'The American people deserve better than what we’ve been seeing,' Obama said. Obama budget hits smokers, wealthy

President Barack Obama presented a budget Wednesday that he called both a compromise and a final offer.

But there’s a lot in the $3.77 trillion proposal — including $583 billion in new revenue from the wealthy and $78 billion over 10 years from new cigarette taxes, not to mention an assumption that a deal to reverse sequestration cuts can be struck — that drew an immediate rejection from Congressional Republican leaders.


Obama said he wasn’t interested in continuing to negotiate. Framing the budget as pitting the rich against the middle class, and smokers and the tobacco companies against preschool students, he asked Republicans to decide which side they’re on.

( Also on POLITICO: Obama budget squeezes $370B from Medicare)

“When it comes to deficit reduction, I’ve already met Republicans more than halfway so in the coming days and weeks I hope that Republicans will come forward and demonstrate that they are really as serious about deficits and debt as they claim,” Obama said. “And I don’t believe that all these ideas are optimal, but I’m willing to accept them as part of a compromise — if, and only if, they contain protections for the most vulnerable Americans.”

Obama’s counting $1.384 billion in savings from winding down the wars in Iraq and Afghanistan and $452 million in cuts to a program that provides funding for heating assistance for low-income households. The budget also includes major cuts to farm subsidies, cuts to the LIHEAP heating programs for the poor, lowering the budget for detaining illegal immigrants, new embassy security as recommended by the Benghazi Review Board and $222 million for gun control efforts.

( PHOTOS: What’s in Obama’s 2014 budget)

The budget also raises the federal minimum wage from $7.25 to $9 per hour, lower than the hike Obama first promised during his 2008 campaign. And it assumes $230 billion in savings due to by implementing the reduction to the growth of Social Security spending known as “chained CPI” — though that proposal immediately fell flat with many Republicans and angered the president’s own base when news of it was leaked late last week.

Obama’s budget comes months after its original due date, and weeks after the House and Senate passed their single chamber budget bills. During his Rose Garden statement, Obama made clear that his budget proposal already represents a compromise offer and said he will not allow spending cuts without the new tax increases he seeks.

“When it comes to deficit reduction, I’ve already met Republicans more than halfway,” Obama said. “So in the coming days and weeks I hope that Republicans will come forward and demonstrate that they are really as serious about deficits and debt as they claim.”

( Also on POLITICO: Full coverage of Obama 2014 budget proposal)

And Gene Sperling, the director Obama’s National Economic Council, on Wednesday afternoon emphasized that the proposal is”not an à la carte menu” for Speaker John Boehner (R-Ohio) and congressional Republicans to choose what they like and discard the rest.

“You can’t decide to only pick out the concessions the president has made and not include the concessions from the Republican side that need to be part of a bipartisan deal that can pass both houses,” Sperling said.

Republicans are not impressed

Republicans made clear Wednesday that they have no appetite for the new taxes Obama seeks.

On a conference call with reporters in the afternoon, House Budget Chairman Paul Ryan (R-Wis.) called the budget “worse than the status quo,” but believed there was a silver lining.

“A positive way of looking at this is at least everybody has put a plan on the table. At least the Senate has put it’s plan on the table, the president’s plan is on the table, so we can have a healthy budget debate,” he said. “My goal is to find common ground to where we can get a down payment on this problem.”

He also identified the president’s willingness to means test pieces of Medicare as a “small instance of common ground.”

“That gives me a glimmer of hope that we can get an agreement at the end of the day but we’re a long way from there right now,” he said.

House Speaker John Boehner (R-Ohio) said the White House should proceed with the “incremental entitlement reforms” the president offered without the tax hikes – the very proposal Obama explicitly ruled out.

“I would hope that he would not hold hostage these modest reforms for his demand for bigger tax hikes. Listen, why don’t we do what we can agree to do? Why don’t we find the common ground that we do have and move on that?” Boehner told reporters at the Capitol. “The president got his tax hikes in January, we don’t need to be raising taxes on the American people.”

And Senate Minority Leader Mitch McConnell (R-Ky.) said on the Senate floor that Obama’s budget proposal won’t make any progress toward reaching an agreement that can pass Congress.

