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Obama’s budget to target rich

Feb 13 2012 18:14 Reuters

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Washington - President Barack Obama will argue for tax increases on the wealthy and new spending on roads and other infrastructure projects, as he lays out a campaign-year budget on Monday that will draw a populist battle line with his Republicans opponents.

For the fourth year in a row, the annual US budget deficit is expected to exceed $1 trillion but the White House will project an easing of the shortfall next year in the fiscal 2013 budget Obama will unveil at 16:15 GMT.

Obama, vulnerable over the weak economy as he campaigns for re-election in November, will call for deferring major deficit cuts until the economic recovery is securely back on track and will outline steps to decrease it over time.

“I think there is pretty broad agreement that the time for austerity is not today,” White House chief of staff Jack Lew told NBC’s Meet the Press on Sunday.

Republicans, in control of the House of Representatives, have already declared the budget a non-starter and plan to seize on it to try to paint the president as a tax-and-spend liberal. They warn that tax hikes will kill jobs while doing nothing to halt the climb in the crushing level of national debt.

“The nation is just drowning in red ink,” said Representative Jeb Hensarling, a Republican from Texas.

“I look forward to seeing the details, but I’m afraid it may be more of the same, and that is: red ink, fewer jobs, less employment, and less opportunity,” Hensarling said.

Mitt Romney, the frontrunner in the Republican race to challenge Obama in November, called Obama’s budget an “insult to the American taxpayer”.

The announcement of the budget grants Obama one of his biggest platforms before the November 6 election to lay out his vision for America’s future, casting Republicans as the party of the rich as he tries to convince voters that he would do more to protect their interests.

In a push for spending on popular programmes like education, Obama will visit a community college in Virginia to deliver remarks on the budget at 16:00 GMT.

Polls consistently show that even as the economy has demonstrated surprising strength in recent weeks, Americans are still unsure of Obama’s economic stewardship, a major problem for him as he seeks to persuade them to give him a second term.

Buffett rule

Obama will repeat a demand for millionaires to pay a minimum tax rate of 30%, the so-called Buffett Rule named after billionaire investor Warren Buffett. He will also identify $4 trillion in deficit reduction over 10 years that broadly mirrors a plan he laid out in September.

The budget projects a deficit of $901bn in 2013, representing 5.5% of gross domestic product (GDP), down from $1.33 trillion or 8.5% of GDP this year, White House officials said.

Obama pledged in 2009 to have cut the deficit in half by the end of his first term, but his budget does not anticipate getting it back under 3% of GDP until 2018.

Obama’s deficit projections are based on growth forecasts that will be released along with the rest of the budget at 16:15 GMT.

The White House has already declared its budget prediction of an 8.9% 2012 unemployment as “stale”, after an improving labour market lowered unemployment to 8.3% in January.

Republicans say Obama uses gimmicks to massage the deficit numbers, pointing to savings from winding down wars in Iraq and Afghanistan, which they complain amounts to counting funds that were never going to be spent.

The president will propose using half of the money from ending Americas’ two foreign wars to subsidise investment in infrastructure as part of his request for over $800bn in multi-year spending on job creation and transportation.

This includes tax breaks for companies and individuals that would be worth more than $300bn in 2012 if passed into law. That could provide additional fiscal stimulus for economic growth as Obama campaigns around the country for re-election.

One of the biggest boosts would come from extending a payroll tax cut for 160 million Americans for all of 2012, which expires on February 29 unless Congress acts. The White House estimates this could add a percentage point to 2012 GDP.

Overall, the budget proposes raising $1.5 trillion over a decade through higher taxes, with around half coming from allowing tax breaks for families earning more than $250 000 a year to expire at the end of 2012 - a longstanding Obama goal.

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