- The Washington Times - Monday, February 2, 2015

With $3.999 trillion in total spending, more than $1 trillion in new taxes over the next decade and a host of controversial new spending, the 2016 budget President Obama submitted Monday amounted to a declaration of political war against Republicans on Capitol Hill, who flatly declared his plans dead.

Mr. Obama said the economy has recovered enough that it’s time to begin spending again. He called for reversing the “sequester” cuts and instead pumping hundreds of billions of dollars into the economy in infrastructure spending over the next decade, paid for by his proposed tax increases.

“I’m not going to accept a budget that locks in sequestration going forward,” the president said. “It would be bad for our security and bad for our growth. I will not accept a budget that severs the vital link between our national security and our economic security.”

His plans include some tax increases he has tried before, such as a “Buffet tax” to impose a mandatory minimum levy on the wealthy, as well as hikes on repatriation of foreign income and capital gains. His spending proposals, likewise, are a mix of new and old.

Republicans said all of them — new and old — are going nowhere.

“There are so many positive things he could’ve done instead of phoning in another tired tax-and-spend manifesto,” said Senate Majority Leader Mitch McConnell, Kentucky Republican. “We basically see the same thing every year. It focuses on growing the bureaucracy instead of opportunity.”


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Mr. Obama’s proposal never achieves balance, with deficits increasing from 2018 onward. He also does little to tackle big fiscal problems on the horizon, including interest payments on the debt that are expected to double to nearly $600 billion a year in 2020, and Social Security’s main trust fund, which will slip into the red next year.

The budget was a bold but possibly fruitless move for Mr. Obama, who finds himself with little influence over the process on Capitol Hill after his party lost control of the Senate in the November elections.

The White House already has backed down on one of its budget proposals, a plan to tax 529 college savings funds that are popular with middle-class families. Mr. Obama relented under pressure from congressional Democrats who said the tax would counter the party’s message on helping the middle class.

On Monday, a bipartisan group of senators went the other direction and announced a bill to expand the 529 program to allow the tax-free money to be spent on computers in addition to tuition and textbooks.

Both sides say other deals can be made, such as a broad overhaul of the corporate tax code and finding ways to get money into the pockets of middle-class Americans.

But there is little agreement over how to reach those deals. Conservatives say Mr. Obama is moving his demands to the left of center even after his party was clobbered in the midterm elections.

White House officials acknowledged that many of the president’s budget proposals, such as taxing carried interest as ordinary income, or the “Buffett rule,” to create a minimum tax of 30 percent on income over $1 million, didn’t pass even when Democrats controlled the Senate.

“The fact that they didn’t pass the first time doesn’t mean they’re not good ideas,” said White House press secretary Josh Earnest. “This is going to be a compromise. Anything that emerges from these proposals and discussions about the budget will require an effort to try to find some common ground.”

Obama economic adviser Jeffrey Zients said the White House hopes the priorities on which both sides agree, such as highway spending, can pave the way for a deal on specifics.

“Everybody agrees that we have to fix our infrastructure,” Mr. Zients said. “Everybody agrees that the current tax system doesn’t work, that our statutory rate at 35 percent is the highest in the world and our international system is dysfunctional. I think you have strategic alignment in some very important areas and then you have specific alignment around proposals that both Republican leadership and the president agree upon.”

Mr. Obama’s budget envisions spending just shy of $4 trillion next year, with a boost of $74 billion in discretionary spending alone. The government would collect $3.525 trillion in taxes, for a deficit of $474 billion. That is about 2.5 percent of the economy as measured by gross domestic product.

Debt held by the public would reach $14.1 trillion but would drop ever so slightly as a percentage of GDP, to 75 percent.

Entitlement spending, which makes up more than two-thirds of the budget, continues to grow quickly, with Social Security spending poised to exceed $1 trillion a year in 2018. Medicare and Medicaid likewise will expand at a brisk pace.

One immediate test for Mr. Obama is the Social Security disability trust fund — one of two trust funds, along with the retirement program, that makes up Social Security. The disability fund is slated to go bankrupt next year, meaning benefits would be cut.

The president proposed siphoning money from the old-age fund to cover the disability fund’s shortfall, but that only hastens problems in the old-age program.

Indeed, Mr. Obama’s budget predicts the old-age program will pay out more in benefits next year than it will take in taxes or interest on its accumulated receipts, marking the first time since its overhaul in the 1980s that the program’s finances have been so grim.

Budget watchdogs said Mr. Obama missed the mark on the issue.

“Unfortunately, the president’s budget fails to offer any specific proposals for strengthening either the retirement or disability programs in Social Security,” said Bob Bixby, executive director of the Concord Coalition, which pushed for budget solutions. “It simply calls for Congress to reallocate some payroll tax revenue to the disability program, leaving the larger financial and demographic challenges to be addressed at a later date.”

Mr. Obama’s top aides will fan out across Capitol Hill this week to defend his blueprint.

Under the budget law, Congress has until April 15 to pass its own plan. That budget is nonbinding and doesn’t go to the president for his signature, but it does set the framework for the annual tax and spending process.

Those bills are signed by Mr. Obama, and that is when he could exert the leverage he spoke of Monday when he said he wouldn’t accept legislation that maintains the sequesters.

“America can’t afford being shortsighted, and I’m not going to allow it,” he said.

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