Obama budget tops $3 trillion

WASHINGTON (AP) — Pledging “a new era of responsibility,” President Barack Obama unveiled a multi-trillion-dollar spending plan Thursday that would boost taxes on the wealthy, curtail Medicare, lay the groundwork for universal health care and leave a string of deficits dwarfing any in the nation’s history.

In addition to sending Congress his $3.55 trillion budget plan for 2010, Obama proposed more immediate changes that would push spending to $3.94 trillion in the current year. That would result in a record deficit Obama projects will hit $1.75 trillion, reflecting the massive spending being undertaken to battle a severe recession and the worst financial crisis in seven decades.

As part of the effort to end the crisis, the administration proposes boosting the deficit by an additional $250 billion this year, enough to support as much as $750 billion in increased spending under the government’s rescue program for banks and other financial institutions. That would more than double the $700 billion bank bailout passed by Congress last October.

In his budget message, Obama sought to draw a clear distinction with the Bush administration, saying “the time has come to usher in a new era — a new era of responsibility” both in government and the private sector.

But Republicans contended Obama was avoiding hard choices in favor of exploding the deficit and raising taxes.

“This budget plan is once again a missed opportunity for American taxpayers — it raises taxes on all Americans, implements massive new spending and fails to make any tough choices to control the deficit,” said Sen. Judd Gregg, R-N.H., the top Budget Committee Republican who was nominated by Obama to join his Cabinet as commerce secretary but then withdrew.

The administration called the request for additional bailout resources a “placeholder” in advance of a determination by the Treasury Department of what will actually be needed.

The spending blueprint Obama sent Congress was a 134-page outline with further details to come in mid- to late April, when the new administration sends up the massive budget books that will flesh out the plan.

The plan balances efforts to fulfill Obama’s campaign pledges to deliver tax cuts to the middle class, expand health-care coverage and combat the economic crisis with an effort to keep a soaring deficit from becoming a permanent drag on the economy. However, Republicans assailed the budget for the tax increases, and some Democrats worried that Obama was not doing enough to get the deficit under control.

“I would give him good marks as a beginning, but we have to do a lot more to take on this long-term debt buildup,” said Senate Budget Committee Chairman Kent Conrad, D-N.D.

“Everyone agrees that all Americans deserve access to affordable health care, but is increasing taxes during an economic recession, especially on small businesses, the right way to accomplish that goal?” asked House Minority Leader John Boehner, R-Ohio.

The $634 billion down payment on expanding health-care coverage would come from a $318 billion increase over 10 years in taxes on the wealthy, defined as couples making more than $250,000 per year and individuals making more than $200,000. The tax increase would occur by reducing the benefit the wealthy get on tax deductions. As one example, taxpayers in the current top tax bracket of 35 percent would see their tax deduction for every $1 given to charity drop from 35 cents to 28 cents.

The other half of the money for expanding health care — $316 billion — would come from curtailing payments to hospitals and insurance companies under Medicare and drug payments under Medicaid.

Obama’s budget projects $2 trillion in deficit reduction over a decade — split between tax increases on wealthier Americans and trimming a variety of government programs ranging from subsidies paid to wealthy farmers to eliminating ineffective government programs. However, previous presidents have also sought to target wasteful government spending only to find the programs targeted had powerful supporters in Congress.