Obama's $3.8 Trillion Budget for 2013

Highlights of Obama's $3.8 Trillion Budget

February 14, 2012

AP - Highlights of the 2013 budget that President Barack Obama sent to Congress on Monday:

SPENDING: Obama proposes spending $3.8 trillion for the 2013 budget year, which begins Oct. 1, a slight 0.2 percent rise from expected spending for the current fiscal year.

DEFICITS: Obama's budget projects that the deficit for the current year will total $1.33 trillion, the fourth straight year of deficits over $1 trillion.

TAXES: The budget would raise $1.5 trillion in new taxes over the next decade, mainly by letting Bush-era tax cuts expire at the end of this year on families making more than $250,000 a year. Obama also recycled a past proposal to limit the deductions wealthy taxpayers can claim and certain tax breaks for corporations, including oil and gas companies. Obama would also raise money by imposing a rule named after investor Warren Buffett that would seek to ensure that wealthy people making more than $1 million a year pay at least 30 percent of their incomes in taxes.

JOB GROWTH: Obama is seeking more than $350 billion in measures to boost economic growth and job creation in the short term, including $50 billion in upfront investments for transportation projects, $30 billion to modernize at least 35,000 schools and $30 billion to help states hire teachers, police and first responders. Republicans, unhappy with past stimulus programs, blocked these proposals last year.

EDUCATION: The budget seeks $850 million for the administration's "Race to the Top" competition to provide grants to schools undertaking approved reforms and $8 billion to support efforts by community colleges to train 2 million workers in high-growth industries.

MILITARY: The Pentagon's overall spending would drop in 2013 as the military begins an effort to save about $260 billion over the next five years, in part by slashing the number of troops, ending the wars in Iraq and Afghanistan and making limited reductions in weapons systems.

HEALTH CARE: The administration seeks to slow the growth in Medicare and Medicaid by about $360 billion over the next decade, but the Obama budget avoids the radical overhaul that House Republicans are pushing and that deficit commissions have said will be needed to get control of the biggest driver of future deficits.

REACTION: Republicans, who oppose tax increases to deal with the deficit, criticized Obama's budget as offering recycled proposals that have been rejected in the past. They also charged that Obama is too timid in his proposals to get control of the growth in government benefit programs such as Medicare.

Fact Check: There are Budget Phantoms in the Room

February 14, 2012

AP - When a president introduces a budget, there are always phantoms flitting around the room. President Barack Obama's spending plan sets loose a number of them.

It counts on phantom savings from the wars in Iraq and Afghanistan. It's underpinned by tax increases Republicans won't let happen and program cuts fellow Democrats in Congress are all but certain to block.

And it assumes rates of growth that the economy will have to become strikingly undead to achieve.

A look at three budget ghosts, sometimes known as gimmicks:

BUDGET: Claims about $850 billion in savings from ending the wars and steers some $230 billion of that to highways.

REALITY: There is no direct peace dividend from ending the wars because the government borrowed to pay for them. The government would have to keep borrowing that amount of money to have it to spend on something else.

Counting the end of wars as a dividend is like a student coming out of college loaded with debt and aching to buy things, says Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

"When you finish college, you don't suddenly have thousands of dollars a year to spend elsewhere — in fact, you have to find a way to pay back your loans."

MacGuineas says,

"Drawing down spending on wars that were already set to wind down and that were deficit-financed in the first place should not be considered savings."

President George W. Bush kept the cost of the wars out of his budgets, a contentious accounting maneuver that may have papered over the impact on spending projections but deepened the national debt as surely as if the price tag had been shown transparently. Taken together, the Bush and Obama budget tricks seem to suggest war costs nothing but ending it frees a ton of money.

BUDGET: Forecasts healthy growth in years ahead, with GDP growth predicted to reach 4 percent in 2014 and 4.2 percent in 2015.

REALITY: It's obviously too soon to know, but reputable private forecasts are not nearly as rosy as the administration's assumptions, and their track record tends to be better. They are generally forecasting a percentage point lower or close to that, a huge difference, and don't see reaching 4 percent growth in the foreseeable future.

Last year, the administration built its proposed budget on a projection of 2.7 percent growth in 2011; it turned out to be 1.7. The forecast for 2012 was 3.6 percent, which the White House lowered in the new budget to 3 percent. IHS Global Insight, a leading forecaster in Lexington, Mass., projects 2.1 percent.

Such projections are key because the government's spending and debt plans rest on how much revenue can be expected to come in.

BUDGET: Assumes taxes will go up on the rich, tax breaks will end for the oil and gas industry, and spending will be cut for programs the president is willing to sacrifice.

REALITY: Tax increases are a non-starter before the election, with Republicans standing in the way, so sweeping parts of Obama's budget plan are little more than a campaign platform laying out what he would try to get done if re-elected.

Some of his proposals are not so tied to the election. They have little or no chance of passing Congress regardless of what happens in November.

For example, he proposes using money from a Justice Department fund for crime victims for other purposes. But Democratic Sen. Patrick Leahy of Vermont, chairman of the Judiciary Committee, quickly signaled he would work to protect the fund, just as he has successfully done in the past.

Obama is the latest in a line of presidents to zero out — provide no money for — programs in order to show budget savings even while knowing Congress will restore the money. Amtrak and the post office are among institutions that have seen such phantoms before.