February 11, 2012 / 1:54 AM / 5 years ago

Obama budget signals election-year tax battle

President Obama pauses while he speaks about contraceptive care funding in the press room of the White House, February 10, 2012.Larry Downing

WASHINGTON (Reuters) - President Barack Obama will seek billions of dollars for jobs and infrastructure in his 2013 budget, an appeal to voters that draws election-year battle lines over taxes and spending as Republicans slammed him for "debt, doubt and decline."

Obama's budget proposal, which he will submit to Congress on Monday, will project a much smaller deficit in 2013 compared with this year, White House officials said on Friday.

"The budget targets scarce federal resources to the areas critical to growing the economy and restoring middle class security," the White House said in a statement, echoing Obama's recent messages on the campaign trial.

The budget gives Obama one of his biggest platforms before the election to tell voters how he would govern in a second White House term, helping him cast Republicans as the party of the rich, while they paint him as a tax and spend liberal.

Congress is free to ignore his proposal and Republicans, seeking to defeat him on November 6, declared it dead on arrival.

"This unserious budget is a recipe for debt, doubt and decline," said Brendan Buck, spokesman for the top Republican lawmaker, Speaker of the House of Representatives John Boehner.

"It would make our economy worse by imposing massive tax increases on small business and still pile up enormous debt that stirs greater economic uncertainty," he said.

The budget will include a multi-year request for over $800 billion for job creation programs and spending on roads and other surface infrastructure, including over $300 billion that could be felt starting this year in tax breaks and other steps to spur hiring.

Obama's request projects a deficit in fiscal 2013 of $901 billion, down from $1.33 trillion this year, the officials said.

The numbers, both higher than the White House estimated in September, indicate a deficit equivalent to 5.5 percent of gross domestic product in 2013, versus 8.5 percent in 2012.

Brighter Outlook

In addition, recent indicators from the labor market have been better than expected and the White House has already announced that a predicted 2012 unemployment rate in the budget of 8.9 percent was "stale" and should be lower. The U.S. jobless rate fell to 8.3 percent in January.

The president will repeat a call for millionaires to pay a minimum effective tax rate of 30 percent, as suggested by billionaire investor Warren Buffett, and identify $4 trillion in deficit reducing steps over 10 years that echo plans he laid out in September.

More details on what has become known as the "Buffett Rule" will come later in the month, together with details of Obama's proposed minimum international tax on the foreign profits of U.S. firms and his administration's broad principles of corporate tax reform.

The budget will also propose raising $1.5 trillion over a decade via higher taxes, with around half coming from allowing tax breaks for families earning more than $250,000 a year to expire at the end of 2012 - a longstanding Obama goal.

Breaking down the job and infrastructure spending, the budget would earmark $476 billion for roads and transportation upgrades over six years, and $350 billion for job creation.

A senior administration official said that, as much as possible, the money directly aimed at jobs would be funneled into the economy this year to kick start job creation.

The plans were previewed in Obama's State of the Union address last month, under a call for more economic fairness in America that sets up a stark contrast with the approaches being pushed by Republican candidates vying to face him in November.

The jobs measures include extending a payroll tax cut over 2012, allowing firms to fully deduct fresh investment and a call to allocate $60 billion to modernize schools and keep teachers on the job, also repeating a request Obama made in September.

Nor is it the first time the president has sought funds from Congress for infrastructure. In 2012 he proposed $35 billion a year over six years for transportation, claiming this would create hundreds of thousands of jobs, and $50 billion to set up a National Infrastructure Bank. Congress did not fund that plan.

Federal government spending has already been capped for 2013 in a deal Obama and Republicans reached last summer to raise the U.S. debt ceiling. Last month Obama announced defense spending cuts of $487 billion over 10 years.

The budget must still spell out where the ax falls on domestic spending. But it identifies $360 billion in savings from Medicare and Medicaid, federal healthcare programs for elderly and poor Americans, over 10 years.

Additional reporting by Caren Bohan, Laura MacInnis and David Lawder, editing by Stacey Joyce, Eric Beech and Jackie frank

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