Obama aims to reduce debt as proportion of national economy, not in absolute terms, and would veto any Republican 2016 budget with bigger cuts

The White House is threatening to block any attempt by Congress to restore the “sequester” budget cuts this year as it argues it is time to move from an austerity-driven focus on reducing government debt, and do more to tackle income inequality instead.

Amid growing global debate over the wisdom of austerity economics, Barack Obama made clear in his own proposed budget on Monday that he believes the US should not be attempting to eliminate its deficit entirely and would only shrink debt as a proportion of the overall economy over the coming years.

But the administration’s proposals are largely symbolic without approval from lawmakers and officials made clear that the president would veto any version of the 2016 budget drafted by the Republican-controlled Congress that sought more aggressive cuts in spending.

“Sequestration is a deal-breaker,” his press secretary, Josh Earnest, told reporters when asked about a possible return of the controversial policy that first proposed mandatory cuts in government spending in 2011.

The effects of sequestration were partially suspended under a deal between Republicans and Democrats in 2013 but are due to return later this year unless Congress agrees to the type of more generous spending provisions favoured by Obama.

“I’m not going to accept a budget that locks in sequestration going forward,” he added in a speech outlining his $4tn proposal. “It would be bad for our security and bad for our growth.”

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Obama’s strong endorsement for a more expansionary spending policy is significant not just for the US economy but for countries in Europe such as Greece and the UK, which are locked in fierce political battles over the merits of balanced budgets during the recovery from the banking crash.

The US president caused a stir in Britain by appearing to back David Cameron’s budget cuts during his recent visit to Washington by saying he “must be doing something right” when asked about them because the economy was growing.

But the White House economic adviser Jason Furman made clear on Monday that he felt the US was able to predict above-trend economic growth over the next few years only by ignoring the calls among Republicans for UK-style fiscal tightening.

Calling instead for investment in infrastructure, college education and child tax credits, Obama added: “We can afford to make these investments while remaining fiscally responsible. And, in fact, we cannot afford – we would be making a critical error if we avoided making these investments.”

His budget would see the US deficit fall from $583bn this year to $476bn next year, but then begin to rise again, adding $5.7tn to the US federal debt over 10 years. Nevertheless, officials argue that as a proportion of the overall economy the US debt will eventually shrink from 75% to 73% by 2025, partly as a result of stronger growth over this period.

The White House also hopes to raise extra revenue by proposing a more aggressive response to corporate tax avoidance, including a one-off levy on an estimated $2tn in overseas profits kept offshore by US multinationals.

Obama’s proposal to pay for greater infrastructure investment by forcing companies to pay 40% of their current tax rate on the hidden money attracted most attention in the run-up to Monday’s budget.

But a host of other measures contained in the Treasury Department “green book” detail the most concerted attempt yet to close international loopholes, including a ban on so-called inversions and new rules preventing companies from shifting money internally to avoid taxes.

Republicans have hinted they would be willing to consider some of these corporate tax reforms too, but insist that more must be done to reduce the burden of taxation on small businesses at the same time.

Obama’s plan has also attracted criticism from some on the left, who argue it does not go far enough.

“When it comes to fixing our rigged corporate tax system, the actual proposals in President Obama’s budget don’t match the rhetoric,” said Richard Trumka of the union umbrella group AFL-CIO. “As this budget stands, it falls short of a very simple standard: our tax system should not encourage corporations to shift jobs or profits overseas. We are also disappointed that the administration continues to propose corporate tax reform that does not raise significant amounts of revenue over the long term.”