Obama Budget

Obama Budget remember America is broke we have no money we have to borrow money from countries that do not like us. But we are going to spend more money instead of doing what you or I would do suck it up tighten your belt and save money but with the Obama Budget we are spending money like no time in history.
My View on how the new White House is Doing


President Obama’s new budget blueprint estimates a stunning deficit of $1.75 trillion for the current fiscal year, which began five months ago, then lays out a wrenching change of course as he seeks to finance his own priorities while stanching the flow of red ink.

By redirecting enormous streams of deficit spending toward programs like health care, education and energy, and paying for some of it through taxes on the rich, pollution surcharges, and cuts in such inviolable programs as farm subsidies, the $3.55 trillion spending plan Mr. Obama is undertaking signals a radical change of course that Congress has yet to endorse.

The deficit he inherited, a shortfall of more than $1 trillion as the current fiscal year began, has continued to swell in recent months with additional bank bailouts, the first wave of spending from a newly enacted stimulus plan and the continuing costs of the wars in Iraq and Afghanistan.

The administration, as it had announced, will try to cut that amount sharply by 2013, when Mr. Obama’s first term ends, to $533 billion, even as it escalates spending on crucial priorities.

“There are times when you can afford to redecorate your house,” Mr. Obama said on Thursday morning as he released an outline of the budget for the next fiscal year, which begins in October, “and there are times when you have to focus on rebuilding its foundation.”

His administration will attempt to close the large fiscal gap even while starting a major health-care initiative intended to substantially extend coverage; to do so, it foresees increasing taxes on the wealthiest Americans and using revenue from a new program: selling carbon credits to manufacturers as part of a cap-and-trade plan meant to slow climate change.

Further savings would come from such items as a proposal to phase out government payments to crop producers making more than $500,000. Additional revenues are posited from a tightening of tax-code enforcement.

"Having inherited a trillion-dollar deficit that will take a long time for us to close, we need to focus on what we need to move the economy forward, not on what’s nice to have," Mr. Obama said. The budget plan projects the deficit falling to $1.17 trillion in 2010 and down to Mr. Obama’s goal of $533 billion in 2013, then increasing again to $712 billion by 2019. Mr. Obama takes credit for $2 trillion in deficit reduction over 10 years, three quarters of which comes from lower expenses in Iraq and Afghanistan and most of the rest from tax increases on the wealthy and revenues from a market-based cap on greenhouse gas emissions.

The forecasts are also founded on optimistic assumptions that the recession will end by next year and quickly produce stronger growth than was seen in the last decade. After the economy shrinks this year, the Obama team assumes that the gross domestic product adjusted for inflation will increase by 3.2 percent next year and then 4 percent or more the following three years, a rate nearly twice the average of the Bush years.

The budget projects slightly lower spending on the Iraq and Afghanistan wars to $130 billion in the 2010 fiscal year, then a much larger drop beginning in fiscal 2011, when Mr. Obama wants to have combat forces out of Iraq. The basic military budget in 2010 would be $534 billion in 2010.

Mr. Obama promised to include the full costs of the wars in all his budgets, saying that because of “dishonest accounting” past budgets have “not told the whole truth about how precious tax dollars are spent. Large sums have been left off the books, including the true cost of fighting in Iraq and Afghanistan.”

The deficit, which at 12.3 percent of gross domestic product is expected to touch its highest level since 1945, could grow this year if the economy worsens significantly and a new infusion of capital into distressed banks is ordered; the administration has estimated that this might call for adding $250 billion to the cost of the bailout already approved by Congress.

"No part of my budget will be free from scrutiny or untouched by reform," Mr. Obama said, in a nod to critics who have suggested that the economic rescue package includes runaway waste.

"I don’t think that we can continue on our current course," he added.

Republicans quickly signaled deep skepticism about President Obama’s approach. Representative Eric Cantor of Virginia, the House Republican whip, said Democrats should not “spend imaginary money” or increase taxes at a difficult moment.

“It is not just misguided but dangerous to raise taxes on small businesses and families that can’t afford to pay them,” Mr. Cantor said. “In fact, a majority of those penalized by the proposed tax increase in this budget are small businesses.”

The new proposal for the coming fiscal year and beyond includes many ambitious and costly programs that would have to be approved by Congress, including some that Republicans and fiscal hawks are likely to oppose.

The tax proposal to help pay for health care, coming after recent years in which wealth has become more concentrated at the top of the income scale, introduces a politically volatile edge to the Congressional debate over Mr. Obama’s domestic priorities.

The president also proposed, in the 10-year budget outline he released Thursday, to use revenues from the centerpiece of his environmental policy — a plan under which companies must buy permits to exceed pollution emission caps — to pay for an extension of a two-year tax credit that benefits low-wage and middle-income people.

The combined effect of the two revenue-raising proposals, on top of Mr. Obama’s existing plan to roll back the Bush-era income tax reductions on households with income exceeding $250,000 a year, would be a pronounced move to redistribute wealth by reimposing a larger share of the tax burden on corporations and the most affluent taxpayers.

Universal health care is worth that price, Mr. Obama said.

"We must make it a priority to give every single American quality, affordable health care," he said. "With this budget we are making a historic commit to comprehensive health-care reform."

