Barack Obama

Obama's budget targets tax loopholes of rich

US president's blueprint to shield the middle class, grow economy and cut deficit is mocked by Republican leader as 'left-wing wish-list'

PUBLISHED : Thursday, 11 April, 2013, 12:00am
UPDATED : Thursday, 11 April, 2013, 4:08am

To Republican mockery, President Barack Obama rolled out a US$3.77 trillion budget yesterday that laid out his battle lines in a new fiscal showdown in Washington, but irked liberal allies.

Obama said his blueprint for fiscal year 2014 would shield the middle class by closing tax loopholes that help the rich, would grow the economy, cut the deficit, train future American workers and protect senior citizens.

"For years, the debate in this town has raged between reducing our deficits at all costs and making the investments necessary to grow our economy," Obama said in the White House Rose Garden.

"This budget answers that argument, because we can do both. We can grow our economy, and shrink our deficits."

Republicans, however, immediately rejected Obama's plans. Senate Republican leader Mitch McConnell branded them as a "left-wing wish-list".

House Speaker John Boehner, who has already passed a Republican budget that slashes spending, warned that Obama had already made life tough enough on the rich, adding: "We don't need to be raising taxes on the American people."

For years, the debate in this town has raged between reducing our deficits at all costs and making the investments necessary to grow our economy. This budget answers that argument, because we can do both

Obama's spending plan for 2014 is in many ways an academic exercise, given that it has no chance of being fully enacted in stalemated Washington.

But it will stand as his entry in the latest fast-building showdown pitching the president's plan to raise taxes on the most well-off against Republican plans to slash government spending with no new revenues.

"We don't view this budget as a starting point. This is an offer where the president came more than half way towards the Republicans in an attempt to get a fiscal deal," said a senior White House official.

"Are Republicans going to be willing to come to us?" the official asked, ahead of the unveiling of the budget at a time hope has faded for a "grand bargain" deal on the deficit between Obama and Republicans.

The blueprint included one key concession to Republicans, which has already angered elements of Obama's liberal Democratic base.

Obama signalled he is ready to modify some cherished entitlement social programmes, by changing cost-of-living adjustments that could trim benefits for some senior citizens.

The move, ahead of a second dinner between Obama and Republicans at the White House later yesterday, was intended to try to lure some support for cross- party budget and deficit talks.

The White House is billing the budget as a document which proves that the need to cut huge deficits does not need to be achieved by savage cuts in government spending and social programmes envisaged by the Republicans.

Officials say the plan includes US$1.8 trillion of deficit reduction over 10 years and would raise US$580 billion in new revenue by curbing income-tax breaks for the rich, without raising rates.

It would raise the tax on a pack of cigarettes from US$1.01 to US$1.95 per pack to finance an early childhood education scheme.

The budget would also provide US$1.65 billion for the Global Fund to Fight Aids, tuberculosis and malaria, and US$4 billion to allow security upgrades after the attack on the US consulate in Benghazi last September.

Republicans strongly dispute Obama's deficit-reduction figures. They argue that since the budget would dispense with US$1.2 trillion in automatic spending cuts, which began in March and are known as the sequester, its real deficit reduction figure would only be US$600 billion in savings.