Obama budget aims to aid Democrats in November congressional elections

Obama's plan stresses his populist narrative ahead of midterm elections

PUBLISHED : Wednesday, 05 March, 2014, 9:03pm
UPDATED : Wednesday, 05 March, 2014, 9:03pm


US President Barack Obama has proposed a budget for the coming fiscal year that has less to do with managing US finances than with stemming his party's losses in congressional elections.

The mildly expansionary, US$3.9 trillion plan has little chance of passing Congress but Obama will use it as a platform to underline his populist voter-friendly narrative ahead of the polls in November.

Obama's Democrats have almost no chance of winning back the House of Representatives and are in grave peril of losing the Senate, a scenario that would guarantee a miserable last two years in office for the president.

A Washington Post/ABC News poll on Tuesday revealed the challenge, showing that of 34 states with Senate races, 50 per cent of voters favour Republicans and 42 per cent favour Democrats.

Obama sought to stay positive and reiterated the vision that saw him re-elected in 2012, telling supporters in a speech at a Washington elementary school on Tuesday that the budget was about "choices" and "values".

"As a country, we have to make a decision, if we are going to protect tax breaks for the wealthiest Americans, or create jobs, grow our economy and expand opportunity for every American," he said.

Senior White House officials admit the budget document is largely aspirational, given that the president's top priorities are routinely blocked by Republicans in Congress.

Broad spending levels have also already been set by a two-year budget agreement reached by top Democratic and Republican negotiators in Congress in December.

The president's budget director, Sylvia Matthews Burwell, hailed the budget document as a "fiscal road map for accelerating economic growth, expanding opportunity and ensuring fiscal responsibility".

"It includes fully paid-for investments in infrastructure, job training, preschool and pro-work tax cuts," she said.

"At the same time, it reduces deficits and strengthens our long-term fiscal outlook through additional health care reforms, tax reform and by fixing our broken immigration system."

Obama proposed an extra US$56 billion in spending above agreed budget levels, to be financed by closing tax loopholes that benefit the rich and in mandatory spending reform.

The budget foresees the American economy growing by 3.1 per cent this year and by 3.4 per cent the next, with inflation remaining under control, rising to 2 per cent in 2015.

It also predicts growing revenue, so that the government can reach a primary surplus - that is, spending excluding the servicing of debt - by 2018.

It suggests the country's budget deficit, which boomed after the 2008 crisis, can be brought down to US$564 billion, or 3.1 per cent of gross domestic product, in the fiscal year beginning October 1, and to 2.2 per cent by 2020.

While the absolute level of US debt, now US$17.3 trillion, will continue to grow, its ratio to the overall size of the economy will fall, from nearly 75 per cent this year to 69 per cent by 2024.