Obama Seeks to Avoid Drama With Election-Year Budget

Saturday, 01 Mar 2014 09:57 AM

 

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Six years into his presidency, President Barack Obama is sending Congress a budget that for once does not herald a partisan legislative showdown.

There's no push to overhaul healthcare as he did in 2009, no drive as in 2010 to restrict Wall Street, no attempt to increase taxes as in 2011 and 2012, no move to halt automatic spending cuts as in 2013.

Politically speaking, this is a peace-time budget in an election year, when the most meaningful fights will take place during congressional campaigns, not on the floors or the House and Senate.

As such, Obama's budget, to be released Tuesday, will offer a template for Democratic political messaging.

To the delight of Democrats, this will not be an austerity budget like last year's. Then, Obama had proposed reducing annual increases in federal benefit programs, a step many Democrats found hard to fathom. The cut was part of Obama's offer to Republicans for a long-term attack on the nation's debt, through a mix of major tax increases and spending reductions.

But that approach failed. Now, with deficits declining and weariness over default threats and government shutdowns, neither side appears willing to play that game of brinkmanship again.

Instead, Obama's spending blueprint for the budget year that begins Oct. 1 proposes $56 billion in spending above the caps agreed to in a bipartisan deal from earlier this year. Under the plan, the extra spending would not add to the deficit because Obama proposes to pay for it with a mix of program cuts and eliminating tax breaks.

It proposes to bring in more revenue through stricter tax rules for U.S. companies that have operations overseas and for foreign businesses with divisions in the United States. Those new rules, requiring congressional action, would tackle what the Obama administration considers tax avoidance schemes.

Both the spending and tax proposals are long shots for legislative action this election year. But they are part of a unifying theme for Democrats eager to distinguish themselves from Republicans before voters.

Already both sides are using the outlines of their fiscal visions to set the terms of the election debate.

Obama, speaking to the Democratic National Committee on Friday, cast some of his budget proposals as part of a larger message of opportunity for all.

"Next week, I will send Congress a budget that will create new jobs in manufacturing and energy and innovation and infrastructure. And we'll pay for every dime of it by cutting unnecessary spending, closing wasteful tax loopholes," Obama said.

"Now, Republicans have a different view. Just last month, their party actually made it a part of their platform to let folks at the very top play by a different set of rules and avoid paying their fair share by stashing their money in overseas tax havens, a practice that also adds billions of dollars to our deficits every year."

A day earlier, House Speaker John Boehner, R-Ohio, had offered a summary of his own of the Republican message, citing the economy and Obama's health care law as defining issues in the election.

"We've seen more and more that the president has no interest in doing the big things that he got elected to do," Boehner. "His budget apparently will make no effort to address the drivers of our debt and our deficit."

That probably will be a central GOP message Wednesday, the day after the budget release, when House Budget Committee Chairman Paul Ryan, R-Wis., holds a hearing on the president's budget.

The $56 billion wish list in Obama's budget is split evenly between domestic programs and defense. It includes an expansion of an earned income tax credit for low-income workers that currently primarily helps low-income working families with children. Obama's plan, which some conservatives embrace, would provide more tax credits to childless workers as well.

The plan would renew Obama's call for universal preschool, which he has proposed paying for with a cigarette tax. It would expand job training programs, create manufacturing institutes and help states reduce energy consumption.

Obama's proposal to increase spending on defense would be contingent on increasing domestic spending as well, in a move designed to put pressure on defense-minded Republicans.

Defense Secretary Chuck Hagel said the extra dollars, which would restore some money trimmed through automatic spending cuts known as the sequester, would permit the Pentagon to increase training, improve aircraft and weapons systems and repair military facilities.

"Continued sequestration cuts would compromise our national security both for the short- and long-term," Hagel said.

Obama will recommend tax changes that would generate billions in revenues to help pay for those initiatives.

His tax proposals include efforts to curtail what the administration views as tax avoidance schemes by U.S. companies with business overseas or by foreign-owned companies with operations in the United States.

One proposal would seek to limit the ability of companies to take advantage of differences in tax rules from country to country, administration officials said. A second would restrict the ability of multinational corporations to assign much of their debt to U.S. operations in order to take advantage of U.S. interest deductions. A third would classify as taxable the income from certain digital transactions that have been able to escape U.S. taxation.

The proposals are part of an international effort by leading economies to limit tax avoidance by multinational companies. Administration officials said the proposals in the budget would raise several billion a year and could be part of a broader tax overhaul that would be used to reduce corporate tax rates.

But Congress probably will not tackle such a massive task this year. After the leading Republican tax writer in the House came out with a detailed plan to change the tax system, Boehner made no commitments to take it up.

He said the proposal by the chairman of the House Ways and Means Committee, Rep. Dave Camp, R-Mich., had allowed a "conversation" to begin on overhauling tax laws.

"That will advise us on if and when and how we move forward," he said.

___

Follow Jim Kuhnhenn on Twitter: http://twitter.com/jkuhnhenn

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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