* Obama says has moved "halfway" toward Republicans
* Plan would trim Social Security retirement program
* Calls on the wealthy to pay more in taxes
* Proposal would cut $1.8 trillion from deficit in 10 years
* House Speaker Boehner criticizes plan
By Jeff Mason and Mark Felsenthal
WASHINGTON, April 10 President Barack Obama
proposed a $3.77 trillion budget on Wednesday that combines
controversial cuts to social safety net programs with tax
increases on the wealthy in a package the White House hopes will
jumpstart deficit-reduction talks.
The proposal, an annual attempt to identify and fund the
president's policy desires, is unlikely ever to become law.
Its deficit cutting measures mirror an outline Obama put
forward last year that was rejected by John Boehner, the
Republican speaker of the House of Representatives. There were
no major departures from that plan, which the White House has
stressed for weeks is still on offer.
Obama's budget included cuts in Social Security, the pension
program for retirees and in Medicare, the health insurance
program for seniors. While Obama has made these proposals
before, their prominence in Wednesday's budget was designed to
demonstrate his seriousness about negotiating with Republicans
on ways to reduce the federal deficit.
"I don't believe that all these ideas are optimal, but I'm
willing to accept them as part of a compromise," Obama said
during brief remarks in the White House Rose Garden.
"When it comes to deficit reduction, I've already met
Republicans more than halfway. So in the coming days and weeks,
I hope that Republicans will come forward and demonstrate that
they're really as serious about the deficits and debt as they
claim to be," he said.
The budget predicts the deficit would fall to $744 billion
in 2014, or 4.4 percent of gross domestic product, from an
estimated $973 billion in 2013. Fiscal 2014 begins on Oct. 1.
It aims to achieve $1.8 trillion in deficit reduction over
10 years. Added to the $2.5 trillion in deficit cuts from past
efforts, the total reduction would be more than the $4 trillion
both parties have said would be an acceptable goal.
The ratio of deficits to GDP would fall to 2.8 percent in
2016, below the 3 percent level economists say is necessary to
put debt on a path to shrinking as a share of the economy.
The proposal revives Obama's call that wealthier people help
more with deficit reduction. It would require those making $1
million a year or more to pay at least 30 percent of their
income in taxes, after gifts to charity
Obama's budget also included proposals to cap tax breaks for
wealthier taxpayers, increase the estate tax and end the tax
break for "carried interest," profits earned by fund managers
like those who run private equity and other investment firms.
Republicans, who are wary of any push to raise taxes after
passing a rate increase for the wealthy at the beginning of this
year, largely dismissed Obama's proposal.
Boehner, Obama's main opponent in deficit talks, said the
president's proposed cuts to entitlement programs such as Social
Security were praiseworthy but not sufficient.
"I would hope that he would not hold hostage these modest
reforms for his demand for bigger tax hikes," Boehner said.
"The president got his tax hikes in January, we don't need
to be raising taxes on the American people. So I'm hopeful in
the coming weeks we'll have an opportunity, through the budget
process, to come to some agreement," he said.
LOOKING FOR A DEAL
Obama's hope is to build a coalition of lawmakers willing to
move toward his position, although most observers see that as
unlikely. He has invited 12 Republican senators to dinner at the
White House on Wednesday.
Both sides were unable to prevent some $85 billion in
across-the-board "sequestration" spending cuts from going into
effect on March 1.
Obama's budget proposal would replace those cuts with his
original deficit-reduction proposal from December. That offer
included $930 billion in spending reductions and some $580
billion in tax revenues.
Controversially, it proposes using a less generous measure
of inflation to calculate cost-of-living benefit increases for
the beneficiaries of some federal programs. This change would
have the effect of shrinking payments to some who receive Social
Although Obama has pledged to shield the most vulnerable
beneficiaries, the proposal has drawn strong opposition from
fellow Democrats and groups representing labor.
Representative Paul Ryan, the Republican vice presidential
nominee last year and a potential 2016 presidential candidate,
said Obama's budget was "worse than status-quo" because of its
tax and spending hikes, but he said there were some small areas
of common ground for further discussion on entitlement programs
such as Social Security and Medicare.
"At least he's put something here that shows his willingness
to address entitlements," Ryan said.
"So that gives me a glimmer of hope that there's a way of
getting to an agreement at the end of the day, but we're
obviously a long way from there right now."
Obama's budget is a clear contrast with a rival blueprint by
Ryan, whose plan aims to balance the budget in 10 years through
deep cuts to healthcare and social programs while lowering tax
"There are three enormous roadblocks - revenues, entitlement
reforms, and the sequester," said Chris Krueger, a Washington
analyst for Guggenheim Partners, referring to prospects for an
agreement. "They're all just miles apart."
NEW SPENDING, BETTER ECONOMY
In line with proposals from his State of the Union address,
Obama's budget includes spending on policy priorities such as
infrastructure and expanded pre-school programs.
A proposal for $77 billion to expand early childhood
education would be financed by nearly doubling the federal
tobacco tax to $1.95 from $1.01 per pack of cigarettes.
The budget also includes a 10 percent tax credit for small
businesses that raise wages or hire new workers.
The administration would also raise $79 billion in revenues
by raising taxes on large estates that are passed on to heirs.
The president's budget would lower to $3.5 million from $5
million the threshold for estates hit by the tax, and would
raise the tax rate to 45 percent from 40 percent.
The budget also suggests capping the value of the tax
exemption for interest paid by municipal bonds, an idea that has
rattled the $3.7 trillion municipal bond market.
The budget envisions a steady pickup in economic growth but
only a gradual decline in the unemployment rate.
The White House sees growth rising to 3.4 percent in 2014
from 2.6 percent this year, while the jobless rate would drop to
7 percent at the end of 2014 from 7.5 percent in the last three
months of 2013.