Dissecting Obama’s 2016 budget proposal

Shaun Donovan, the White House’s director of the Office of Management and Budget, talks to Gwen Ifill about whether President Obama’s budget proposal can find a political middle ground, especially when Democrats say “invest” and Republicans hear “spend.”

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    President Obama formally unveiled his $4 trillion spending plan today in Washington. The arrival of box loads of budgets triggered what is sure to be months of wrangling with Republican majorities in the House and the Senate.

    The boxes rolled down congressional halls this morning, while across, town, the man who sent them there appealed for a fair hearing.


    We have got to put politics aside, pass a budget that funds our national security priorities at home and abroad and gives middle-class families the security they need to get ahead in the new economy.


    The centerpiece of the president's plan is a six-year, $478 billion public works program to repair highways, bridges and transit systems. Half of the money would come from a one-time tax on U.S. companies' overseas profits.

    The budget also calls for raising the capital gains tax rate to 28 percent for wealthier Americans and using the revenue for $320 billion in low and middle-class tax breaks. There's also $60 billion for free community college.

    All told, Mr. Obama wants to increase defense and domestic spending by 7 percent. That would break mandatory caps imposed in 2011 under the so-called sequestration.


    I'm not going to accept a budget that locks in sequestration going forward. It would be bad for our security and bad for our growth.


    The president rejected Republicans' calls to lift the caps for defense spending only. And they immediately accused him of reverting to tax-and-spend policies that endanger the economy.

  • Senate Majority Leader Mitch McConnell:

  • SEN. MITCH MCCONNELL, Majority Leader:

    Rhetorically, at least, we hear the White House echo Republican calls for policies aimed at helping the middle class, but then we see the White House push more of the same stale top-down policies favored by political bosses over on the left.


    House Speaker John Boehner said there's no provision for ever balancing the budget. Republican leaders promise to offer their own plan in the spring.

    We dig a little deeper now into the budget, beginning at the White House.

    I spoke with Shaun Donovan, director of the Office of Management and Budget, a short time ago.

    Director Donovan, welcome.

    Much of the advance discussion about the president's budget, including what we see in the actual document today, focuses on the plight or the concerns of the middle class. Why is your approach better than any other approach on that?

    SHAUN DONOVAN, Director, Office of Management and Budget: Well, because I think what we have really done is look at, what are the core things that are eating away at the fortunes of the middle class in this country?

    And, first of all, we have to make sure that paychecks go farther. We know that families are struggling to afford child care, struggling to afford to send their kids to college. And so what we have is a comprehensive proposal that will make paychecks go farther today.

    At the same time, we have got to look to the future and say, what are the ways we're going to grow the good middle-class jobs of the future? That means we have got to invest in manufacturing, our infrastructure. We have got to make sure that we remain the best in the world at inventing new things, and that means research and development.

    And then we also have to make sure that as we create those jobs in the future that Americans are ready to take them, and so in this budget we double the number of slots for job training, we double the number of apprenticeships and we make sure that community college is going to be like high school is today.

    In the future, everyone should be able to go to community college and that is why free community college is a key part of the budget.


    But when you use the word invest, Republicans hear the word spend and they hear the word tax.

    How do you hope to make any progress with your priorities if that's the translation of your word invest?


    Well, first of all, let's look at the facts on what the budget does.

    Over 10 years, we achieve with this budget $1.8 trillion in deficit reduction. And that's undeniable if you look at the numbers. But, second, what we're doing is taking a bipartisan example, the so-called Murray-Ryan deal that was reached two years ago, we're taking that and building on it.

    What we're saying is, let's get rid of these harmful cuts called sequestration, let's do them dollar for dollar on the defense and the non-defense side, and let's pay for it by savings on the mandatory and the revenue side over the long term. That is what was done and allowed us to make progress two years ago on our budget. And that is the model that we're building on.


    When you talk about the revenue side, you're talking about raising taxes on corporate profits. You're talking about raising taxes on financial firms and inheritance taxes.

    Why isn't that, as some Republicans are describing it — I think Paul Ryan called it yesterday envy economics or class war.


    Well, let's take an example on capital gains, for example.

    Right now a family that is forced to sell, whether it's their home or a business, before they die, they're taxed at regular rates. If a family is wealthy enough to be able to hold on to that asset and pass it on to their kids, they're taxed at a much, much lower rate on that asset.

    And so, what we're really trying to achieve here is fairness, and as the president said consistently, we're asking the wealthiest in the country to pay a little bit more; 99 percent of the cost of that capital gains proposal would come from the wealthiest 1 percent in this country.

    We think that that is a very reasonable proposal. And so we're proposing that. At the same time, we're proposing hundreds of billions of dollars of savings on the spending side as well, so we're proposing a balanced plan that we think has a real chance of getting done this year.


    Do you have any reason to believe that there is any consensus or any willingness on the part of the people who are going to receive this budget on Capitol Hill for middle ground on things like infrastructure, transportation spending? Do you see any room there?



    And I do think, first of all, the structure that we're following is based on Murray-Ryan. It's established bipartisan precedent that we're building on. Second, there are lots of areas if you look more closely where we're building on bipartisan ideas.

    Community college is something that's been pursued at the federal level and at the state level, like in Tennessee, on a bipartisan basis. The proposal that we have for a second-earner tax credit has actually been sponsored by one of the Republican leaders in the House of Representatives.

    Infrastructure has traditionally been a bipartisan area. And we're linking it to international tax reform that has both Democratic and Republican sponsors, and I could go on. There's a long list of areas where there's the potential for bipartisan agreement.


    How about on Pentagon spending or even on homeland security spending, rolling back these across-the-board budget cuts you talked about?


    Well, look, you don't need to take my word for it, Gwen. If you listened to the testimony that the Joint Chiefs of Staff gave this past week, they said one of the most dangerous threats that we're facing around the world is sequestration.

    If we can't reverse these cuts, we're not going to be able to invest in the critical things that we need to, to keep folks safe overseas and keep them safe at home. You know, right now, we're having a fight about whether we're going to fund the Department of Homeland Security for a full year. We need to do that and we need to increase investments in things like cyber-security and many other things, the technology of the future, where the wars of the future are going to be fought.


    And so the battle is joined, this time on the budget front.

    Director of the Office of Management and Budget Shaun Donovan, thank you for joining us.


    Great to be with you, Gwen.

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