Obama's election-year budget challenge

President Obama on Monday sent Congress a $3.8 trillion budget for the federal government that will fuel election-year battles over spending and taxes. 

The White House claims the plan for fiscal 2013 would create jobs in the short term through billions in stimulus spending while dealing with the deficit down the road. But the GOP says the budget would simply deepen the nation’s deficit crisis while burdening the economy with tax hikes.  

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Obama’s proposal includes $350 billion in stimulus measures and $476 billion for transportation and infrastructure that would be partially paid for by savings from the end of the wars in Iraq and Afghanistan. 

Obama unveiled the budget at a Northern Virginia Community College event where he highlighted an $8 billion education initiative.

"In the year ahead, I will continue to pursue policies that will shore up our economy and our fiscal situation," Obama said in his introduction.

Republicans say the proposal doubles down on the failed 2009 stimulus bill, which never lived up to expectations, and argue the transportation component is funded with a Pentagon budget gimmick.


“Today we are witnessing one of the most spectacular fiscal cover-ups in American history," Senate Budget Committee ranking member Jeff Sessions (R-Ala.) said.

The plan proposes cutting the deficit by $3 trillion over 10 years. That reduction would be achieved through $1.5 trillion in new taxes, $800 billion in “war savings,” $278 billion in mandatory spending cuts and $360 billion in Medicare and other entitlement cuts. 

The GOP says the healthcare savings are an illusion because the plan assumes a “doc fix” that would prevent provider cuts in Medicare without specifying how that $500 billion would be paid for. 

House Budget Committee Chairman Paul Ryan (R-Wis.) says Obama’s plan does nothing to address the solvency of Medicare, which he says will go bankrupt in 10 years due to the rapidly aging population.

"Our families, seniors, children and grandchildren deserve better than this reckless budget and this dismal failure of leadership," Ryan said.

The budget adheres to the $1 trillion in cuts to discretionary spending over 10 years that was mandated by the August debt-ceiling deal. But the GOP says the deficit cuts do not go nearly far enough and points out the plan forecasts an increased deficit for this year of $1.33 trillion.

The GOP pointed out that the budget would add $11 trillion to the national debt over a decade and that the tax increases amount to $1.9 trillion if estate taxes and other fees are taken into account.

The decline to a $901 billion deficit next year also heavily depends on the expiration of Bush-era tax rates for the wealthy. Republicans argue those tax rates should be made permanent.

House Appropriations Committee Chairman Hal Rogers (R-Ky.), who is keen to take the pressure off the discretionary spending he oversees, said "the President’s budget falls exceptionally short in many critical areas — including a lack of any substantive proposal for mandatory and entitlement spending reform. 

“It is imperative that both the President and Congress put greater focus on addressing the exploding costs of these programs — which make up the vast majority of the federal budget.”

Obama’s proposal is not expected to pass either chamber of Congress, but will provide grist for the campaign trail as the president battles with the GOP for control of Washington.

Republicans in both chambers want to use budget plan as a weapon against the president. Senate Minority Leader Mitch McConnell (R-Ky.) plans to force a vote on the proposal in the Senate, hoping to replicate the 97-0 defeat that was dealt to Obama’s budget last year. 

The budget includes a grab bag of small-bore initiatives. There is $850 million for the Race to the Top schools program, a $2.2 billion advanced manufacturing tax credit and increased funding for wireless broadband.

The budget also includes a variety of new ways to pay for the targeted spending, including spectrum sales and a Financial Crisis Responsibility Fee that would be imposed on banks. The revenue from that fee would raise $61 billion to pay for a new mortgage-refinancing program.

—This story was updated at 11:41 a.m.

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