“The document headed our way does not appear designed to bridge the differences between the House- and Senate-passed budgets,” McConnell said. “That’s the role Americans would expect the president to play at this stage, but his budget simply does not represent some grand pivot from left to center. It’s really just a pivot from left to left.”

Obama’s also been taking heat from his liberal flank. Groups that have since Friday been critical of his chained CPI proposal reiterated their opposition to any benefit cuts Wednesday.

Even the National Council for La Raza, the Hispanic advocacy group heavily invested in the immigration debate, took a shot at Obama’s budge for proposed cuts that it says will “place an undue burden on vulnerable Latino seniors and families.”

There were virtually no full-throated statements in support of Obama’s budget. Even Obama’s political arm, Organizing for Action, was silent on his budget Wednesday. One liberal group, the Progressive Change Campaign Committee, advertised unnamed “OFA team leader and other OFA volunteers” who would discuss their opposition to Obama’s proposed entitlement cuts.

Sperling told POLITICO’s Glenn Thrush that part of the aim of the White House budget is to show that everyone must compromise to get a deal done.

“Our aspiration is to in the middle of divided government, show that this president is willing to live up to what he says, which is that nobody gets 100 percent of what they want,” Sperling said. “Everybody’s got to compromise.”

OFA officials did not immediately respond to a request for comment.

Adding to the relevance question of the new document released: the appropriations process that presidential budgets usually get started has essentially been frozen for years amid a partisan standstill.

And the proposal comes with a big caveat by assuming the White House and Congress can still reach a deal on sequestration cuts, which last month started slicing $1.2 trillion in discretionary spending over the next decade.

“My budget also replaces the foolish, across-the-board spending cuts that are already hurting our economy. I have to point out that many of the same members of Congress who supported deep cuts are now the ones complaining about them the loudest, that they hit their own communities.”

But even making this long-shot promise to restore across-the-board cuts, Obama pledges to slash $25 billion in fiscal ’14 — and more than a half trillion through 2023 — through targeted cuts, program consolidations and other savings to both discretionary and mandatory programs.

The biggest new revenue in Obama’s proposal is nearly doubling the federal tax on a pack of cigarettes, from $1.01 per pack to $1.95. That funding is meant to subsidize Obama’s universal preschool program, a major new program he proposed in the State of the Union.

“We’ll work with states to make high-quality pre-school available to every child in America. And we’re going to pay for it by raising taxes on tobacco products that harm our young people,” Obama said. “It’s the right thing to do.”

Yet some of Obama’s proposals target programs popular with lawmakers, the kinds of pie-in-the-sky cuts that have been rejected after other Democratic and GOP presidents also pitched them.

For example, Obama proposes a $472 million cut from his fiscal ’12 budget request for EPA’s state revolving loan funds for wastewater and drinking water, as well as a $452 million cut to LIHEAP, the program that helps needy families heat and cool their homes. In both instances, Congress is likely to try to restore funding.

Obama’s budget also counts figures Republicans on Wednesday morning began to paint as fanciful: $1.384 billion in savings from winding down the wars in Iraq and Afghanistan.

Pentagon to cut more bases

Meanwhile, the Pentagon revived its politically radioactive proposal for a new round of base closures.

The Defense Department is requesting about $2.4 billion over the next five years for a round of base closures that would start in 2015, with the promise that consolidating the military’s roughly 23 percent in “excess capacity” in real estate would pay dividends over the long term. DoD also is asking Congress to slow the growth in its personnel costs with a 1 percent troop pay raise and increases in the fees paid for some health care services.

One novelty in the fiscal 2014 submission was that Pentagon officials evidently feel they’ve culled all the high-profile weapons programs they need – Wednesday’s submission did not contain news of any major cancellations. In fact, it includes funding for a new Air Force rescue helicopter program; fully supports Lockheed Martin’s controversial F-35 Lightning II with orders for 29 aircraft; and continues supporting nascent programs such as the Army’s Ground Combat Vehicle and the Marine Corps’ Amphibious Combat Vehicle.

