The White House set out a statement of the Democratic Party's election-year priorities Tuesday morning, unveiling a $3.9 trillion budget for fiscal 2015 that would boost spending on domestic priorities, raise taxes on the rich and shrink the military.
The plan would raise taxes by almost $1 trillion over the next 10 years, mostly on the wealthy. Revenues would climb to 19.9 percent of GDP by 2024, while spending would increase to 21.5 percent.
It faces no chance of being adopted by the House and Senate, which struck a the bipartisan deal in December that already set spending levels for 2015. Nor is it intended to resolve the long-term mismatch between federal spending and revenues.
Rather, it de-emphasizes the politically difficult choices needed to address the nation’s fiscal problems, and instead highlights a number of plans for boosting low- or middle-income Americans while closing tax preferences for high-income earners, with the clear goal of providing campaign material for Democrats in the fall elections.
The White House had already indicated that the 2015 budget would not include one of the most controversial features of the 2014 version, a plan to adopt a different measure of inflation, the chained Consumer Price Index, that would have reduced Social Security benefits and led to higher tax collections. That measure, which Obama had offered at the time as a first step toward working out a compromise on debt reduction with the GOP, angered many liberal lawmakers and drew some opportunistic criticism from Republican strategists seeking seniors' votes.
Last year's compromises remain "on the table," the White House said in a fact sheet accompanying the budget Tuesday, but this year's edition is a more "traditional" budget that sets out the president's vision for creating economic growth.
In the days leading up to the official roll-out, the administration leaked a number of details regarding the budget, including that it would stick to the $1.014 trillion discretionary spending limit set by the December deal between Rep. Paul Ryan, R-Wisc., and Sen. Patty Murray, D-Wash., as a baseline, but also include $56 billion in new spending on domestic initiatives. The White House also has touted a grab bag of Democrat-friendly measures that the budget includes.
One major provision would be to ramp up the Earned Income Tax Credit, a refundable tax credit meant to increase the rewards to work for poor Americans. Having already expanded the EITC for larger families in 2009, the administration also would boost its value for single, childless workers.
Another key feature of the plan would be $302 billion in spending on infrastructure projects such as roads and bridges. Those funds would be offset by increased revenue from a corporate tax reform plank that would lower rates and expand the tax base for businesses.
The budget, which calls for $26 billion in added defense spending, would rearrange the Pentagon's priorities. It would shift resources toward addressing cyberterrorism, and would shrink the size of the Army to its lowest level since World War II by 2019, retire the A-10 Warthog attack aircraft and reduce certain military benefits.
Obama also reissued his call for a number of domestic priorities, including universal pre-K education, comprehensive immigration reform, an infrastructure bank and an increase of the minimum wage from $7.25 to an inflation-indexed $10.10. The plan also would give federal workers a 1-percent raise.
Those plans would be paid for by closing a variety of tax credits, deductions, benefits and preferences for high-income Americans. Most notably, the budget would remove the “carried interest loophole” — a feature of the tax code that results in some investment managers’ earnings being taxed as capital gains rather than at the higher rate that applies to incomes.
There are other measures to raise taxes on the wealthy, including limiting the value of itemized deductions for high earners, and instituting the "Buffett Rule," which would ensure that "millionaires" pay at least 30 percent of their income in taxes.
Although the deficit fell faster than expected in 2013, from roughly $1.1 trillion to $680 billion, the lowest level since the financial crisis in 2008, the Congressional Budget Office warned in February that it now expects deficits over the next 10 years to be greater than previously thought because the weak economy will depress tax revenues.
The CBO projected that in 2024 the federal debt will be nearly 80 percent of total economic output and rising and stated that the outlook beyond the coming decade is “even more worrisome.”
The administration's projections show the debt stabilizing at 74.6 percent of the economy by 2015 under the Obama budget, and declining to 69 percent of Gross Domestic Product by 2024. The 2024 budget deficit would be 1.6 percent of GDP, compared with the CBO's projection of 4 percent under current law.