Analysis: A budget plan or a campaign document?

[February 14, 2012]  WASHINGTON (AP) -- President Barack Obama's new budget lays down the political themes he will pound as he campaigns for re-election -- more spending on jobs and higher taxes for the wealthy. It sets him apart from the Republican contenders and gives Democrats a platform to run on.

And a target for GOP candidates to shoot at.

In his $3.8 trillion spending plan for the budget year that begins Oct. 1, Obama levels direct criticism at Republicans. Though nobody is expecting the budget to be embraced by Congress, that's still an unusual negotiating tactic in a usually dry document. It highlights the elevated political stakes.

"Unfortunately, Republicans in Congress blocked both our deficit reduction measures and almost every part of the American Jobs Act for the simple reason that they were unwilling to ask the wealthiest Americans to pay their fair share," Obama said in his budget introduction.

It was a reference to a legislative plan that Obama proposed in September and that Congress ignored. Many of its features are incorporated into his new budget.

Much of the presidential spending outline, in fact, plays to Obama's election-year agenda, a strategy not lost on Republicans.

"This proposal isn't really a budget at all. It's a campaign document," said Senate Minority Leader Mitch McConnell, R-Ky.

Obama's budget blueprint showcases the major priorities of his presidency, ones that contrast sharply with Republicans' near-solid opposition to tax increases and advocacy for deep spending cuts, including in popular benefit programs such as Medicare and Medicare.

The president seeks to achieve about $4 trillion in deficit-reduction over the next decade, with $1.5 trillion of it coming from higher taxes -- both by going after wealthy individuals and by closing some corporate loopholes.

Obama's budget does claim $360 billion in savings over the next decade in Medicare and Medicaid programs, but he proposes to do it with relatively modest changes. White House officials defended the cuts to so-called entitlement programs.

"I think we're taking a serious pass at deficit reduction, on the entitlement side and overall," said acting Budget Director Jeffrey Zients.

Obama would let Bush-era tax cuts expire for households making over $250,000 a year and also raise taxes on stock dividends for the highest income Americans. And he would institute a new minimum tax of at least 30 percent for those earning over $1 million a year.

With such calls, Obama is seeking to rally middle-class support and capitalize on recent polls that show most Americans believe the rich aren't paying enough taxes.

"We don't begrudge success in America," Obama said Monday. "We do expect everybody to do their fair share, so that everybody has opportunity, not just some."

The strategy could be especially relevant if former Massachusetts Gov. Mitt Romney is Obama's Republican opponent.

Romney, one of the wealthiest Americans ever to run for president, created an uproar with the disclosure that he paid taxes at the relatively low rate of 14 percent last year, mostly because most of his income was from investments, which are taxed at a lower rate than wages.

Romney called Obama's budget, with its higher taxes and spending increases "an insult to the American taxpayer."

Romney, former House Speaker Newt Gingrich and former Sen. Rick Santorum of Pennsylvania all would allow the Bush tax cuts enacted in 2001 and 2003 to remain in place for all wage earners no matter how wealthy.

Santorum would also eliminate all corporate taxes for U.S. manufacturers. Romney would lower the corporate tax to 25 percent, Gingrich to 12.5 percent. Obama is expected to put out a plan later this month for a lower corporate tax, along with closing loopholes, but he didn't disclose details in his budget.

Romney proposes that no one with adjusted gross income under $200,000 should be taxed on interest, dividends or capital gains. Santorum would triple the personal exemption for dependent children and reduce the number of tax brackets to two -- 10 percent and 28 percent. Gingrich would give taxpayers the option of paying a 15 percent flat tax.

The president's relatively modest proposed cuts to Medicare and Medicaid, mostly through cuts to medical providers, is at odds with GOP plans for tougher action, including a House-passed plan by Budget Committee Chairman Paul Ryan of Wisconsin under which future seniors would get a fixed amount to buy medical insurance.

Responding Monday to Obama's new budget, Ryan said, "It seems like the president has decided again to campaign instead of govern and that he's just going to duck the responsibility to tackle this country's fiscal problems."

It's not unusual for presidents to put out politically laced budgets when they're seeking re-election, said longtime congressional budget analyst Stanley Collender.

"The White House clearly made an assessment that nothing they could propose would be accepted by the Republicans in Congress," said Collender, a managing director of Qorvis Capital, a Washington-based economic consulting firm.

"So why not take advantage of the circumstances and propose what you want, instead of what they want? And that's what they did," Collender said.

It was probably a safe bet. Because of partisan deadlock, Congress has not passed an annual budget in nearly three years. The government has been kept running by a series of appropriations measures.

Obama's spending blueprint projects a 2012 deficit above the $1 trillion mark for the fourth year in a row, but projects it to fall to $901 billion in fiscal 2013.

With the jobless rate stuck above 8 percent for three years, Obama's proposal to increase spending on short-term measures for job growth and for highway and other construction projects could prove popular, along with his proposal for higher taxes on the wealthy.

"We are not out of the woods yet," Obama said in his budget message. "Instead, we are facing a make-or-break moment for the middle class, and for all those who are fighting to get there."

[Associated Press; By TOM RAUM]

Tom Raum covers economics and politics for The Associated Press.

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