Obama's budget headed to Congress

[February 13, 2012]  WASHINGTON (AP) -- President Barack Obama is sending Congress a new budget that seeks to achieve $4 trillion in deficit reduction over the next decade through cuts in government spending and higher taxes on the wealthy. At the same time, he wants to boost spending in key areas such as transportation and education.

The spending blueprint is certain to spark an election-year battle with Republicans, who are vowing to oppose Obama's tax hikes. They contend the president is not doing enough to attack a dangerous deficit problem.

In a fact sheet previewing the budget, the administration sought to cast the debate as a battle to protect the middle class following decades of eroding security and a deep recession.

"We must transform our budget from one focused on speculating, spending and borrowing to one constructed on the solid foundation of educating, innovating and building," the administration said.

Obama was scheduled to speak Monday morning to students at Northern Virginia Community College to highlight the budget's education initiatives.

Jack Lew, the president's chief of staff, made the rounds of the Sunday talk shows to promote the spending initiative as a balanced approach that will focus on the short-term imperative to provide more support to the economy while attacking long-term deficits.

While administration officials defended the plan as a balanced approach, Republicans attacked the effort for failing to do more to restrain the deficit, which Obama had promised in 2009 to cut in half by the end of his first term.

"We're taking responsibility for dealing with the drivers of our debt," Rep. Paul Ryan, chairman of the House budget Committee, said Sunday. "Medicare is going bankrupt."

Ryan is preparing an alternative to Obama's budget that will be similar to a measure that the House approved last year but failed in the Senate.

This year's budget debate is expected to dominate the presidential contest and congressional elections with the issue not finally resolved probably until a lame-duck session of Congress after the November election when lawmakers will have to decide what to do with expiring Bush-era tax cuts and looming across-the-board spending cuts.

Obama's spending plan for the budget year that begins Oct. 1 projects a deficit for this year of $1.33 trillion. That would mean four straight years of trillion-dollar-plus deficits.

Under Obama's outline, the deficit would decline to $901 billion in 2013 with continued improvements shrinking the deficit to $575 billion in 2018.

Senate Republican leader Mitch McConnell of Kentucky said Democrats did not want to vote on Obama's spending plan, so he would once again put it forward for a Senate vote where he predicted it would fail as it did last year.

Lew blamed House Republicans for pushing extreme measures rather than trying to reach consensus with Democrats and avoid the kinds of last-minute crises that roiled financial markets in 2011, such as the summer showdown over raising the government's borrowing limit.

"Congress didn't do a great job last year. It drove right to the edge of the cliff on occasion after occasion," Lew said.

According to the White House fact sheet, Obama's budget will adhere closely to the approach he outlined in September in a submission to the congressional "supercommittee" that failed to agree on at least $1.2 trillion in additional spending cuts to keep across-the-board cuts from taking effect next January.

The Obama budget sticks to the caps on annual appropriations approved in August that will save $1 trillion over the next decade. It also puts forward $1.5 trillion in new taxes, primarily by allowing the Bush-era tax cuts to expire at the end of this year for families making $250,000 or more per year.

Obama, as he has in the past, also proposed eliminating tax deductions the wealthy receive and would also put in place a rule named for billionaire Warren Buffett that would seek to make sure that households making more than $1 million annually pay at least 30 percent of their income in taxes.

Obama would also impose a new $61 billion tax over 10 years on big banks aimed at recovering the costs of the financial bailout and providing money to help homeowners facing foreclosure on their homes. It would raise $41 billion over 10 years by eliminating tax breaks for oil, gas and coal companies and claims significant savings from ending the wars in Iraq and Afghanistan.

Lew said the budget would cut spending by $2.50 for every $1 in extra taxes it seeks.

Among the areas targeted for increases, Obama is proposing $476 billion in increased spending on transportation projects including efforts to expand inner-city rail services.

To spur job creation in the short-term, Obama is proposing a $50 billion "upfront" investment for transportation, $30 billion to modernize at least 35,000 schools and $30 billion to help states hire teachers and police, rescue and fire department workers. Republicans in Congress, opposed to further stimulus spending, have blocked these proposals in the past.

The White House said Monday Obama will seek $8 billion to create a fund to encourage community colleges and businesses to work together to train workers in high-growth industries.

The Obama budget seeks $360 billion in savings in Medicare and Medicaid mainly through reduced payments to health care providers, avoiding tougher measures advocated by House Republicans and the deficit commissions that said it was critical to restrain health care costs.

Lew appeared on ABC's `This Week," CNN's "State of the Union," "Fox News Sunday," NBC's "Meet the Press" and CBS' "Face the Nation." Ryan was on ABC and McConnell was on CBS.

[Associated Press; By MARTIN CRUTSINGER]

Associated Press writer Andrew Taylor contributed to this report.

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