Obama debuts budget in fiscal showdown

TO Republican mockery, President Barack Obama rolled out a $US3.77 trillion ($3.61 trillion) budget overnight that laid out his battle lines in a new fiscal showdown in Washington but irked some liberal allies.

Mr Obama said his blueprint for fiscal year 2014 would shield the middle class by closing tax loopholes that help the rich, would grow the economy, cut the deficit, train future American workers and protect seniors.

"For years, the debate in this town has raged between reducing our deficits at all costs and making the investments necessary to grow our economy," he said on an unseasonably warm morning in the White House Rose Garden. "This budget answers that argument, because we can do both. We can grow our economy, and shrink our deficits."

Republicans however immediately rejected Mr Obama's plans. Senate Minority Leader Mitch McConnell branded them as a "left wing wish list".

House Speaker John Boehner, who has already passed a Republican budget that slashes spending, warned that Mr Obama had already made life tough enough on the rich, adding: "we don't need to be raising taxes on the American people."

Mr Obama's spending plan for 2014 is in many ways an academic exercise, given that it has no chance of being fully enacted in stalemated Washington.

But it will stand as his entry in the latest fast-building showdown pitching the president's plan to hike taxes on the most well off against Republican plans to slash government spending with no new revenues.

"We don't view this budget as a starting point. This is an offer where the president came more than half way towards the Republicans in an attempt to get a fiscal deal," said a senior White House official.

"Are Republicans going to be willing to come to us?" the official asked, ahead of the unveiling of the budget at a time hope has faded for a "grand bargain" deal on the deficit between Mr Obama and Republicans.

The blueprint included one key concession to Republicans, which has already angered elements of Obama's liberal Democratic base.

Mr Obama signalled he is ready to modify some cherished entitlement social programs, by adjusting cost of living adjustments that could trim benefits for some senior citizens.

The move, ahead of a second dinner between Mr Obama and Republicans at the White House today, was intended to try to lure some support for cross party budget and deficit talks.

The White House is billing the budget as a document which proves that the need to cut voluminous deficits does not need to be achieved by savage cuts in government spending and social programs envisaged by Republicans.
Officials say the plan includes $US1.8 trillion of deficit reduction over 10 years and would raise $US580 billion dollars in new revenue by curbing income tax breaks for the rich, without raising rates.

It would raise the tax on a pack of cigarettes from $US1.01 to $US1.95 per pack to finance an early childhood education scheme.

The budget would also provide $US1.65 billion for the Global Fund to Fight AIDS, Tuberculosis and Malaria and $US4 billion to allow security upgrades following the attack on the US consulate in Benghazi last September.

Republicans dispute Obama's deficit reduction figures, arguing that since the budget would dispense with $US1.2 trillion in automatic spending cuts, which began in March and are known as the sequester, its real deficit reduction figure would only be $US600 billion in savings.

Among measures that had already been opposed by Republicans, the Obama budget would implement the "Buffett Rule" which would mandate that households making more than a million dollars a year pay at least 30 per cent of income in taxes.

The budget foresees a deficit of $US744 billion, or 4.4 per cent of GDP, in 2014 - down from a projected deficit of $US973 billion this year.

Officials projected that the shortfall would reach 2.8 per cent of GDP by 2016 and 1.7 per cent by 2023.

The plan assumes unemployment will average 7.2 per cent next year, down from the current 7.6 per cent.

Economic growth meanwhile is predicted to pick up to 3.2 per cent next year, from 2.3 per cent this year.

The White House says that the plan represents more than two dollars in spending cuts for every one dollar of new revenue accrued from closing tax loopholes.

It also includes $400 billion in health savings that administration officials say could be found by cracking down on fraud.

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Obama to hand back five per cent of salary

US President Barack Obama speaks to members of the Business Council about the possible effects of the upcoming sequester's budget cuts on the business community. Source: AFP

US President Barack Obama plans to return five per cent of his $US400,000 annual salary to US government coffers out of sympathy for federal workers furloughed as a result of massive budget cuts.

"The salary for the President, as with members of Congress, is set by law and cannot be changed," a White House official said today on condition of anonymity.

"However, the President has decided that to share in the sacrifice being made by public servants across the federal government that are affected by the sequester, he will contribute a portion of his salary back to the Treasury."

Mr Obama will cut cheques every month to account for the impact of the budget cuts, known as the sequester, which came into force on March 1.

The White House has warned that thousands of federal government workers could be furloughed, see salaries hit or even be laid off because of arbitrary budget cuts of $US85 billion.

The measure came into force because Mr Obama and Republican lawmakers were unable to agree a deal on cutting the US budget deficit.

Mr Obama is said to have chosen the five per cent figure as it is equal to the cut being inflicted on non-exempt, non-discretionary government spending.

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Obama wants 'balanced' budget cuts

President Barack Obama heaped blame on Republicans on Friday for the failure to break a deadlock in efforts to avert looming automatic spending cuts and warned that a "ripple effect" would start hurting the middle class and the overall U.S. economy. Deborah Lutterbeck reports.

WITH spending cuts now etched into law, US President Barack Obama urged Congress to find a deficit-trimming ways that avoids using a 'meat cleaver'.

Mr Obama advocated what he called a balanced approach to replace across the board cuts of $US85 billion ($83.6 billion) in federal spending this year, blending "smart" cuts with reforms.

The so-called sequester mandated cuts were never actually meant to go into effect when it was fashioned in a deal with Congress in 2011.

The drastic cuts are not expected to be immediate or uniform across the country or from one government department to another.

Economists have warned that the cuts could cost many jobs and hinder growth in the still fragile US economy. But the realisation is sinking in that despite the perils they bring, the cuts are here to stay - at least for now.

In his weekly radio and internet address on Saturday, the president argued however there was still time to find a smarter solution to the nation's deficit and debt problem.

"I still believe we can and must replace these cuts with a balanced approach - one that combines smart spending cuts with entitlement reform and changes to our tax code that make it more fair for families and businesses without raising anyone's tax rates," Mr Obama said.

These were allusions to Mr Obama's willingness to trim spending on programs like medical care for the elderly and the poor, something which is anathema to many in his Democratic Party, and Mr Obama's drive to close tax loopholes he says benefit the rich.

Republicans, who ceded to Mr Obama in another budget showdown late last year and allowed taxes on the rich to go up, have said point blank that any deficit reduction now has to come from spending cuts, exclusively.

US President Barack Obama gestures as he speaks about automatic defense budget cuts.

Mr Obama said the budget deficit now exceeding $US1 trillion can be reduced without laying off workers or forcing parents and students to pay the price.

Under the sequester, 800,000 civilian employees of the Defense Department will go on a mandatory furlough one day a week and the navy will trim voyages.

Cuts will also be made to special needs education and preschool for less well-off children. National parks could close and wait times could hit four hours at airport customs posts.
 

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