President Barack Obama’s $3.8 budget proposal would further increases taxes on wealthy Americans and trim Social Security and other popular benefit programs in an attempt to rein in runaway deficits, USA TODAY reports. The tax and spending plan is two months late, which the administration says is due to the intensive “fiscal cliff” negotiations at the end of December and the fights over the March 1 automatic spending cuts known as sequestration.
The president’s spending and tax plan is two months late. The administration blames the delay on the lengthy “fiscal cliff” negotiations at the end of December and then fights over the March 1 automatic spending cuts.
The budget plan, which is being unveiled today, would trim the deficit by $1.8 trillion over the next decade, for a total deficit savings of $4.3 trillion, according to the administration’s calculations, the newspaper reports.
Republicans in Congress are unhappy with the higher taxes, and Democrats are upset about the proposed cuts to Social Security.
The Obama administration wants to change the inflation formula for Social Security and other government benefit programs. It would take into account changes that occur when people substitute goods rising in price with less expensive products. It results in slightly lower annual readings for inflation. The switch would cut spending on government benefit programs by $130 billion over 10 years, although the administration said it planned to protect the most vulnerable. The change would also raise about $100 billion in higher taxes because the current CPI formula is used to adjust tax brackets each year. A lower inflation measure would mean more money taxed at higher rates.
The Obama budget proposal will join competing budget outlines already approved by the Republican-controlled House and the Democratic-run Senate. The budget already adopted by the GOP-controlled House would cut deficits by a total $4.6 trillion over 10 years on top of the $1.2 trillion called for in the 2011 deal.
The budget outline approved by the Democratic-controlled Senate tracks more closely to the Obama proposal, although it does not include changes to the cost-of-living formula for Social Security.
It is unlikely that Congress will get down to serious budget negotiations until this summer, when the government once again will be confronted with the need to raise the government’s borrowing limit or face the prospect of a first-ever default on U.S. debt.
Also in Obama’s budget proposal:
— An additional $50 billion for infrastructure investments, including $40 billion for immediate investments in repairs to highways, bridges, transit systems and airports.
— $1 billion to launch a network of 15 manufacturing innovation institutes across the country.
— A new program to offer preschool to all 4-year-olds from low- and moderate-income families. It would be funded by higher taxes on tobacco products.
— Another $100 billion in cuts to defense spending and an additional $100 billion in cuts to domestic programs over the next decade.
— Reducing spending on Medicare and other health-care programs by $400 billion over 10 years. The cuts would come from a number of ways, including negotiating better prescription drug prices and asking wealthy seniors to pay more.
— Scaling back of farm subsidies and trimming federal retiree programs to obtain another $200 billion in savings.
— Raise an additional $580 billion by restricting deductions for the top 2 percent of family incomes and implement the “Buffett Rule,” which would require that households with incomes of more than $1 million pay at least 30 percent of their income in taxes.