Instead, Obama would reduce deficits by raising taxes by nearly $2 trillion over the next decade on corporations and the wealthy, in part by letting expire George W. Bush-era tax cuts on household income over $250,000 a year.
And the president is encouraging lawmakers to rewrite the tax code to eliminate the alternative minimum tax, which strikes many middle-class families, while requiring millionaires to pay at least 30 percent of their annual income to the Internal Revenue Service.
The $3.8 trillion spending request for fiscal 2013 would limit agency budgets according to limits agreed to during last year’s budget battles, forcing belt-tightening at the Pentagon and the lowest spending on domestic agencies as a percentage of the economy in at least a decade.
Obama said his proposal would save at least $4 trillion over the next 10 years and stabilize government borrowing. But Republicans blasted the budget as insufficient, with Senate Minority Leader Mitch McConnell (Ky.) deriding it as “a campaign document.”
Despite the savings, budget deficits would be markedly higher than they would under a debt-reduction plan Obama submitted to Congress in September, staying well above $600 billion a year for most of the next decade. The portion of the debt held by outside investors would climb to $18.7 trillion by 2021, or 76.5 percent of the overall economy — twice the size of the debt before the recession hit in 2007 and $1 trillion higher than the president’s September forecast.
Administration officials blamed that increase in large part on gloomier economic projections, which tend to depress tax collections, increase government spending and drive up deficits. Since the budget was prepared, job growth has proved stronger than expected, officials said, adding that the picture would look brighter today.
But White House economic adviser Gene Sperling said the administration added “our aspirations” to the $3.8 trillion request. New initiatives would increase 10-year deficit projections by about $350 billion. They include an extra $125 billion for road and rail projects, as well as permanently extending tax breaks that provide families up to $10,000 for college tuition and reward businesses for doing research in the United States.
In an unusually partisan budget message to Congress, Obama wrote that “reining in our deficits is not an end in itself” but “a necessary step to rebuilding a strong foundation so our economy can grow and create good jobs.” Drawing a sharp contrast with his Republican opponents, Obama said his approach “rejects the ‘you’re on your own’ economics that have led to a widening gap between the richest and poorest Americans.”