President Obama on Wednesday unveiled a $3.77 trillion spending plan that proposes modest new investments in infrastructure and education, major new taxes for the wealthy and significant reforms aimed at reducing the cost of Social Security and Medicare.
“Our economy is poised for progess, as long as Washington doesn’t get in the way,” Obama said in announcing his budget plan on the South Lawn of the White House. He said his budget represents “a fiscally responsible blueprint for middle-class jobs and growth.”
“We don’t view this budget as a starting point in the negotiations. This is an offer where the president came more than halfway toward the Republicans,” a senior administration official told reporters Tuesday, speaking on condition of anonymity to detail the forthcoming document.
“So this is our sticking point,” the official said. “And the question is: are Republicans going to be willing to come to us to do serious things to reduce our deficits” – including raising taxes on millionaires.
So far, senior Republicans have rejected the proposal, which would sharply increase both spending and deficits next year over current projections. While the nonpartisan Congressional Budget Office forecasts $3.6 trillion in outlays in the fiscal year that begins in October, Obama calls for $170 billion more.
And while the CBO forecasts a deficit of $616 billion in 2014, Obama calls for a larger gap between spending and revenues of $744 billion, administration officials said, or 4.4 percent of the nation’s gross domestic product.
The budget gap would narrow over the coming decade, shrinking to 1.7 percent of GDP by 2023, when the national debt would also be shrinking as a measure of the overall economy.
But Obama proposes to lop only about $600 billion off projected borrowing over the next decade — trillions of dollars less than the austere, balanced-budget package that House Republicans endorsed earlier this year. While Obama proposes $1.8 trillion in new savings and tax revenue over the next decade, much of the money would be dedicated to replacing the sequester, $1.2 trillion in automatic spending cuts that went into effect March 1.
Obama’s deficit-reduction plan mirrors the offer he made in December to House Speaker John A. Boehner (R-Ohio) in negotiations over the so-called fiscal cliff. At the time, Obama called for $1.2 trillion in new taxes. The fiscal cliff deal included roughly $600 billion in new revenues over the next decade, with the bulk of the money coming from higher rates on households earning more than $450,000 a year.
[...] As he has in the past, Obama proposes to slice $400 billion from federal health programs, primarily Medicare, with the bulk of the cuts falling on drug companies and other providers. But Medicare beneficiaries would also take a hit, through higher premiums for couples making more than $170,000 a year and inducements for low-income recipients to use more generic drugs.
And for the first time, Obama formally proposes to slow the growth in Social Security benefits by applying a less-generous measure of inflation to programs throughout the federal government. The change would trim cost-of-living increases by roughly 0.3 percent a year, saving the government about $130 billion over the next decade.
White House officials said the new inflation measure — known as the chained consumer price index, or chained CPI — would not apply to programs for the poor, such as Supplemental Security Income, or SSI, and would be adjusted to reduce the impact on people 77 or older.
The deficit-reduction plan mirrors an offer Obama made in December to House Speaker John A. Boehner (R-Ohio) in negotiations over the so-called fiscal cliff. At the time, Obama called for $1.2 trillion in new taxes, but the fiscal cliff deal included roughly $600 billion in new revenues over the next decade, with the bulk of the money coming from higher rates on households earning more than $450,000 a year.
Obama’s decision to include chained CPI in his budget proposal has infuriated many Democrats, and a number of liberal lawmakers protested the Social Security cuts Tuesday at the White House. Republicans, meanwhile, who have pressed the president to put the change on the table, have so far dismissed the offer as too “modest” to justify GOP support for higher taxes.