Obama anchors budget on tax cuts for the rich

US President Barack Obama. AP

WASHINGTON – US President Barack Obama will Monday roll out a populist election-year budget challenging Republicans to support his job creation drive and to finally agree to hike taxes on the richest Americans.
Obama will use his annual spending plan to flesh out his pledge to build a new economy in which every American gets a “fair shot” and the rich pay what the president calls a “fair share,” senior officials said.

His proposal will be seen as a highly political document, given its timing as Obama gears up his reelection fight and the fact it follows spending guidelines from a deficit control agreement with Republicans in September.

The budget is also unlikely ever to come into force, as Democratic Senate Majority leader Harry Reid has said there will be no vote on a budget proposal this year, due to the already agreed spending guidelines.

Specifically, the budget reaffirms tight cuts in discretionary spending by $1 trillion over 10 years and reduces discretionary spending from 8.7 percent of GDP in 2011 to five percent in 2022, Obama administration officials said.

The proposal, to be officially unveiled by Obama in Northern Virginia on Monday, calls on Congress to back the Buffett rule, named after billionaire financier Warren Buffett, designed to ensure no household earning more than one million dollars a year pays less than 30 percent in taxes.

It also renews Obama’s call for the George W. Bush-era tax cuts to be repealed on Americans earning more than $250,000 a year.

Obama’s repeated attempts to repeal the Bush tax cuts and to bring in higher taxes for the rich have always foundered in Congress where they are opposed by Republicans.

But Obama wants to use the call for the rich to pay more money for financing job creation programs and infrastructure spending to boost the economy as a populist campaign issue as he runs for a second term in November.

“We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by,” Obama said when he set the rhetorical framework for the budget in his State of the Union address last month.

“Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules,” he said, playing on rising anger over inequality in post-recession America.

Republicans are sure to oppose most of Obama’s plan and treated the administration’s preview of the budget with disdain.

“It seems he’s put his presidency on autopilot,” said Brendan Buck, a spokesman for House speaker John Boehner.

“We can’t have a real, robust recovery when the president is doubling down on job-killing tax increases and pilling up this much debt.”

Officials said the plan will also again call for a Financial Crisis Responsibility Fee levied on the largest banks and finance firms to compensate taxpayers for government bailouts during the financial crisis.

The proposal has in the past been blocked by Congress and appears to have little chance of being enacted now.

The plan will project a $1.3 trillion deficit for the current fiscal year, slightly higher than $1.296 trillion in 2011, an administration official said.

Obama’s last annual budget before he seeks reelection in November will also project a $901 billion deficit for fiscal year 2013 (beginning October 2012), and will frame his campaign trail message of a fair fight for all.

In all, the document calls for more than $4 trillion in deficit reduction by 2018.

The spending plan will also include more than $350 billion for short-term job creation programs, senior officials said.

Obama also resubmits portions of his American Jobs Act, which has foundered in Congress, to accelerate employment creation amid signs the economy is finally speeding up. Unemployment fell to 8.3 percent in January giving Obama’s reelection prospects a boost.

He calls for $350 billion in short-term job growth measures and asks Congress to pass an extension of a two percent cut on payroll taxes until the end of the year, after a two-month extension passed last year which runs out this month.

Obama also renews his call for a boost to infrastructure spending which has again, had a tough ride in Congress.

The president wants to spend $50 billion to repair roads, rails and runways to create thousands of jobs. He also wants to spend $30 billion to modernize at least 35,000 schools and $30 billion more to help states and local governments hire teachers and first responders.