Aamer Madhani

USA TODAY

Budget plan drops prior focus on entitlement cuts

Republicans already have been raising opposition to the plan

Obama%27s wish list includes new manufacturing hubs%2C job training and early childhood education

WASHINGTON — President Obama released his 2015 budget Tuesday, making the case for $56 billion in increased spending while offering the rosy projection that the nation is now on track to cut deficits to below 2% of the economy over the next decade.

The budget proposal, which faced resistance from Republican lawmakers even before its release, details Obama's wish list for new manufacturing hubs, job training and early childhood education and other domestic programs that would be offset by revising some spending programs and slashing tax benefits for multimillion-dollar retirement accounts.

"It's a road map for creating jobs, with good wages and expanding opportunities for all Americans," Obama said at an event at a local elementary school to announce the budget's release. "And at a time when our deficit has been cut half, it allows us to meet our obligations to future generations without leaving them a mountain of debt."

After floating the idea of implementing "chained CPI" — a less generous calculation for annual cost-of-living increases to Social Security — as well as raising tax revenues in last year's proposal, Obama, as expected, downplayed deficit cutting this year and offered a budget that will be far more palatable to Democrats running for re-election.

Obama would pay for half of his new spending by implementing new rules that would cap tax-preferred saving on retirement funds for individuals who have already accumulated enough to finance an annual income of more than $200,000 per year in retirement, or more than $3 million per person.

The rest would be paid for through a series of spending changes, including reducing subsidies to the federal crop insurance program ($14 billion), raising TSA passenger fees on commercial air travel ($5 billion), and preventing individuals from collecting unemployment insurance and disability insurance at the same time ($3 billion).

Even before the budget release, Republicans began picking away at a proposal that is predicated on long-term optimism about the state of the U.S. economy.

"After years of fiscal and economic mismanagement, the president has offered perhaps his most irresponsible budget yet," House Speaker John Boehner said. "American families looking for jobs and opportunity will find only more government in this plan."

Rep. Hal Rogers, the Republican chairman of the House Appropriations Committee, suggested Obama's budget is dead on arrival.

"It is important to remember that it is the Congress, not the White House, that holds the 'power of the purse' and will decide where to cut, where to sustain, and where to invest tax dollars to the most benefit of the American people," Rogers said.

Obama trumpeted that the deficit will come in at $514 billion in the current fiscal year, the lowest it's been since he took office five years ago, and is projected to be even lower next year. The budget also assumes that unemployment will gradually fall to 6% by the last year of Obama's presidency and will fall to 5.4% by 2018 and remain at that level through 2024

But Republicans complain that Obama and fellow Democrats are downplaying the independent Congressional Budget Office's calculation that the annual deficit is projected to balloon to more than $800 billion by 2022, as Medicare costs are projected to rise. GOP lawmakers charge the president is turning his back on austerity to help fellow Democrats win votes.

But the president's budget says $650 billion can be saved through adopting changes in the tax code. He also points to a series of changes to Medicare and Medicaid, including encouraging the purchase of generic drugs and stopping companies from blocking consumers' access to generic drugs, that can bring $402 billion in savings over the next decade.

"At at time when our deficits are falling at the fastest rate in 60 years, we got to decide if we're going to keep squeezing the middle class, or if we're going to continue reduce the deficit responsibly, while taking steps to grow and strengthen the middle class," Obama said.

Among the highlights in Obama's budget proposal:

DEFENSE

Obama sets the Pentagon budget at $495.6 billion, roughly the same level as the last fiscal year. Defense Secretary Chuck Hagel has already outlined plans for reducing the size of the Army by 100,000 soldiers by 2019, shrinking the largest service's troop level to pre-World War II levels.

EXPANDING EITC

Obama wants to expand the earned-income tax credit for 13.5 million low-income Americans by closing tax loopholes benefiting certain fund managers and high-income, self-employed workers. Under Obama's proposal, 7.7 million workers would be eligible for a larger credit and 5.8 million workers would be made newly eligible for the credit. The proposal would cost $60 billion over 10 years.

TRANSPORTATION

The budget includes $302 billion over four years to repair dilapidated roads and bridges. Obama would pay for the projects through $150 billion in temporary revenues that would be generated by ending some tax breaks for businesses as part of corporate tax reform that would also lower tax rates.

MANUFACTURING HUBS

Obama has already launched four hubs for high-tech manufacturing that connect businesses with research university. His long-term vision calls for establishing 45 of these hubs over the next decade, and his 2015 budget includes funding for five more.

EARLY CHILDHOOD EDUCATION

The president repeats his push, included in his 2014 budget, for universal prekindergarten and expanding Head Start, which provides early childhood education for low-income families. The proposal would be paid for through an increase in the tobacco tax. Obama also proposes to double the Education Department's current discretionary investment in preschools to $500 million to help support the program. An additional $250 million in grant money would also be made available to the program.

Contributing: Susan Davis