US President Barack Obama sent Congress a US$3.8 trillion budget plan that hopes to tame galloping deficits by raising taxes on the wealthy and trimming the US’ most popular benefit programs. In aiming for a compromise between Republicans who refuse to raise taxes and Democrats who want to protect those benefits, he is upset some on both sides.
The White House wants to break away from the current cycle of moving from one fiscal crisis to another while the government skirts the brink of a shutdown. Deep political divisions have blocked substantial agreements to address the country’s gaping debt.
It is unlikely that US Congress will begin serious budget negotiations before summer, when the government once again will be confronted with the need to raise its borrowing limit or face the prospect of a first-ever default on US debt.
The president’s budget proposal includes US$1.8 trillion in new deficit cuts as the US tries to wrestle down its debt. The last time the government ran an annual surplus was in 2001.
On Wednesday, the US Department of theTreasury said the US deficit was on pace to finish below US$1 trillion for the first time in five years. The deficit hit a record US$1.41 trillion in budget year 2009.
Obama’s budget blueprint for next year assumes that Washington reverses the recent deep budget cuts that have become a daily reality for the military.
It calls for a base Department of Defense budget of US$526.6 billion — US$52 billion more than the level established by the blunt spending cuts, which had been designed to force the White House and Congress to reach a fiscal deal to avoid them.
The president’s spending and tax plan for the budget year that begins Oct. 1 is two months late. It projects deficit reductions of US$1.8 trillion over the next decade, achieved with higher taxes, reductions in payments to Medicare health aid providers and cutbacks in the cost-of-living adjustments paid to millions of recipients in Social Security pensions and other government programs.
A key advocacy group for the aging on Wednesday said it was “deeply dismayed” by the plan to trim the government’s two biggest benefit programs.
Obama himself said his offer to trim future benefit increases for tens of millions of people is “less than optimal” and acceptable only if Republicans simultaneously agree to raise taxes on the wealthy.
“If anyone thinks I’ll finish the job of deficit reduction on the backs of middle-class families or through spending cuts alone that actually hurt our economy short-term, they should think again,” the president said.
Republicans have rejected higher taxes, arguing that the US$600 billion increase on wealthy earners that was part of a December agreement to avoid a sharp hit to the economy is all they will tolerate.
The administration maintains that Obama’s proposal is balanced, with the proper mix of spending cuts and tax increases.