President Barack Obama sent Congress a $4 trillion budget that would raise taxes on corporations and the nation’s top earners, spend more on infrastructure and housing, and stabilize, but not eliminate, the annual budget deficit.
The spending blueprint challenges Republicans to make politically thorny choices between defending current tax rates for the wealthy and Obama’s proposals to boost spending for the middle class, the Pentagon and companies that build domestic infrastructure.
It also plays to the president’s Democratic base with proposals to increase spending for domestic programs such as education and child care and expanding Social Security benefits for same-sex couples.
In remarks this morning, Obama said he’d reject any budget from Congress that locks in the “mindless austerity” of existing budget caps and cuts funding for his priorities.
“We would be making a critical error if we avoided making these investments,” the president told government workers at the Department of Homeland Security on Monday.
More than a fiscal plan, the budget sets the terms Democrats want for the political debate heading into the 2016 elections. Addressing income inequality has become a mantra for Democrats from Obama to Hillary Clinton, the front-runner for the party’s presidential nomination, and some of the Republican contenders have taken up the issue as well.
The proposed budget for the fiscal year starting Oct. 1, released this morning in Washington, backs up Obama’s recent talk about directing assistance to the middle class, administration officials said. Rather than dialing back his goals after Republicans expanded their House majority and took control of the Senate in November’s midterm elections, the president is pursuing a more aggressive strategy.
Congressional Republicans, who are under no obligation to follow Obama’s blueprint, were out with criticism as soon as the budget documents arrived at the Capitol.
Representative Tom Price and Senator Mike Enzi, the chairmen of the House and Senate budget committees, called Obama’s proposals a “wish list.”
House Speaker John Boehner, an Ohio Republican, criticized Obama for not having a plan to bring the budget in balance.
“It contains no solutions to address the drivers of our debt, and no plan to fix our entire tax code to help foster growth and create jobs,” Boehner said in a statement.
Obama’s plan includes $2.1 trillion in new revenue over the next 10 years, including from a 19% minimum tax on U.S. companies’ foreign earnings.
It projects a 2016 deficit of $474 billion. The shortfall would represent 2.5% of gross domestic product, a level that many economists regard as sustainable, down from a projected 3.2% in fiscal 2015. It wouldn’t rise above 2.6% of GDP in any year for the next decade under the president’s budget, even as the absolute numbers rise.
In fiscal 2017, the nominal deficit would narrow to $463 billion, or 2.3% of GDP. It would grow in each of the following years, from $479 billion in fiscal 2018 to a high of $687 billion in fiscal 2025.
Those figures are substantially less that the record $1.4 trillion deficit in 2009, the year Obama took office and the U.S. began pulling out of the worst recession since the Great Depression. Tax Plans
On the tax front, Obama wants to raise the top rate on capital gains and dividends to 28% from 23.8% and impose levies on asset transfers at death, closing what the White House calls the “largest capital gains loophole” in the tax code.
The president’s plan pits drug and technology companies that keep earnings overseas out of reach of U.S. taxes against firms that build roads, bridges and mass transit systems. He wants to fund $478 billion in infrastructure work over six years in part by applying a 14% tax to profits that are parked outside the country.
The president’s corporate tax plan, which creates a narrow opening to talk about a business tax overhaul with Republicans, includes the 19% levy on future foreign earnings for U.S. companies. The administration is no longer insisting that overseas profits be taxed at the 35% top U.S. corporate rate.