Obama sends Congress $3.8 trillion spending plan

By MARTIN CRUTSINGER, AP Economics Writer Published: April 10, 2013

WASHINGTON (AP) — President Barack Obama sent Congress a $3.8 trillion spending blueprint on Wednesday that strives to achieve a “grand bargain” to tame runaway deficits, raising taxes on the wealthy and trimming popular benefit programs including Social Security and Medicare.

The president's budget projects deficit reductions of $1.8 trillion over the next decade, achieved with higher taxes, reductions in payments to Medicare providers and cutbacks in the cost-of-living adjustments paid to millions of recipients in Social Security and other government programs.

The budget would also nearly double the federal tax on cigarettes to $1.95 per pack. That money would fund a new preschool program for 4-year-olds.

The president's proposed spending for the 2014 fiscal year, which begins Oct. 1, would rise 2.5 percent from this year.

The budget projects a deficit for the current year of $973 billion, falling to $744 billion in 2014. Those would be the first deficits below $1 trillion since 2008. Even with the president's deficit reductions, the budget projects the red ink would total $5.3 trillion over the next 10 years.

The plan includes a compromise proposal that Obama offered to House Speaker John Boehner during “fiscal cliff” negotiations last December. Boehner walked away from those talks because of his objections to raising taxes on the wealthy.

By including proposals to trim Social Security and Medicare, the government's two biggest benefit programs, Obama is hoping to entice Republicans to consider tax increases.

“I have already met Republicans more than halfway, so in the coming days and weeks I hope that Republicans will come forward and demonstrate that they're really as serious about the deficit and debt as they claim to be,” Obama said in the White House Rose Garden.

But instead of moving Congress nearer a grand bargain, Obama's proposals so far have managed to anger both the Republicans, who are upset by higher taxes, and Democrats unhappy about cuts to Social Security benefits.

House Budget Committee Chairman Paul Ryan, R-Wis., rejected the administration's argument that the refusal of Republicans to consider further tax increases represents inflexibility.

“We Republicans have already done things to move to the middle, to find common ground,” Ryan said on MSNBC. “We really believe if we set the stage right, we can get fundamental tax reform.”

Senate Republican Leader Mitch McConnell dismissed Obama's budget as “not a serious plan. For the most part, just another left-wing wish list.”

The president's spending and tax plan is two months late. The administration blames the delay on the lengthy negotiations at the end of December and then fights over the resulting March 1 automatic spending cuts.

The Obama budget proposal will join competing outlines already approved by the Republican-controlled House and the Democratic-run Senate.

Obama's plan is not all about budget cuts. It also includes an additional $50 billion in spending to fund infrastructure investments, including $40 billion in a “Fix It First” effort to provide immediate money to repair highways, bridges, transit systems and airports nationwide.

Obama's budget would also provide $1 billion to launch a network of 15 manufacturing innovation institutes across the country, and it earmarks funding to support high-speed rail projects.

The president's plan to establish a program to offer preschool to all 4-year-olds from low- and moderate-income families would be financed by the higher tax on tobacco, which the administration said would raise $78 billion over a decade.

The administration said its proposals to increase spending would not increase the deficit but rather would be paid for either by increasing taxes or making deeper cuts to other programs.

Among the proposed cuts, the administration wants to trim military spending by an additional $100 billion and domestic programs by an extra $100 billion over the next decade.

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