Obama proposes $4T budget with tax hikes on the wealthy

President Obama on Monday called for an end to “mindless austerity” as he presented the Republican Congress with a $4 trillion budget proposal that would shatter the budget caps under sequestration.

Bolstered by the growing economy, the president declared that the deficit focus of the past should be discarded in favor of “investments” in infrastructure and education, funded partly by tax hikes on the wealthy and big business.

“Will we accept an economy where only a few of us do spectacularly well? Or are we going to build an economy where everyone who works hard has a chance to get ahead?” Obama said Monday at the Department of Homeland Security following the budget’s unveiling. 

He described his proposals as “middle-class economics” in which “everybody gets a fair shot, and everybody is doing their fair share, and everybody plays by the same set of rules.

The fiscal blueprint — the second-to-last of Obama’s presidency and the first he’s pitched to a GOP-controlled Congress — sets the stage for a high-stakes battle, with Republicans determined to use their new majorities in the House and Senate to slash domestic spending and bring the budget in balance within 10 years.

Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellSenate passes 0B defense bill Overnight Health Care: New GOP ObamaCare repeal bill gains momentum Overnight Finance: CBO to release limited analysis of ObamaCare repeal bill | DOJ investigates Equifax stock sales | House weighs tougher rules for banks dealing with North Korea MORE (R-Ky.) said Obama had broken his promise to present a budget with “practical, not partisan” ideas.

“Unfortunately, what we saw this morning was another top-down, backward-looking document that caters to powerful political bosses on the left and never balances — ever,” McConnell said. 

Republicans shot down much of Obama’s plan, including proposals to breach spending ceilings by $74 billion and raise $320 billion in revenue by taxing the rich and large financial companies.

“It may be Groundhog Day, but the American people can’t afford a repeat of the same old top-down policies of the past,” Speaker John BoehnerJohn Andrew BoehnerSpeculation mounts, but Ryan’s job seen as safe Boehner warns Trump: Don't pull out of Korea-US trade deal GOP Rep: Ryan wasting taxpayers dollars by blocking war authorization debate MORE (R-Ohio) said.

Administration officials touted their tax plan as a winner for the middle class, arguing it would give more than 44 million households an average benefit of $600. The budget’s proposed tax breaks include a $3,000 child care tax credit, a college tax credit of $2,500, a second-earner tax credit of $500 and an expanded earned income tax credit for workers without children and non-custodial parents.

Another cornerstone of the proposal is a $478 billion infrastructure program that would be funded through a tax on corporate earnings. The United States would tax the offshore earnings of U.S. companies at a 14 percent tax rate, generating an estimated $238 billion in revenue for the government.

While that plan could be seen as an overture to the GOP, administration officials emphasized it would only be viable as part of a comprehensive corporate tax reform package. 

Taking aim at the sequester caps, Obama asked Congress to increase spending on several fronts, including for education, job training and cybersecurity andfor combating climate change.

He requested a baseline budget for the Pentagon that would be higher than this year’s, but proposed that emergency war funding, known as the overseas contingency operations fund, be cut by nearly a quarter, to $51 billion.

To pay for the spending increases, Obama proposed cuts in mandatory spending, closing tax loopholes and limiting tax benefits. He also claimed revenue in immigration reform, arguing a Senate bill that passed in 2013 — a non-starter in the GOP Congress — could raise $160 billion for the government. 

The broad calls for spending increases are a marked contrast from Obama’s rhetoric in early 2011, just a few months after the GOP reclaimed the House in a midterm election “shellacking” of his party.

Then, with the deficit projected to hit $1.6 trillion, Obama proposed to rein in spending with a $3.7 trillion plan that included a five-year freeze of discretionary spending except for national security. 

Four years later, and despite losing the Democratic majority in the Senate, Obama on Monday touted the decline in the yearly deficit and argued the country can now afford to spend more. 

“That’s part of what keeps deficits low — because the economy is doing well,” he said. “So we’ve just got to be smarter about how we pay for our priorities, and that’s what my budget does.”

The president also took a hard line against the spending cuts under sequestration, arguing the budget deal reached in 2011 should not stand. 

“I’m not going to accept a budget that locks in sequestration going forward,” Obama said.

Republicans, meanwhile, are gearing up to produce a budget this spring that will likely take aim at domestic programs and entitlement programs like Medicare to help ease a national debt load that stands at more than $18 trillion.

“A proposal that never balances is not a serious plan for America’s fiscal future. Especially when we have to borrow money just to afford the programs we already have,” Reps. Tom Price (R-Ga.) and Sen. Mike EnziMichael (Mike) Bradley EnziWe can't allow Congress to take earned benefits programs away from seniors Senate approves Trump's debt deal with Democrats Senate panel might not take up budget until October MORE (R-Wyo.), the chairman of the congressional budget committees, said in a statement.

While Price and Enzi dismissed Obama’s plan as the “same tired agenda,” they could include parts of it in their proposal, particularly sections that cut spending and eliminate waste.

Obama called for 101 different cuts and consolidations that would save $14 billion in 2016. Of that total, $3.6 billion would come from discretionary programs, while another $10.6 billion would come from weeding out fraud within agencies and accounts such as the Internal Revenue Service and the Social Security Disability Insurance Trust Fund.

This story was updated at 8:43 p.m.