By Erik Wasson - 03/02/14 05:00 PM EST
President Obama will release his fiscal 2015 budget on Tuesday, a month late and after an especially muted rollout.
But as an election year platform for Obama, the budget is still an important document and could cause heartburn for members of his party facing difficult reelection races.
Here are eight things to watch for.
1. How much spending, how much debt?
The White House has said the new budget will show more deficit reduction than past budgets. Experts will be looking to see how that’s achieved, whether through more savings or tax increases, higher growth and lower interest rate assumptions, or gimmicks.
The Office of Management and Budget assumes all the policies the president wants — from continuing ObamaCare to enacting a new jobs stimulus — are put in place.
For comparison, last year the Obama budget proposed spending $3.8 trillion in 2014 and $3.9 trillion in 2015. The deficit for 2015 was projected to be $576 billion and 10 years of deficits added up to $5.2 trillion.
By 2023, the debt held by the public was to rise from $12.4 trillion to $19 trillion, and annual interest on the debt from $233 billion to $763 billion. The White House touted the fact that the $439 billion deficit in 2023 was just 1.7 percent of the economy compared to 6 percent in 2013.
Using the OMB “adjusted” baseline, the White House said the budget had $2.5 trillion in deficit reduction over 10 years.
2. How much in tax increases?
Last year Obama proposed $583 billion more in taxes over 10 years, not including $115 billion in new revenue from switching to a new measure of inflation. By 2023, the government was set to collect 20 percent of gross domestic product in taxes, up from 16.7 percent in 2013. By comparison, spending was to decrease from 22.7 percent in 2013 to 21.7 percent.
One thing that will be closely watched is the tax “loopholes” that Obama seeks to close. Last year, Obama proposed ending the carried interest tax break used by hedge fund managers.
But the president is no longer switching to the chained consumer price index and wants to expand the Earned Income Tax Credit, so the Obama administration will likely have to go after some new tax breaks to make up for the revenue loss.
3. What does the White House think the economy will look like when Obama leaves office?
To build the budget, the White House has to make assumptions about what the economy will do for the rest of Obama's time in office and beyond.
Last year, Obama's budget projected that real gross domestic product (GDP) would grow 2.3 percent over calendar 2013, 3.2 percent over 2014 and be at a healthy 3.6 percent growth rate by the time he left office. GDP was supposed to be $19 trillion by then. The unemployment rate was to fall from 8.9 percent in 2011 to 6.2 percent in 2016.
Raising growth projections and lowering interest rate forecasts could help OMB show deficits declining as a percentage of the economy over the next decade. The Congressional Budget Office in February changed its forecast to see fewer workers and less tax revenue than it had previously thought.
4. What's in the new $56 billion stimulus package, and how is it paid for?
The White House has revealed that the budget will call for $56 billion more in discretionary spending in 2015 than was agreed to in the December House-Senate budget deal.
The initiative, billed as the Opportunity, Growth and Security Initiative, would direct $26 billion to the Pentagon. It is not clear exactly how the money is to be spent or what tax loopholes and other savings are to use used to offset the new spending.
How much will be used to fund clean energy projects that the GOP has criticized? Under current law, full sequestration cuts to the tune of $109 billion per year is to come back into effect starting in 2016. Will Obama propose to eliminate that entirely?
5. What does the White House say about an immigration bill?
The White House, under pressure from liberals, is keeping cuts to Social Security benefits and other entitlements out of the budget.
Because of that, about $230 billion in deficit reduction will be lost. How will Obama make up the difference?
One source of savings would be to assume that the Senate’s immigration bill, which includes a pathway to citizenship for illegal immigrants, is enacted this year. The CBO said last year the bill would reduce the deficit by $197 billion, and the government could start collecting taxes on workers that were previously paid under the table.
6. How exactly does the Defense budget get cut?
Defense Secretary Chuck Hagel has already outlined much of Obama's plan to reduce Pentagon spending, but some details are not known.
One outstanding question is the size of the war funding. Last year, the budget said the Overseas Contingency Operations fund for Afghanistan and other wars was to shrink to $37 billion in 2015. Is this year’s number bigger, and how much training and other standard expenses are covered by it?
7. How is the $300 billion infrastructure fund paid for?
Obama is slated to call for $300 billion increased infrastructure spending, half of which would be paid for through business tax reform. Does this corporate tax reform package differ from past ideas?
Additionally, the gas tax has not been raised in years, and the Highway Trust Fund will be depleted by August. Are there any ideas in the budget that raise hopes for a long-term transportation bill, rather than a short infusion of money to the fund? And what does the budget say about the gas tax?
8. Are there any entitlement cuts, and will they hurt Democrats in the election?
The budget is an election year platform. Obama used the document last year as an olive branch to Republicans by including cuts to Social Security and Medicare.
The Social Security cuts were taken out of this year’s blueprint after liberals said they were bad politics as well as bad policy, given the large turnout of seniors expected in the coming election.
Still, sources say premium increases to Medicare Part B are still Obama’s budget. Are there any other cuts that could alienate the Democratic base or be used by GOP candidates in attack ads?