President Barack Obama released Wednesday his $3.778 trillion spending proposal for 2014, a budget that he said was a “fiscally responsible blueprint for middle-class jobs and growth.” But critics are dediring it for cutting Social Security and Medicare benefits as well as capping individuals’ retirement savings in IRAs and 401(k)s at $3 million.
In releasing his budget, Obama said that the debate in Washington “has raged between reducing our deficits at all costs, and making the investments necessary to grow our economy. And this budget answers that argument, because we can do both. We can grow our economy and shrink our deficits.”
Obama said that he would not “do deficit reduction on the backs of the middle class,” and that he’d already “met Republicans halfway on the deficit.”
Reiterating comments made in his State of the Union address, Obama said Americans should ask themselves three questions every day: “How do we make America a magnet for new jobs? How do we give our workers the skills they need to do those jobs? And how do we make sure that hard work leads to a decent living?”
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Key aspects of the budget to achieve these goals, Obama said, include:
- “Responsibly paying” for investments in education, manufacturing, clean energy, infrastructure, and small business.
- $1.8 trillion of additional deficit reduction over 10 years, bringing total deficit reduction achieved to $4.3 trillion.
- More than $2 in spending cuts for every $1 of new revenue from closing tax loopholes and reducing tax benefits for the wealthiest.
- Cutting the deficit to 2.8% of GDP by 2016 and 1.7% by 2023 with debt declining as a share of the economy, “while protecting the investments we need to create jobs and strengthen the middle class.”
The budget also asks the wealthy to contribute to deficit reduction by:
- Implementing the Buffett Rule by imposing a new “Fair Share Tax” on high-income taxpayers.
- Limiting tax expenditures for the affluent by capping itemized deductions and certain other deductions and income exclusions at 28%.
- Restoring the estate, gift, and generation-skipping transfer taxes to 2009 levels.
- Taxing carried interest profits as ordinary income.
- Eliminating a special depreciation benefit for corporate jets.
Ethan Rome, executive director of Health Care for America Now, noted in a statement that while the “good news” in Obama’s budget proposal was that it protects Medicaid and the Affordable Care Act, raises additional revenue and will help create jobs to grow the middle class, the bad news is that it includes “Republicans’ proposal to cut Social Security benefits” and “would make many seniors pay more for their Medicare.”
Joe Lieber of Washington Analysis notes that “liberals are especially concerned about the president’s inclusion of chained CPI,” a different measure of the consumer price index, “as a cost savings measure.” He continued, “This proposal would lower Social Security payments because the index rises at a slower rate than the current CPI measurement due to assumptions about purchasing.”
Using chained CPI would also “increase tax revenues because brackets would not rise as much over time,” Lieber says. Most Republicans, however, “support the measure due to the economics.”
Chained CPI would change the formula used to calculate the cost-of-living adjustment (COLA). The group Strengthen Social Security notes that the chained-CPI approach “would cut the benefits of all beneficiaries, including current retirees, disabled workers and others.”