President Barack Obama unveiled a 2015 budget Tuesday that looks to expand on his second term goal of reducing economic inequality. Dubbed the “Opportunity for All” budget, Obama’s plan includes higher spending on employment and job-training programs and the elimination of some tax breaks for the wealthiest Americans and corporations.
The $3.9 trillion proposal follows on the bipartisan budget deal reached by Sen. Patty Murray, D-Wash., and Rep. Paul Ryan, R-Wis., last December, but includes $56 billion in additional funding to agencies, offset by $28 billion in alternative spending cuts and tax hikes to generate revenue.
The proposed outlays are $250 billion higher than in last year’s budget. But less than a third of that new spending goes to discretionary programs, for which the president and Congress control spending levels.
To benefit working class Americans, Obama proposes an enhanced and expanded earned-income-tax-credit (EITC), projecting it would benefit an estimated 13.5 million Americans. The budget also includes new spending for infrastructure, research and preschool programs.
To offset the $60 billion cost of an expanded EITC, the White House has proposed eliminating two tax loopholes employed by the wealthiest Americans: the “carried interest” and “Gingrich” loopholes. Currently, hedge fund and private-equity firms can treat income from managed investments as capital gains — also known as capital interest. Instead, the budget proposes treating capital interest as ordinary income, which will raise the tax rate on billions of dollars paid out to firm managers.
And by closing the so-called “Newt Gingrich/John Edwards” loophole, under which some self-employed individuals can avoid paying taxes on Social Security and Medicare, Obama’s budget hopes to extract more revenue from the wealthiest Americans. The White House has claimed that both of these loopholes, “do not promote work or growth.”
Obama’s budget also pledges to reduce the deficit by lessening America’s borrowing needs. The White House projects that as a result, the deficit will fall to 1.6 percent of the economy in 2024, which would be the smallest deficit since 2007.
The plan carries forward the economic inequality theme that Democrats are making central to this year’s midterm elections, even if Democrats are not planning to bring the proposal to the floor this year.
Senate Democrats welcomed Obama’s budget with what National Journal describes as “an awkward embrace.” They recognize that the president’s proposal is not likely to go anywhere in Congress, and they are not eager to reopen budget negotiations after Murray and Ryan reached a spending deal in December.
Budget Committee chair Patty Murray responded to the president’s budget release with a statement acknowledging the existing deal. “While the American people have a budget in place and the certainty they deserve that there won’t be another budget crisis through the end of 2015, we in Congress owe it to them to work together to build on that bipartisan foundation.”
Rep. Paul Ryan dismissed Mr. Obama’s budget as a “campaign brochure” and House Speaker John Boehner, R-Ohio, said it was his “most irresponsible budget yet.”
House Republicans are expected to release their budget in the coming weeks.