to 20 percent for families making more than $250,000 a year and individuals making more than $200,000.

Make the research and experimentation tax credit permanent, saving businesses about $83 billion over the next decade.

Eliminate capital gains taxes on the sale of some small business stocks, as long as they are held for at least five years .

Repeal a widely ignored law that taxes the personal use of company-issued cell phones like other fringe benefits, saving taxpayers $2.8 billion over 10 years.

Obama presents $3.8 trillion budget 02/01/10 [Last modified: Monday, February 1, 2010 10:29pm]

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