As part of that strategy, Obama will jettison the framework he unveiled last year for a so-called grand bargain that would have raised taxes on the rich and reined in skyrocketing retirement spending. A centerpiece of that framework was a proposal — demanded by GOP leaders — to use a less-generous measure of inflation to calculate Social Security benefits.
The idea infuriated Democrats and never gained much traction with rank-and-file Republicans, who also were unwilling to contemplate tax increases of any kind. On Thursday, administration officials said that the grand-bargain framework remains on the table but that it was time to move on.
“Over the course of last year, Republicans consistently showed a lack of willingness to negotiate on a deficit-reduction deal, refusing to identify even one unfair tax loophole they would be willing to close,” said a White House official, speaking on the condition of anonymity to describe the budget before its official release. “That is not going to stop the president from promoting new policies that should be part of our public debate.”
Republicans said emerging details of the president’s budget prove he was never serious about addressing the nation’s long-term debt problems.
“This reaffirms what has become all too apparent: the president has no interest in doing anything, even modest, to address our looming debt crisis,” Brendan Buck, a spokesman for House Speaker John A. Boehner (R-Ohio), said in a statement. “The one and only idea the president has to offer is even more job-destroying tax hikes, and that non-starter won’t do anything to save the entitlement programs that are critical to so many Americans.”
The new budget request, due out March 4, comes during a relative lull in Washington’s lengthy budget wars. Late last year, Congress approved a two-year spending plan negotiated by the chairmen of the House and Senate Budget committees, Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.), that would ease automatic cuts, known as the sequester, that were eating away at agency spending. And this month, Congress agreed to forgo another battle over the federal debt limit, voting to suspend its enforcement until March 2015.
The lack of conflict is due in part to the collapse of the deficit as a political issue. While annual budget deficits remain high by historical standards, they have shrunken rapidly over the past few years as the economy recovered and Congress acted to cut spending.
The latest estimates from the nonpartisan Congressional Budget Office show the deficit falling to$514 billion this year and to $478 billion in fiscal 2015 — well below the trillion-dollar deficits the nation racked up during the recession and immediately afterward. But the CBO warned that deficits would start to grow again in a few years.
In recognition of that fact, Obama would retain some parts of his grand-bargain framework, including a proposal to require wealthy seniors to pay more for Medicare benefits than they do now. White House officials said the president continues to believe that entitlement programs such as Medicare and Social Security must be reformed to be sustainable.
Meanwhile, Obama would fully pay for proposed new spending in his budget request, administration officials said, including $56 billion for what they called “Opportunity, Growth and Security Initiative.” The package, which would be split between domestic programs and defense, will include fresh cash for 45 new manufacturing institutes; a “Race to the Top” for states that promote energy efficiency; new job training programs and apprenticeships; and expanded educational programs for preschoolers.
White House officials declined to say Thursday how they would fund the initiative. But Obama has in the past proposed limiting the value of income-tax deductions for wealthy households and closing a variety of corporate tax breaks.
A senior administration official said the budget would also propose new corporate tax rules aimed at preventing companies from moving profits overseas to avoid U.S. taxes. For instance, the rules will seek to limit a company’s ability to borrow domestically — and take large tax deductions on the interest — and then invest the money overseas.
Prohibiting corporations from gaming the tax code has been a popular issue among Senate Democrats and would help emphasize bread-and-butter themes in a year when Democrats will also be focusing on raising the minimum wage and other populist measures.
“President Obama’s budget will be a powerful statement of Democratic principles,” Senate Majority Leader Harry M. Reid (D-Nev.) said in a statement.
Senior administration officials said they decided to chart a more partisan, aspirational path after Republicans failed to respond to the olive branch offered last year. Then, after two years of near-misses on the budget in negotiations with Boehner, Obama still believed a deal was possible.
Now, they said, the president is not so optimistic. And he believes it is up to Republicans to make the next move.
At the same time, the nation’s debt problem has become markedly less urgent, they said, leading the president to back away from the most controversial part of his debt-reduction framework — the proposal to adopt a new measure of inflation known as the chained consumer price index, or chained CPI.
Although other cost-cutting proposals could yet cause tensions within his party, Obama’s decision not to include chained CPI in his budget request immediately won praise from Democrats.
“I applaud President Obama for his important decision to protect Social Security,” Sen. Bernard Sanders, the liberal independent from Vermont, said in a statement. “With the middle class struggling and more people living in poverty than ever before, we cannot afford to make life even more difficult for seniors and some of the most vulnerable people in America.”
Officials said Obama’s budget request will include other nuggets of note. For example, it assumes that an overhaul of the nation’s immigration laws will pass Congress despite deep divisions in Republican ranks. It also assumes that a sharp, but somewhat mysterious slowdown in health-care spending will continue throughout the next decade.
As a result, the White House projects that annual budget deficits will fall below 2 percent of gross domestic product by the end of the decade. That outlook is much rosier than CBO projections, which show the deficit rising to 4 percent of GDP in 2024.
Scott Wilson contributed to this report.