* Proposal would scale back tax breaks for wealthy
* Obama: "Our budget is about ... our values"
* Republicans object to spending increases
By Jeff Mason, Mark Felsenthal and David Lawder
WASHINGTON, March 4 President Barack Obama
proposed new tax credits and job-training programs for U.S.
workers on Tuesday in a 2015 budget that drew instant
condemnation from Republicans, who dismissed the document as an
election-year campaign pitch.
The $3.9 trillion blueprint for the fiscal year that begins
on Oct. 1 also would boost spending on roads and bridges and
expand early-childhood education while paying for some of the
additional spending by scaling back tax breaks for wealthier
The proposal has almost no chance of passage in Congress,
where Republicans control the House of Representatives, but it
lays out Obama's policy priorities ahead of November
congressional elections. Democrats will be fighting to keep
control of the U.S. Senate and avoid losing ground in the House.
"Our budget is about choices, it's about our values," Obama
told reporters during a visit to an elementary school.
"At a time when our deficits are falling at the fastest rate
in 60 years, we've got to decide if we're going to keep
squeezing the middle class or if we're going to continue to
reduce the deficits responsibly while taking steps to grow and
strengthen the middle class."
While working within the overall cap of $1.014 trillion for
discretionary spending that Congress set for 2015, the president
proposed $56 billion in additional spending for education,
welfare and defense programs, paid for in part by ending a tax
break for wealthy retirees.
Republicans objected to the plan's spending increases and
said it did not address larger fiscal challenges related to the
Social Security retirement program and Medicare and Medicaid
healthcare for the elderly, poor and disabled.
"After years of fiscal and economic mismanagement, the
president has offered perhaps his most irresponsible budget
yet," Republican House Speaker John Boehner said in a statement.
"Spending too much, borrowing too much, and taxing too much, it
would hurt our economy and cost jobs."
Democrats hope to draw a contrast with the Republicans'
focus on fiscal restraint and portray themselves as better able
to deliver jobs and growth.
Obama's proposal signaled a shift from last year's emphasis
on deficit cutting to a greater focus on fighting poverty, a
goal the president is highlighting as he eyes his legacy with
fewer than three years left in office.
Republicans, cognizant of Americans' slow recovery from the
2007-2009 recession, also have focused on poverty-reduction but
they favor a dramatically smaller government role.
House Budget Committee Chairman Paul Ryan, a potential
Republican presidential contender in 2016, argued in a report on
Monday that the government had barely made a dent in combating
poverty in the past 50 years despite massive spending.
He blasted Obama's Tuesday proposal.
"This budget isn't a serious document; it's a campaign
brochure," said Ryan, who will unveil a Republican budget as a
counter to Obama's in the coming weeks.
POVERTY, TAXES, AND DEFICITS
Obama's budget proposes expanding the Earned Income Tax
Credit, an anti-poverty measure that is meant to encourage
low-income Americans to continue working.
The change would expand the program to cover some 13.5
million people who do not have children and make it available to
younger workers who are not currently eligible.
The expansion, which would cost $60 billion, would be funded
by closing loopholes such as the tax break for "carried
interest," profits earned by wealthy investors who run private
equity and other funds.
Obama has long sought to end that tax break, which allows
financiers to treat their income as capital gains, making it
subject to a tax rate of 20 percent instead of the nearly 40
percent rate on ordinary income paid by the highest earners.
Representative Dave Camp, the Republican chairman of the
powerful House Ways and Means Committee, also proposed last
month to "clean up" the carried interest deduction, but tax
reform is not expected to get traction in Congress this year.
The White House signaled last month that its new budget
would not extend the olive branch to Republicans on reform of
entitlement programs such as Social Security. Last year Obama
proposed changing how the government calculates inflation for
Social Security and other federal benefits that could have led
to income drops for older Americans.
White House officials said Obama abandoned the idea after
Republicans declined to offer concessions of their own.
While Obama played down the deficit issue, congressional
budget analysts have warned that longer-term budget picture
looks bleak because of the aging of the population, which will
lead to increased costs for entitlements programs such as Social
Security and Medicare.
The White House projected that in fiscal year 2015 the
budget deficit would total $564 billion, or 3.1 percent of the
nation's gross domestic product. That would be down from a $649
billion deficit, or 3.7 percent of GDP, in fiscal year 2014.
The Obama budget projects that annual deficits will remain
in the $400 billion to $500 billion range throughout the decade,
reaching a modest 1.6 percent of GDP in 2024.
The outlook from the non-partisan Congressional Budget
Office looks far worse, forecasting that deficits will climb
back to $1.1 trillion by 2024, or 4 percent of GDP.
The Pentagon unveiled a $496 billion base budget that
shifts the United States from its war-footing for the first time
in a dozen years, cutting the size of the military to pay for
training and new weapons systems in an era of tighter spending.
The budget set the Obama administration on a collision
course with Congress by seeking to eliminate popular older
weapons and reform military compensation while proposing an
additional $26.4 billion in military spending to be paid for by
closing tax loopholes and cutting mandatory spending.