The Republican leaders of the House and Senate Armed Services Committee leaders both ripped Obama for advancing a Pentagon budget that doesn’t factor in sequestration. Sen. Jim Inhofe (R-Okla.) said Obama’s plan included “disproportionate and illogical budget cuts” to military services that will “drastically undermine the readiness and capabilities they need to operate in an increasingly dangerous world.”

Citing growing tensions in Syria, North Korea and North Africa, Rep. Buck McKeon (R-Calif.) said the president’s budget doesn’t jive with reality. “In other words, we are already adding to what we have asked our military to do while the president cuts their resources,” he said. “Now, with no assessment of strategic impact, the president has proposed yet another arbitrary cut of $120 billion from the military.”

Millions for gun control and health care

As Obama’s Senate allies are reaching a deal on gun control, his budget calls for $222 million for state and local governments to implement gun safety proposals, including $150 million for school safety programs and $55 million to improve the much-maligned National Instant Criminal Background Check System — the federal database that serves as the heart of the background checks system Obama is seeking to expand.

The budget proposal also allocates $20 million to expand the violent death reporting system to all 50 states and $10 million specifically for research on gun violence, causes and prevention.

The White House is seeking more money for both the Department of Health and Human Services and the Internal Revenue Service to implement Obama’s health care law.

On taxes, Obama’s budget includes some items that in theory should appeal to the GOP. The proposal speaks of individual and corporate tax reform with urgency, backs off language offered in previous years that would have taxed dividends at the higher rates that apply to wages and even tracks with a recent Republican proposal to change the tax treatment of derivatives.

At the State Department, Obama’s budget reflects new priorities in the wake of the September 2012 attack on the U.S. consulate at Benghazi, Libya.

The budget would give the State Department a 5 percent increase in its diplomatic security staff and fund “targeted security upgrades at critical locations” and funds $2.2 billion for new security construction, as was recommended by the Benghazi Accountability Review Board.

Obama also focuses funding on his goal to curb the spread of HIV/AIDS around the world, $580 billion for bilateral work in Middle East and North African hotspots like Egypt, Tunisia and Yemen and nearly $1 trillion for climate change and energy programs.

The budget provides ammunition for GOP critics of the government’s role in the housing market. The administration estimates that the Federal Housing Administration will need a $943 million injection of taxpayer cash at the end of the current fiscal year to cover a shortfall in its insurance fund. House Republicans have been holding a series of hearings to criticize the agency with Financial Services Committee Chairman likening FHA to failed subprime lender Countrywide.

The agency is taking steps it hopes will close this budget gap and its defenders note that if FHA had not stepped in to insure more loans in recent years the housing crisis would have been far worse.

Obama’s budget gives other new specifics on the continued fallout from the 2008 financial crisis. For example, it includes revised figures on how much the government bailout cost taxpayers, lowering the lifetime costs to $47.5 billion. Originally, the Troubled Asset Relief Program was expected to have a $341 billion price tag, but the figure keeps dropping as banks and other firms repay the government.

The White House budget also proposes a $350 million boost for the Securities and Exchange Commission for implementation of the 2010 Dodd-Frank law even though Republicans have rejected similar previous pitches arguing it has enough resources to do its job.

Agriculture research and cuts

Obama pitches status-quo funding of $22.6 billion for the Agriculture Department with targeted increases for research into obesity, food safety, bioenergy and climate change, as well as a first-ever proposal for mandatory funding to the Land and Water Conservation Fund that helps protect national parks, wildlife refuges and national forests.

Obama’s budget also suggests making a dent in the deficit through almost $38 billion in cuts over a decade for a popular crop insurance program and an end to so-called “direct payments” to farmers.

Crop and livestock production values are at all-time highs and the farming sector is one of the strongest in the U.S. economy, prompting Obama’s budget to say the subsidies “can no longer be justified” in otherwise tight economic times.

Bob Young, the chief economist at the American Farm Bureau Federation, said Obama is pushing too far with more agriculture subsidy cuts.