The officials said the increase in revenues, estimated at $318 billion over 10 years, would account for about half of a $634 billion “reserve fund” that Mr. Obama will set aside in his budget to address changes in the health care system. The other half would come from proposed cost savings in Medicare, Medicaid and other health programs.

In a document summarizing its proposals, the White House said it would finance coverage for the uninsured in part by “rebalancing the tax code so that the wealthiest pay more.”

To narrow the deficits, the president proposed $636.7 billion in tax increases on the wealthy over the next 10 years, largely by reversing tax cuts passed by President George W. Bush on taxpayers who make $200,000 or more, or $250,000 for married couples. The top income tax bracket would return to 39.6 percent from 36 percent and capital gains and dividends for those over the income limits would be taxed at 20 percent.

The White House also proposed tax provisions that would raise $353.5 billion over 10 years by repealing credits and reductions for oil and gas companies, toughening tax collections and other changes in tax law.

On the other side of the ledger, Mr. Obama would cut taxes for lower- and middle-class Americans by $770.1 billion over 10 years and for businesses by $149.4 billion.

Among the most challenging areas for reducing spending are in the Pentagon’s accounts, which have been running at record levels as the wars continue, the military expands, and the costs of building new weapons escalates.

While the budget outline requests a small increase in basic military spending, the Obama administration has made it clear that it intends to shift some of the money from huge cold war-style weapons systems to smaller programs focused on fighting insurgents in Iraq and Afghanistan and new threats to the nation’s cybersecurity.

Internal debate over which programs to cut is still so intense that Defense Secretary Robert M. Gates has taken the unusual step of requiring even the members of the Joint Chiefs of Staff to sign agreements not to leak the details. But some clues have emerged, and military consultants say it seems clear that expensive missile defense systems and parts of the Army’s vast modernization effort will be cut back. Some also say that plans for a new Navy destroyer are likely to be scrapped.

In the short term, the White House said it would ask Congress in coming weeks for another $75.5 billion for the wars on top of the $65.9 billion already approved to get through the rest of the current fiscal year. It builds $130 billion in expenses for the wars into the 2010 fiscal plan but keeps it separate from the base Pentagon budget.

Beyond the assumption that cost of the wars fall over the next decade, the budget blueprint outlines few cuts in big-ticket spending. The most significant involve paring agricultural subsidies for wealthier farmers and eliminating intermediary costs for student loan programs. The blueprint also projects $316 billion in savings over 10 years from increasing efficiency and competitive bidding in Medicare and Medicaid programs.

Few individual departments, though, will see their budgets actually go down in 2010. Just 3 of the 15 cabinet departments will be cut from 2009 to 2010 — Energy, Health and Human Services and Justice. But energy and health are also getting huge infusions of money from the $787 billion economic recovery legislation just signed into law.

The State Department gets the biggest increase, rising from $36.7 billion this year to $51.7 billion next year, although Mr. Obama will not be able to keep his promise to double foreign aid.

The Obama budget promises a comprehensive effort to address global warming, slash oil imports and create a new “green” economy that produces millions of new jobs. The White House estimates that the effort, built around a cap-and-trade program to limit greenhouse gas emissions, will produce $150 billion over 10 years beginning in 2012 to finance renewable energy projects and potentially hundreds of billions of dollars more that will be returned to families, communities and businesses that suffer hardship as the result of higher energy prices.

However, Congress is in the early stages of debating global warming legislation program, and any revenue from it is still largely speculative.

The Department of Energywill have much more to spend, thanks in part to money from the stimulus package for research, weatherization programs and modernization of the electric grid this year and beyond. Also included in the current year are several billion dollars in aid for American automakers to design and build high-mileage cars. The Department of Interior budget grows slowly, with new money for park maintenance, endangered species protection and renewable energy projects.

At the Environmental Protection Agency, the budget projects a 34 percent spending increase for 2010, with much of the money devoted to clean water projects, a Great Lakes restoration program and across-the-board increases for regulation, research and enforcement.

Because utilities and other businesses would presumably pass on the costs of carbon payments to customers, Mr. Obama will propose to use most of the revenue from the greenhouse gas emission permits to finance an extension of the new “Making Work Pay” tax credit beyond the two years covered in the economic recovery plan.

That tax relief, the administration will argue, will offset households’ higher costs for utilities and other products and services from businesses’ passing on their permit expenses.

That tax credit will annually provide $400 to low-wage and middle-income workers or $800 to couples; Mr. Obama would like to increase those figures to $500 and $1,000. The credit phases out for those with incomes above $75,000 a year and for couples with incomes of more than $150,000; no benefit would go to individuals with more than $100,000 income and couples with $200,000.

The tax credit will begin showing up in the form of lower withholding for eligible workers beginning April 1.

The remainder of the projected revenue from the permits will finance Mr. Obama’s campaign promise to provide $15 billion a year over 10 years to subsidize research and development of alternative energy sources, officials said. The stimulus package included a multibillion-dollar down payment to develop a national electricity grid to harness and distribute energy from such sources, including wind farms.

Behind the numbers in Mr. Obama’s first budget is one of the most far-reaching domestic agendas in years, and at a time when the president and Congress are already grappling with an economic crisis worse than any in decades. The environmental permits would not take effect until 2012, at which point the administration expects the economy to have recovered. Similarly, some of the tax increases would not take effect until 2011.
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Source:NYT