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Obama’s budget plan tailored for midterm elections

Kathleen Hennessey And Christi Parsons McClatchy-Tribune

WASHINGTON – Looking beyond the deficit battles and financial crises of years past, President Barack Obama put forward a $3.9 trillion budget proposal Tuesday that set out a wish list of programs on education, infrastructure, job training and urban revitalization, adding policy details to his rhetorical promises to bridge the gap between rich and poor.

Like any president’s annual budget blueprint, Obama’s stands no chance of being adopted as-is by Congress.

This year, the prospects are especially dim since Congress recently approved a two-year spending deal after years of ugly budget fights, and there is little interest in reopening the debate.

Still, the plan, with its list of domestic initiatives, will serve as a campaign-ready agenda for Democrats wanting to draw contrasts with Republicans in this midterm election year.

Moreover, the budget provides insight into the ideological leanings of a second-term president who is no longer constrained by re-election concerns, the burdens of a recession and the subsequent focus on deficits.

The plan shows Obama, even in aspirational mode, seeking a liberal but pragmatic agenda. His budget includes adjustments in existing programs – a tweak here, an expansion there – but no grand new blueprints.

Its spending levels just barely exceed caps set by the recent bipartisan budget deal, and cuts and consolidations are made to get there. Discretionary spending – money not automatically allocated by entitlement programs – stands at roughly the same level Obama proposed last year.

“Our budget is about choices. It’s about our values,” Obama said Tuesday. “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.”

A year ago, Obama used his budget to try to draw Republicans into negotiations on a large-scale deal to cut the long-term federal deficit.

This year, with the deficit declining rapidly, such enticements were largely missing. Most notably, Obama dropped a proposal aimed at slowing the growth of Social Security payments by changing how cost-of-living increases get calculated.

Obama’s current plan would cut the deficit by adjusting the way the government means-tests Medicare, requiring higher premiums for some wealthy seniors. He would include measures to force down the cost of prescription drugs, which also reduces federal spending, and would count on the deficit-reducing impact of his proposed immigration reform measure.

He proposed paying for new spending – a $55 billion “Opportunity, Growth and Security Initiative” – by closing tax loopholes used primarily by the wealthy and raising tobacco taxes. Among the tax provisions he would eliminate is the carried-interest rule, which allows some hedge fund managers to pay a lower tax rate on a significant share of their income.

Republican opponents focused largely on Obama’s strategies for boosting incomes for the working poor, setting up an election-year showdown over how the parties address the public’s increasing worries about the income gap.

Obama would expand the Earned Income Tax Credit, which supplements wages for low-income workers. His plan would focus on childless workers, who currently get minimal benefit from the long-standing tax credit, broadening their eligibility and doubling the maximum they could receive to $1,000.

The proposal would cost $60 billion over 10 years and would give a tax break to 13.5 million people, the White House said.

Republicans, whose party once embraced the tax credit – enacted under a GOP president, Gerald Ford – have since labeled it a failed policy.

“We should be reforming this flawed approach to helping low-income workers, not expanding it,” Sen. Marco Rubio, R-Fla., said Tuesday.

Other programs aimed at the families of working- and middle-class Americans also faced Republican resistance. Obama repeated a plan he proposed last year to expand access to preschool through federal grants to states and school districts, paid for by $78 billion in new tobacco taxes. That idea has gone nowhere in Congress.

Obama also called again for an overhaul of the corporate tax system that would lower rates while closing loopholes. He would use money from that change to stabilize the dwindling highway trust fund.

Overall, Obama’s budget details $3.9 trillion in federal spending in fiscal year 2015 and $3.3 trillion in revenue, leaving $564 billion in shortfall. (If no changes to the law were made, the deficit would come in at $478 billion in 2015, according to the Congressional Budget Office.)

That deficit comes to just over 3 percent of gross domestic product, about the same level as before Obama took office and down from almost 10 percent in 2009. The White House says its plan will reduce the annual deficit to 1.6 percent of GDP in 10 years and begin shrinking the debt as a share of the economy.

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