Obama budget, jobs plan get early tests on Hill

[February 02, 2010]  WASHINGTON (AP) -- President Barack Obama's proposed budget, stuffed with initiatives to spark jobs and the economy, is getting an early test with lawmakers weary of record deficits, wary of his tax ideas and nervous about winning re-election in November.

Obama's proposed $5,000-per-job tax credit for companies that hire more workers could come up for a vote in the Senate as early as the end of the week -- if senators can work out the details.

Treasury Secretary Tim Geithner and Obama's budget director, Peter Orszag, were to push it during appearances Tuesday before congressional committees to explain the president's $3.8 trillion budget plan. Defense Secretary Robert Gates and Joint Chiefs of Staff Chairman Adm. Mike Mullen also were to be on Capitol Hill to discuss war spending.

Congress rejected the idea of a jobs credit for businesses last year, questioning whether it would work and how to prevent unscrupulous employers from defrauding the government.

Obama also wants to renew some expiring goodies from his stimulus plan last year:

-Another round of $250 bonus payments to Social Security recipients and other retirees.

-Extended jobless benefits and health insurance subsidies for the long-term unemployed.

-Another year of middle-class tax credits of up to $400 for individuals and $800 for couples filing jointly.

But the budget also would impose nearly $1 trillion in higher taxes on couples making more than $250,000 and individuals making more than $200,000 by not renewing tax cuts enacted under former President George W. Bush. Obama would extend Bush-era tax cuts for families and individuals making less.

All told, Obama's tax and spending plan raises more taxes than it cuts, while still posting a record-breaking $1.56 trillion deficit -- an amount equal to about 42 cents for every dollar the government is spending.

"It's a budget that reflects the serious challenges facing the country," Obama said. "We're at war. Our economy has lost 7 million jobs over the last two years. And our government is deeply in debt."

Rep. Charles Rangel, D-N.Y., chairman of the tax-writing House Ways and Means Committee, predicted the tax proposals would ignite a spirited debate. "I only hope the debate can be more focused on policy than politics," he said.

Republicans said they were ready.

"As if record deficits weren't enough, President Obama's budget still includes major tax increases that will hit our fragile economy like a brick wall," said Rep. Tom Price of Georgia.

In all, Obama would increase taxes on some businesses and wealthy individuals by about $1.4 trillion over the next decade, while cutting taxes for middle-class workers and other businesses by about $330 billion. The bottom line: Tax receipts would increase by about $1.1 trillion over the decade.

"The tax increases in the budget dwarf the tax relief," said Sen. Chuck Grassley of Iowa, the top Republican on the Senate Finance Committee. "Everyone should be intellectually honest about that."

To address soaring deficits, Obama proposed a three-year freeze on spending beginning in 2011 for many domestic government agencies. It would save $250 billion over the next decade by following the freeze with caps that would prevent spending increases after 2013 from rising faster than inflation.

Military, veterans, homeland security and big benefit programs such as Social Security and Medicare would be spared. Federal support for elementary and high school education would get what the administration termed the biggest increase in history. The Pell grant college tuition program which would nearly double, to just under $35 billion, helping an additional 1 million students.

As tax receipts increase and need-based benefits decrease as the economy recovers, the deficit would fall to $1.27 trillion in 2011 under Obama's budget. It would drop to $828 billion in 2012 but would remain at levels surpassing any previous deficits through 2020.

The administration argued that Obama inherited a deficit that already was topping $1 trillion when he took office and, given the severity of the downturn, the president had to spend billions stabilizing the financial system and jump-starting economic growth.

[Associated Press; By STEPHEN OHLEMACHER]

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.