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Obama budget calls for new spending to lower unemployment, help middle class

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President Barack Obama unveiled a multitrillion-dollar spending plan, pledging an intensified effort to combat unemployment and asking Congress to approve new job-creation efforts that would boost the deficit to a record-breaking $1.56 trillion.

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Obama has pledged to appoint a bipartisan task force to draft a plan to lower deficits over the next five years, but Republicans have turned down the president, saying the design of the commission would give Democrats the upper hand, stacking the deck for tax increases. Instead, they have called for a commission dedicated solely to cutting spending.

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Some GOP lawmakers also have endorsed Ryan's alternative budget plan, which would wipe out deficits in part by privatizing Social Security and replacing traditional Medicare benefits with an insurance voucher for people age 55 and older. On Sunday, White House budget director Peter Orszag called that an "interesting" approach that "may not be the one the American public favors."

On Monday, Ryan fired back. "At least we're offering a plan," he said. "They're offering a commission."

Orszag declined on Monday to say when Obama would appoint commission members. He also would not discuss the scope of its mandate, including whether higher taxes for middle-class families would be on the table.

Obama won office on a pledge to protect families making less than $250,000 a year from tax increases, and his budget blueprint includes a variety of middle-class tax cuts, including a one-year extension of his signature Making Work Pay tax credit, worth $400 a year to individuals and $800 to families. Obama also proposes to extend tax cuts that benefit the middle class, enacted during George W. Bush's administration, past their scheduled expiration this year, at a cost of more than $2 trillion over the next decade.

Independent budget experts say it will be difficult to significantly reduce deficits without hitting the middle class.

Asked whether Obama had considered limiting those tax cuts, or at least offering a way to pay for them, Orszag said no.

"A lot of painful choices . . . have already been put on the table," he said, citing $1.2 trillion in proposed deficit reduction. "So is more necessary? Sure. But we think that, to get the rest of the way there and get the medium-term deficit down to where it needs to be, requires a bipartisan process, and that's what we're pursuing."

Some analysts said that Obama's proposals to cut deficits are unlikely to pass muster on Capitol Hill, leaving more work for the commission. For example, the president is proposing to raise taxes on multinational corporations by more than $120 billion over the next decade; a similar plan in last year's budget went nowhere in Congress.

Obama also wants to limit the value of itemized deductions for high earners to raise nearly $300 billion over the next decade, an idea lawmakers rejected last year to help finance far-reaching health-care legislation.

And while Obama's budget assumes that health-care legislation eventually will pass, reducing deficits over the next decade by about $150 billion, neither the White House nor congressional Democrats have outlined a plan to push the measure through a reluctant Congress.

Outside budget analysts called the blueprint a reasonable approach to the nation's fiscal problems. Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities, called it "a pretty solid budget, given the bounds of the possible."

"Obviously, it falls well short of what will be needed to get deficits under control," he said. "But the budget probably goes as far in that area as today's toxic political environment will allow."

Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, echoed that view, saying that any serious proposal to restrain deficits would require politically painful proposals, such as increasing the retirement age and limiting Social Security benefits for high earners. That kind of plan would be dead on arrival in an election year, she said. She warned, though, that Obama should be doing a better job now of preparing the public for the hard choices ahead.

"You can't brag in the State of the Union speech about tax cuts for 95 percent of the country, send out talking points about all the new spending and tax cuts in your budget and continue to promise not to raise taxes for families making less than $250,000 -- all while claiming you want to get deficits under control," she said.

Obama "has to stop pretending these small, little steps are the kinds of tough choices we should be focusing on right now, instead of the bigger policies," she said.


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