Obama budget would hike taxes on rich, boost jobs spending

Feb 13, 2012, 18:10 GMT

Washington - US President Barack Obama proposed additional taxes on the wealthy and new spending on jobs programmes in his 2013 budget plan, which he sent Monday to Congress.

The budget proposal calls for 3.8 trillion dollars in spending and sets up a showdown with Republicans in Congress over how to tackle the country's massive budget deficit.

Obama said the budget was 'a reflection of shared responsibility.'

'At a time when our economy is growing and creating jobs at a faster clip, we have to do everything we can to keep our economy on track,' he told students at a community college outside Washington, as he pitched plans that include additional education spending.

'We have to make some tough choices to put this country on a more sustainable path.'

The plan focuses on issues that are set to spearhead Obama's bid for reelection in November, including efforts to fight unemployment and a proposed minimum federal tax rate of 30-per-cent for households earning more than 1 million dollars a year.

The budget would allow the decade-old tax cuts for the highest earners to expire, reducing the deficit by 1.5 trillion dollars over the next 10 years, according to a White House factsheet.

The budget's deficit projections, set for 1.33 trillion dollars this year, or 8.5 per cent of gross domestic product, and 901 billion dollars in 2013, or 5.5 per cent of GDP, were drawing some of the heaviest fire. The figures fall far short of Obama's 2008 election promises to cut the deficit in half by the end of his four-year term.

Opposition Republicans, who hold a majority in the lower House of Representatives, where they can block Obama's budget, quickly attacked the White House proposals as too political and inadequate in slashing spending at a time of soaring national debt.

'You can't tax your way out of this problem,' Texas Congressman Jeb Hensarling said in a television interview. 'I mean, you're going to have to deal with the spending side.'

The proposed budget reflects previously announced efforts to slash military spending and other cost-saving measures: trimming NASA's Mars programme, savings in health care programmes for the poor and elderly, and administrative cuts across the federal government.

White House chief of staff Jack Lew defended the figures Sunday, stressing that the recession made reducing the deficit so quickly impossible.

'I think that there's pretty broad agreement that the time for austerity is not today. We need to go on a path where, over the next several years, we bring our deficit under control,' he told broadcaster NBC. 'Right now we have a recovery that's taking root, and if we were to put in austerity measures right now, it would take the economy in the wrong way.'