- The Washington Times - Monday, February 13, 2012

Unveiling a $3.8 trillion election-year federal budget loaded with deficits, tax increases and hundreds of billions of dollars in new stimulus spending, President Obama said Monday that his plan will “restore an economy where everybody gets a fair shot.”

“The economy is growing stronger, the recovery is speeding up,” Mr. Obama said at Northern Virginia Community College in Annandale, Va., where he also proposed a new job-training program. “We can’t cut back on those things that are important for us to grow.”

Drawing a number of battle lines for the fall campaign, Mr. Obama is inviting another clash with congressional Republicans by calling for short-term spending to create jobs with proposals that GOP lawmakers already have rejected. He would spend $50 billion immediately on transportation infrastructure, $30 billion to modernize schools and $30 billion to hire teachers and emergency workers.

The president said one of the first budget proposals Congress must enact is an extension of the payroll-tax holiday for about 160 million workers, which is set to expire at the end of this month. House Republicans on Monday signaled that they were ready to do that.

“The last thing we need is for Washington to stand in the way of America’s comeback,” Mr. Obama said. “Preventing a tax hike on the middle class is only the beginning.”

His budget — which calls for a total of $350 billion in short-term stimulus spending, a $475 billion highway program and $1.5 trillion in tax increases on wealthier Americans — has virtually no chance of passing as is, but is intended to highlight the differences between the two parties as Mr. Obama seeks re-election. It would impose a 30 percent minimum tax on those earning $1 million or more.

Mr. Obama also proposes to raise taxes on investment income for families earning more than $250,000. He would tax dividends as ordinary income, raising the top tax rate from 15 percent to 39.6 percent. Taxes on capital gains for the top income bracket would rise from 15 percent to 20 percent.

The president said families earning more than $250,000 per year don’t need more tax breaks, but the country needs the money from tax hikes to pay for essential programs for the middle class.

“The budget we’re releasing today is a reflection of shared responsibility,” Mr. Obama said. “We don’t need to be providing additional tax cuts for folks who are doing really, really, really well. Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep investing in everything else: education, clean energy, a strong military, care for our veterans? We can’t do both — we can’t afford it.”

Acknowledging GOP charges he is promoting “class warfare,” Mr. Obama added, “We don’t envy the wealthy, but we do expect everybody to do their fair share. We look out for each other. We pull each other up. That’s who we are.”

Republicans immediately attacked the president for loading his budget with what they called fiscal gimmicks and for failing to address the nation’s $15.3 trillion debt.

“The president offered a partisan, election-year budget that ratchets up spending while ignoring the biggest drivers of our debt and calls for massive tax increases on hardworking families and small businesses,” said House Majority Leader Eric Cantor, Virginia Republican. “The president’s budget will make our economy worse today and result in debt, doubt and decline in the coming years.”

House Budget Committee Chairman Paul Ryan, Wisconsin Republican, said the president has “punted again” on deficit reduction and that House Republicans won’t go along.

“This is a plan for America drowning in debt,” Mr. Ryan said. “It’s a political plan for the president’s re-election.”

Mitt Romney, seeking the Republican presidential nomination, said the budget proposal “won’t take any meaningful steps toward solving our entitlement crisis.”

“The president has failed to offer a single serious idea to save Social Security and is the only president in modern history to cut Medicare benefits for seniors,” the former Massachusetts governor said in a statement.

The president’s budget request for fiscal 2013 anticipates borrowing a total of $901 billion, which would be the first time since Mr. Obama took office that the deficit falls below $1 trillion. But the spending plan pegs the deficit for the current fiscal year, which ends Sept. 30, at $1.33 trillion, nearly the same level it was three years after the president promised to cut it in half by the end of 2012.

Administration officials say the budget will reduce the deficit $4 trillion over the next 10 years through a mix of tax increases, caps on spending and savings in other areas.

“I’m proposing some difficult cuts that, frankly, I wouldn’t ordinarily make,” the president said. He said the reducing the deficit in the long term will allow his administration to boost the economy right now.

But Republicans say the budget also relies on an accounting trick to count hundreds of billions of dollars in savings tied to the drawdown of the war in Iraq. Rather than apply all of the $850 billion of presumed savings to deficit reduction, Mr. Obama intends to spend half of it on infrastructure projects to create jobs.

Sen. Jeff Sessions, Alabama Republican and ranking member of the Senate Budget Committee, said Mr. Obama’s 10-year plan would add $11.2 trillion to the national debt, little changed from the projected $11.5 trillion under currently enacted spending legislation.

“It’s a tax-and-spend budget, virtually identical to the path we were already on,” Mr. Sessions said. “Where is the $4 trillion in deficit reduction?”

Referring to a debt crisis that has spawned civil turmoil abroad, Mr. Sessions added, “Next year, the United States could be like Greece.”

Former U.S. Comptroller General David A. Walker said Mr. Obama’s budget will add $6.684 trillion in deficits over the next decade and predicted that revenue increases will outpace spending cuts. He also criticized the administration’s practice of counting reductions in military spending overseas as long-term “savings.”

“The president’s budget fails to lay out a substantive path to restore fiscal sanity,” Mr. Walker said in a statement.

Sen. Mark L. Pryor, Arkansas Democrat, said Mr. Obama’s budget is a case of misplaced priorities that he wouldn’t support.

“I am concerned that spending on luxury programs, such as high-speed rail and spaceship taxis, take precedence over basic needs,” Mr. Pryor said in a statement. “… Moreover, some of the nation’s best and most cost-effective military units have been targeted for cuts. I will not support a budget that sidelines basic needs, invests in luxuries and still results in a whopping $700 billion deficit in 2022.”

The president’s proposal forecasts a high level of government spending indefinitely. The plan calls for overall government spending to remain above 22 percent of gross domestic product for the next decade. Overall government spending has averaged about 20 percent of GDP in the post-World War II era.

The budget calls for a 10-year, $60 billion “financial crisis responsibility fee” on the nation’s biggest banks, aimed at recovering the costs of the financial bailout and helping homeowners facing foreclosure. It would raise $41 billion over 10 years by eliminating tax breaks for oil, gas and coal companies.

Spending would be reduced in several Cabinet agencies. The Pentagon’s core budget would decrease for the first time since 1998 by 1 percent. But the president also would boost spending slightly at the State Department, including a new $770 million fund to promote democratic and economic reforms in the Middle East and North Africa. He also would keep military aid to Egypt at $1.3 billion, in spite of a crisis triggered by an Egyptian crackdown against American democracy activists.

The president spoke at the community college Monday to highlight his plan to spend $8 billion to create a fund to promote job training for high-growth industries.

Susan Crabtree contributed to this report.

• Dave Boyer can be reached at dboyer@washingtontimes.com.

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