In the U.S.: Obama’s election-year budget to target rich

13 February 2012


“Time for austerity is not today.” Inspiring confidence to take precedence over reducing deficit.

President Barack Obama will propose an election-year budget on Monday that raises taxes on millionaires and seeks billions of dollars for job-creating infrastructure projects, drawing a populist battle line with his Republican opponents.

Obama’s fiscal 2013 budget proposal to Congress will defer significant cuts in the deficit until the economy is securely back on track, a priority as he seeks re-election in November, while outlining measures to shrink that funding gap over time.

“I think there is pretty broad agreement that the time for austerity is not today,” new White House chief of staff Jack Lew, the president’s budget director until a few weeks ago, told NBC’s “Meet the Press” on Sunday.

Obama’s budget is likely to be declared a non-starter by Republicans, in control of the U.S. House of Representatives, who want to paint the president as a tax-and-spend liberal. They warn that tax hikes will kill jobs while doing nothing to halt the climb in the crushing level of national debt.

“We’re taking responsibility for dealing with the drivers of our debt,” said Republican Paul Ryan, chairman of the House Budget Committee. “Unfortunately, the president and his party’s leaders – they’re not a part of this conversation,” he told ABC News’ “This Week” on Sunday.

The budget grants Obama one of his biggest platforms before the November 6 presidential election to lay out his vision for America’s future, casting Republicans as the party of the rich as he tries to convince voters he would do more to protect their +interests.

Polls consistently show that even as the economy has demonstrated surprising strength in recent weeks, Americans are still unsure of Obama’s economic stewardship, a major problem for him as he seeks to persuade them to give him a second White House term.

BUFFETT RULE

Obama will repeat a demand for millionaires to pay a minimum tax rate of 30 percent, named after billionaire investor Warren Buffett, and identify $4 trillion in deficit reduction over 10 years that broadly mirrors a plan he laid out in September.

The budget projects a deficit of $901 billion in 2013, representing 5.5 percent of gross domestic product (GDP), down from $1.33 trillion, or 8.5 percent of GDP this year, White House officials say.

Obama pledged back in 2009 to have cut the deficit in half by next year, but his budget does not anticipate getting it back under 3 percent of GDP until 2018 — satisfying credit rating agencies and investors who view this as a key threshold to stabilize the growth in national debt as a proportion of output.

Obama’s deficit projections are based on growth forecasts that will be released along with the rest of the budget at 1115 EDT (1615 GMT).

The White House has already declared its budget prediction of an 8.9 percent 2012 unemployment as “stale,” after an improving labor market lowered unemployment to 8.3 percent in January.

That encouraging sign for the recovery implies that deficit projections could be revised lower if growth, and accompanying tax revenues, also turn out to be stronger than expected.

However, Republicans say Obama uses gimmicks to massage the deficit numbers, pointing to savings from winding down wars in Iraq and Afghanistan, which they complain amounts to counting funds that were never going to be spent.

The president will propose using half of the money from ending Americas’ two foreign wars to subsidize investment in infrastructure as part of his request for over $800 billion in multi-year spending on job creation and transportation.

This includes tax breaks for companies and individuals that would be worth more than $300 billion in 2012 if passed into law, potentially delivering U.S. growth an additional fiscal stimulus as Obama campaigns around the country for re-election.

One of the biggest boosts would come from extending a payroll tax cut for 160 million Americans for all of 2012, which expires on February 29 unless Congress acts. The White House estimates this could add a percentage point to 2012 GDP.

Overall, the budget proposes raising $1.5 trillion over a decade through higher taxes, with around half coming from allowing tax breaks for families earning more than $250,000 a year to expire at the end of 2012 – a longstanding Obama goal.

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