Obama budget provides election fodder

By Anne K Walters Feb 13, 2012, 21:56 GMT

Washington - US President Barack Obama on Monday proposed additional taxes on the wealthy and new spending on jobs programmes in his 2013 budget plan, setting up an inevitable showdown with Congress and the Republicans seeking to unseat him in November elections.

The budget proposal sent to Congress Monday calls for 3.8 trillion dollars in spending and will likely be unable to pass through the lower House of Representatives, where Republicans sharply disagree with the Democrats over how to tackle the country's massive budget deficit.

Obama's plan focuses on issues that spearhead his 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.

Obama presented the proposal as a manifestation of policies he laid out in his State of the Union address last month that he feels will bolster the middle class and make sure all Americans do their 'fair share.'

He called the budget '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.

Obama said his budget would require 'tough choices' but that long-term deficit reduction plans would allow investment now in job creation and infrastructure.

'We can't cut back on those things that are important for us to grow. We can't just cut our way into growth,' he said. 'We can cut back on the things that we don't need, but we also have to make sure that everyone is paying their fair share for the things that we do need.'

Republicans called the proposal irresponsible and said it would increase the country's debt and tax the same people who they say are most likely to create jobs.

'President Obama's budget proposal is a failure of leadership. The president's budget spends too much, borrows too much, and raises taxes on job creators,' said Senator John Thune.

The Republican rivals seeking the party's presidential nomination also made an issue of the budget proposal, with former Massachusetts governor Mitt Romney's campaign calling it 'an insult to the American taxpayer.'

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.

Other tax measures would call for dividend income to be taxed like ordinary income for taxpayers earning more than 250,000 dollars per year, White House officials said. The move would help ensure that millionaires, many of whom earn much of their income from investments, aren't taxed at a lower effective rate than most middle-class Americans.

'The president believes at this time where we are asking for shared sacrifice, we simply can not afford to devote 260 billion dollars for tax breaks for the highest paid Americans,' said Gene Sperling, director of the National Economic Council.

He said Obama could not in good faith ask senior citizens to suffer cuts in their government health care benefits if the wealthy were not also being asked to sacrifice.

The budget's deficit projections - set for 1.33 trillion dollars in the current year (8.5 per cent of gross domestic product) and 901 billion dollars in 2013 (5.5 per cent of GDP) - were drawing heavy 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.

The White House however defended itself, saying that Obama's promise came before the extend of the economic problems was known.

'When we we came into office we knew things were in bad shape but we didn't realize how much,' said Jeffrey Zients, acting director of the White House's Office of Management and Budget.

Opposition Republicans, who hold a majority in the lower House of Representatives, 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.