April 10, 2013

President Obama's budget cuts debt, entitlements

As he strives for 'grand bargain,' the president's $3.8 trillion budget includes both Republican and Democratic ideas, which could anger everyone.

The Associated Press

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President Obama, accompanied by acting Budget Director Jeffrey Zients, speaks about his proposed 2014 federal budget at the White House in Washington, D.C., on Wednesday.

The Associated Press

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Though presidents have for nearly a century launched the budget process, Obama's request for the fiscal year that begins in October arrived on Capitol Hill 65 days late, weeks after the House and Senate had each adopted its own spending blueprint.

In the House, Ryan's plan seeks to balance the budget over the next decade without new taxes, in part by keeping the sequester in place, repealing Obama's health care initiative, and making unprecedented cuts to Medicaid and other programs for the poor.

In the Senate, Budget Committee Chairman Patty Murray, D-Wash., won narrow approval for a competing spending plan that would replace the $1.2 trillion sequester in part with nearly $1 trillion in new taxes.

Neither proposal would trim Social Security benefits. And though Ryan proposes to replace Medicare with a cheaper system known as "premium support," Obama's budget offers slightly larger Medicare savings in the near term.

The president's debt-reductions include nearly $400 billion from federal health programs, primarily Medicare, with the bulk of the cuts falling on drug companies and other providers. But Medicare beneficiaries would also take a hit, through higher premiums and requirements to substitute generic drugs for more expensive brand names.

Obama also proposes to slow the growth of Social Security benefits through chained CPI, trimming cost-of-living increases by roughly three-tenths of a percentage point a year and saving the government about $130 billion over the next decade.For the coming fiscal year, the blueprint proposes to spend $3.78 trillion and projects a deficit of $744 billion, or 4.4 percent of the nation's gross domestic product. That's down from the $973 billion deficit the White House projects for the current fiscal year and heralds an end to the era of record deficits in excess of $1 trillion that ramped up the national debt during and after the recent recession.

Obama's budget request -- the fifth of his presidency -- proposes a range of other initiatives. His written message to Congress calls a growing economy the "North Star that guides our efforts," and his budget seeks $100 billion in new cash for roads and railways, $1 billion for 15 new institutes to promote innovation in manufacturing and $8 billion to help community colleges prepare students for existing jobs.

Obama also seeks hundreds of billions of dollars in new revenue, including a $3 million cap on the value of individual retirement accounts and an increase in the estate tax after 2018.

Administration officials emphasized that those proposals are separate from their offer for a debt-reduction compromise, which remains the top priority.

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