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Obama's $4 trillion budget seeks end to ‘mindless austerity’

The sense of fiscal crisis hanging over Washington for the last four years seems to have passed

WASHINGTON — President Barack Obama sent Congress an unexpectedly bold $3.99 trillion budget proposal Monday, signaling his desire to put an end to the deficit-cutting fervor that has gripped Washington since the GOP took control of the House of Representatives in 2011.

After four years of budgetary clashes between Obama and congressional Republicans, the threat of a political showdown leading to an economic catastrophe seems to have passed.

“I want to work with Congress to replace mindless austerity with smart investments that strengthen America,” Obama said Monday in a speech at the Department of Homeland Security. “And we can do so in a way that is fiscally responsible.”

Partly because of stronger economic growth and partly as a result of the across-the-board spending cuts triggered in 2013 — when a bipartisan deficit commission failed to come to an agreement on long-term debt reduction — the budget deficit for the fiscal year ending in September is projected to be the smallest since Obama took office, according to an estimate released by the nonpartisan Congressional Budget Office last week. Moreover, the $468 billion deficit, 2.6 percent of the nation’s gross domestic product (GDP), will be slightly below the historical average when calculated as a share of the economy.

The president’s budget is seen as an aspirational, political document instead of a legislative one — the starting point of negotiations with congressional leaders.

While Republicans have already balked at the proposed budget — particularly proposals to raise taxes on corporations and the wealthy — some conservative lawmakers have indicated their desire to work with the administration on middle-class tax cuts and select spending priorities.

GOP leaders have said they are unwilling to force another government shutdown over spending, even after gaining control of the Senate after November’s elections.    

The president’s budget for fiscal year 2016, starting Oct. 1, 2015, would roll back the automatic spending cuts triggered in 2013 — known as sequestration — and includes billions of dollars of new spending on programs such as additional tax credits for child care, subsidies for those seeking to attend community college, universal preschool education, a public works program for infrastructure and efforts to buff up the country’s defenses against cybersecurity attacks. The proposal would increase defense spending to $561 billion, about $38 billion more than sequestration levels.

Total federal spending over the next 10 years under the Obama budget would average 21.75 percent of GDP, identical to the average achieved by Republican President Ronald Reagan during his presidency, according to the Center on Budget and Policy Priorities, a left-leaning economic think tank.

Robert Greenstein, president of the organization, said in a statement that the latest Obama budget was “rather bold, with an unusual number of major new proposals for a president’s seventh budget.”

The budget would pay for the spending increases through a number of tax proposals that would raise rates for top earners, corporations and the financial sector, although it predicts that the deficit for fiscal year 2016 would creep up to $474 billion. White House forecasters predict deficits to remain at a manageable level for the next 10 years — about 3 percent of GDP — but only if congressional Republicans go along with the proposed tax increases.

The Congressional Budget Office took a bleaker view, predicting in its estimate that deficits would again rise to $1.1 trillion by 2025 as more baby boomers begin to draw from Medicare and Social Security.

Asked on NBC’s “Meet the Press” if he could work with the president, Rep. Paul Ryan, R-Wisc., chairman of the House Ways and Means Committee offered some hope that there will be areas of compromise.

Instead of focusing on taming deficits, he said the budget could be used as a tool to boost economic growth, endorsing the proposal to expand the earned income tax credit for childless earners as one such provision.   

“If we can find common ground, the answer is yes,” he said. “We’ve had such a stagnant economy, the slowest recovery since World War II. Middle-income wages are stagnant. We’ve got to break out of this slog, and I do believe there are things we can do in the next year to get this economy growing faster.”

Nonetheless, Ryan went on to slam the president’s proposals to raise taxes as “envy economics.”

“It doesn’t work,” he said.  “We’re an aspirational people, we’re an optimistic people, and our policies should reflect that, and that is not the kind of economic policy the president is interested in practicing.” 

Sen. John McCain, R-Ariz., last week called for a rollback of the defense cuts put in place by sequestration. “Let’s be clear. If we continue with these arbitrary defense cuts, we will harm our military’s ability to keep us safe,” he said during a hearing of the Senate Armed Services Committee. “We have heard all of this from our top military commanders before, yet there are still those that say, ‘Never fear. The sky didn’t fall under sequestration.’ What a tragically low standard for evaluating the wisdom of government policy.”

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