WASHINGTON—Arriving more than 60 days late, President Barack Obama’s budget hit doorsteps in the nation’s capital Wednesday, its tax increases and calls for more big government programs surprising no one. When it comes to specific policy, congressional lawmakers will mostly ignore the $3.77 trillion plan, outlined in more than 2,000 pages. But it will add fuel for politicians of all stripes when it comes to politics.
President Obama’s plan continues the his theme, used during last year’s campaign, that asking the rich to pay more taxes is both popular rhetoric and effective policy for dealing with the country’s persistent economic woes. The budget contains a net tax increase of about $1 trillion and calls for $5.3 trillion in more borrowing over the next decade. It does not seek a balanced budget. But unbalanced budgets are the norm inside the Capital Beltway: The federal government has spent more than it brings in for 55 of the last 60 years.
The president’s new plan seeks to restrict tax deductions for the nation’s highest income earners, including capping deductions allowed for charitable contributions at 28 percent, even though the top tax bracket now has increased to 39.6 percent. According to an analysis done by Forbes, the cap would raise the cost of giving to charity from 60 cents per dollar to 72 cents per dollar. Organizations studying charitable donations predict the 28 percent deduction cap could lead to a $2.18 billion to $9 billion decline in annual giving.
Obama’s budget calls for extra revenue so it can pay for a bevy of new federal programs that highlight the president’s core philosophy that government is the best driver and sustainer of the nation’s economy. In releasing his budget, Obama called the philosophy “making the investments necessary to grow our economy.” He said these “targeted investments” will “create jobs right now, and prime our economy to keep generating good jobs down the road.” Obama used the tactic of the government priming the economic pump in 2009 with his $831 billion federal stimulus package. At that time, the Obama administration argued that such federal investment would keep the unemployment rate below 8 percent. Instead the unemployment rate has remained above 8 percent for 43 consecutive months.
The president’s budget recalls the stimulus philosophy by adding such federal programs as the $40 billion “Fix It First” infrastructure initiative. It also seeks $1 billion to create 15 manufacturing innovation institutes and $10 billion for a National Infrastructure Bank. According to The Heritage Foundation, 45 early educational and childcare federal programs already exist. But Obama’s budget seeks to create yet another in the form of a Preschool for All initiative, with the program’s $66 billion price tag paid for by raising the federal tax on cigarettes.
In total, Obama’s budget would increase spending for 2014 by $160 billion over the Congressional Budget Office’s February projections. Under the budget, the federal deficit, which has topped $1 trillion for four straight years, would be reduced by just $600 billion over the next decade.
Senate Republican Leader Mitch McConnell called the president’s new budget “just another left-wing wish list.” His colleague, Sen. Marco Rubio, R-Fla., said Obama’s budget “is a blueprint for a recession … and it encourages long-term dependency on government.”
But with the Senate and House having already proposed and passed their own budget resolutions, the president’s plan likely comes too late to affect the legislative process. The president is statutorily obligated to give Congress a budget blueprint by Feb. 4 each year. Obama’s late arriving budget turned the congressional budget process upside down, leading some lawmakers to speculate on the president’s motives.
“I want to believe the intention is not to purposely blow up the budget process so the president can campaign against the very budget process he blew up,” McConnell said Wednesday on the Senate floor. “But, from the reports we’re seeing, it’s getting harder and harder not to draw that conclusion.”
Obama’s budget this year cannot fare any worse than his budget last year, which the Senate rejected in a 99-0 vote last May.
But the president’s new plan does claim to trim entitlement and healthcare costs by about $600 billion over the next decade. It proposes to save $130 billion over the next 10 years by tweaking the way the government determines the annual cost-of-living adjustment for Social Security.
A Democratic-controlled White House taking steps to reign in the growth of Social Security is a development that should not be ignored. But the proposal does not come close to reaching the structural changes needed to reform entitlements. Even so, liberal groups have launched a campaign against the entitlement change. Left-leaning organizations delivered to the White House on Tuesday a petition with more than 1 million signatures of people opposing any entitlement cuts. This all but assures that Obama’s budget would have a difficult time improving on last year’s Senate vote shellacking.
“He does deserve some credit for some incremental entitlement reforms that he has outlined in his budget,” said House Speaker John Boehner. “I hope he won’t hold hostage these modest reforms for his demands for bigger tax hikes.”