07 Apr Obama Budget Seeks to Trim Entitlements, Raise Taxes
President Barack Obama will make another push for a grand bargain of tax increases and entitlement cuts in the budget he releases next week, according to a senior administration official.
The president’s fiscal 2014 blueprint will include $1.8 trillion in deficit reduction over the coming decade and propose dramatically shrinking, but not eliminating, the deficit by 2023. It would increase taxes on the wealthy by shrinking their deductions — something GOP leaders continued to say Friday is a nonstarter — and make entitlement cuts that already have Obama’s liberal supporters screaming foul.
The deficit would drop to 2.8 percent of GDP in 2016 and a “fiscally sustainable” 1.7 percent in 2023 under Obama’s plan — incorporating his December “grand bargain” offer to Speaker John A. Boehner, R-Ohio, who rejected it then and again today.
The $1.8 trillion deficit reduction figure doesn’t account for the savings from the sequester, which would save $1.2 trillion over the coming decade unless Congress acts to replace it. The net deficit reduction relative to the sequester would be $600 billion, Carney acknowledged. But the administration says the overall deficit reduction achieved in the past two years would reach $4.3 trillion.
The budget effectively incorporates the president’s December grand bargain offer to Boehner — including a stingier measure of inflation that would shrink increases in Social Security and other benefits across the government, cut Medicare payments to drug companies and require wealthier seniors to pay higher premiums. It also would increase revenue through “bracket creep” in the tax code.
The inflation change, touted by the administration as “superlative CPI” but really a variation of something called “chained CPI,” would raise about $230 billion over the coming decade, with about $100 billion coming from higher taxes. CPI stands for consumer price index.
“While this is not the president’s ideal deficit reduction plan, and there are particular proposals in this plan like the CPI change that were key Republican requests and not the president’s preferred approach, this is a compromise proposal built on common ground and the president felt it was important to make it clear that the offer still stands,” the senior administration official said.
That’s not a new position. The White House has been saying repeatedly in recent months that its offer still stands. But that offer has been to no avail as the GOP insists on a cuts-only package, with Boehner withdrawing his own December offer of $1 trillion in revenue and $1 trillion in spending cuts after Obama demanded an immediate hike in tax rates on the rich to avert the fiscal cliff.
Boehner again rejected more tax hikes Friday.
“If the president believes these modest entitlement savings are needed to help shore up these programs, there’s no reason they should be held hostage for more tax hikes,” he said in a written statement.
But the administration continues to insist tax hikes and entitlement cuts go hand in hand. “Things like CPI that Republican leaders have pushed hard for will only be accepted if congressional Republicans are willing to do more on revenues,” the official said.
To pay for some new education programs Obama has already unveiled — including a pre-kindergarten initiative — his budget will raise tobacco taxes.
Other details released Friday include a limit of $3 million in assets in tax-advantaged IRAs and other retirement accounts while generating $9 billion over a decade.
The budget would also crack down on people who collect both disability and unemployment benefits at the same time.