“The agricultural sector has been called on repeatedly to make cuts to programs and farmers and ranchers have answered that call probably more than any other group,” he wrote in an email, adding the Farm Bureau preferred the Senate Budget Committee’s proposal last month to cut farm programs by $23 billion over a decade while “recognizing that even getting to that level will cause severe damage to our nation’s agricultural safety net.”

Another round of increases to federal science and research spending complement a significant cash boost for cybersecurity programs. The new funds for federal R&D — totaling $143 billion, by the administration’s count — follow years of similar investments proposed in the president’s annual spending plans. Many of the research initiatives included with this year’s budget, however, actually are repeat appearances that have lagged on Capitol Hill.

The blueprint devotes just as much attention to cybersecurity across multiple federal agencies. Those highly sought increases for the 2014 fiscal year arrive about two months after the president signed an executive order that aims to bring sweeping reforms to the nation’s cyber defensive posture.

Cybersecurity spending appears to be on the rise at almost every agency. Obama himself emphasized the point in his own budget preamble: “The Budget supports the expansion of Government-wide efforts to counter the full scope of cyber threats, and strengthens our ability to collaborate with State and local governments, our partners overseas, and the private sector to improve our overall cybersecurity.”

Programs at the Department of Homeland Security to protect federal and private computer networks would get a significant boost, even as overall DHS spending would decline. There’s also a pot of $44 million in new money set aside for a federal cybersecurity information sharing program. The president further is backing significant cyber spending increases at the Pentagon — a number for which isn’t provided — to recruit and station new cyber offensive and defensive units. And littered in budget documents are new funds for the FBI and others to track down cyber criminals and bolster U.S. cyber defenses.

Second-term priorities

Obama’s budget gets into the nitty-gritty on some of his other second-term priorities. He details how he wants to spend $50 billion to improve the nation’s infrastructure, with just more than half dedicated to highway repair and construction while the rest would be divided among improvements to airports, Amtrak, public transportation and nudging along some state efforts.

On energy and the environment, the president’s budget includes more money for renewables like wind, solar and geothermal, as well as $11.7 billion to help overhaul how the Interior Department manages oil and gas development on public lands. There’s also increases for coal mine safety inspections and $60 million to help come up with an alternative to Yucca Mountain in Nevada as the nation’s primary nuclear waste repository.

The budget stresses Obama’s commitment to deal with climate change, noting it “poises an economic, security and environmental threat that demands a decisive response.” But while the spending blueprint mentions EPA rules expected in the next fiscal year on light-duty and heavy-duty vehicles, it makes no reference to the timing on more controversial plans for major industrial sources like power plants.

Some green groups wanted more on global warming, including assuming revenue from a carbon tax. “The election is over and President Obama cannot run again, so he has no excuse for acting like a milquetoast,” said Friends of the Earth President Erich Pica.

And the American Petroleum Institute mocked Obama for rehashing a long-stalled plan to increase oil and gas taxes, issuing the very same press release it put out last year on the budget and crossing out mentions of “2013” and replacing them with “2014.”

While NASA funding overall sees a slight decrease by about $50 million, the president’s budget would also target funds toward human missions to Mars and $78 million to begin work on a project using robots to redirect small asteroids headed toward Earth.

Other winners include the Education Department, which would see a 4.6 percent increase in Obama’s budget, with $750 million in immediate grants to states to apply for funding for the universal preschool education program that would be funded by the increased cigarette tax. It also includes another $200 million for Obama’s Race to the Top program.

Obama also proposes boosting the Department of Veterans Affairs’ budget to $63.5 billion, with more money dedicated to case backlogs for returning Iraq and Afghanistan troops, $1.4 billion for programs to combat veteran homelessness, $586 million for medical and prosthetic research and money for construction of three new national cemeteries in Florida and Nebraska.

The Commerce Department comes out a winner with a $1 billion increase in Obama’s budget, with more money proposed for weather satellites, wireless broadband development and to create a network of 15 manufacturing-focused research institutes outlined in February during the president’s State of the Union address.

Breanna Edwards, Jennifer Epstein, Philip Ewing, Josh Gerstein, Joanne Kenen, Abby McIntyre, Kate Nocera, Jon Prior, Tony Romm and Steven Sloan contributed to this report.