Obama sending long-awaited 2014 budget to Congress

WASHINGTON (AP) ? President Barack Obama on Wednesday is sending Congress his 2014 budget, an effort to achieve an elusive "grand bargain" to tame runaway deficits that have soared above $1 trillion for each of the past four years.

Obama's spending blueprint for the 2014 budget year would accomplish the deficit cuts through a combination of further tax increases, further reductions in the growth of spending and reductions in the growth of the government's biggest benefit programs, Social Security and Medicare.

But instead of moving Congress nearer a grand bargain, the Obama's proposals so far have managed to anger Republicans and Democrats alike.

Obama's Democratic allies have attacked him for pursuing cuts in Social Security and Medicare, while Republicans have rejected the president's efforts to raise taxes further.

The president's spending and tax plan for the budget year that begins Oct. 1 is two months late. The administration blames the delay on the lengthy "fiscal cliff" negotiations at the end of December and then fights over the March 1 automatic spending cuts.

The president's plan tracks an offer he made to House Speaker John Boehner, R-Ohio, during December's budget negotiations, which Boehner ended up walking away from because of his opposition to higher taxes on the wealthy.

The Obama budget proposal will join competing budget outlines already approved by the Republican-controlled House and the Democratic-run Senate.

Congress is unlikely to get down to serious negotiations until this summer, when the government will once again be confronted with the need to raise the government's borrowing limit or face the prospect of a first-ever default on U.S. debt.

As part of the administration's effort to win over Republicans, Obama will have a private dinner at the White House with about a dozen GOP senators Wednesday night. The budget is expected to be a primary topic, along with proposed legislation dealing with gun control and immigration.

Early indications are that the budget negotiations will be intense. Republicans have been adamant in their rejection of higher taxes, arguing that they will not go further than the $600 billion increase on top earners over a decade that was part of the late December agreement to prevent the government from going over the "fiscal cliff."

The administration maintains that Obama's proposal is balanced with the proper mix of spending cuts and tax increases.

"The president's been clear that it's going to take broad and shared sacrifice," Treasury Secretary Jacob Lew said in an interview on National Public Radio. "He would not find it acceptable to make only reductions in entitlement programs. That we need also to raise revenues so that we have a fair balance of what the deficit reduction will come from."

The most sweeping proposal in Obama's budget is a switch in the way the government calculates the annual cost-of-living benefits for the millions of recipients of Social Security and certain other benefit programs from the current method tied to changes in the consumer price index.

The new method, known as chain-weighted CPI, takes into account changes that occur when people substitute goods rising in price with less expensive products. It results in a slightly lower annual reading for inflation.

The switch to modified CPI inflation formula would cut spending on government benefit programs by $130 billion over 10 years, although the administration said it planned to protect the most vulnerable. The change would also raise about $100 billion in higher taxes because the current CPI formula is used to adjust tax brackets each year. A lower inflation measure would mean more money taxed at higher rates.

Once the COLA change is fully phased in, it is estimated that it would mean about $560 less in annual benefits for a typical 75-year-old receiving benefits and $984 less for someone 85.

The White House has said it would reduce deficits by a total of $1.8 trillion over a decade, reducing the annual red ink to the $500 billion range by 2016 and down to 1.7 percent of the size of the economy in 10 years. When the deficit program proposed by the president is combined with $2.5 trillion in deficit reductions already approved, it would total $4.3 trillion in deficit cuts over the next decade.

Obama has presided over four straight years of annual deficits totaling more than $1 trillion, reflecting in part the lost revenue during a deep recession and the government's efforts to get the economy going again and stabilize the financial system.

The Obama budget's $1.8 trillion in new budget cuts would take the place of the automatic $1.2 trillion in reductions required by a 2011 budget deal. That provision triggered $85 billion in automatic cuts for the current budget year and those reductions, known as a "sequester," would not be affected by Obama's new budget.

The budget plan already passed by the GOP-controlled House would cut deficits by a total $4.6 trillion over 10 years on top of the $1.2 trillion called for in the 2011 deal. The budget outline approved by the Democratic-controlled Senate tracks more closely to the Obama proposal, although it does not include changes to the cost-of-living formula for Social Security.

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Associated Press writers Andrew Taylor, Jim Kuhnhenn and Donna Cassata contributed to this report.

Source: http://news.yahoo.com/obama-sending-long-awaited-2014-budget-congress-070201216--finance.html

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