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February 10, 2012

Obama budget predicts $1.3T deficit for 2012

Andrew Taylor Associated Press

WASHINGTON D.C. — The White House on Friday confirmed a report that President Barack Obama’s new budget predicts a $1.3 trillion deficit for the ongoing fiscal year. The deficit would drop to $901 billion next year under the administration’s tax and spending policies.

In his budget submission on Monday the president will also repeat his call to raise the top marginal income tax rate for individuals making more than $200,000 a year and families earning $250,000 percent to a Clinton-era 39.6 percent rate as part of $1.5 trillion in tax hikes over the coming decade. That proposal alone raises almost $900 billion over the coming decade.

The election-year document is sure to get a brushoff from Republicans controlling the House. The White House says that Monday’s budget will contain many items from a September submission to a failed congressional deficit “supercommittee,” which deadlocked over tax increases and how much to cut popular benefit programs like Medicare.

The Obama budget will also reflect tight “caps” on agency operating budgets forged in last summer’s budget and debt limit pact between Obama and House Speaker John Boehner. Those include a $6 billion cut in the budget for core Pentagon operations and cuts to many domestic agencies as well.

But it’s commonly assumed that presidential politics will prevent Democrats and Republicans from renewing efforts for a broader budget agreement, though negotiations on Capitol Hill are ongoing in efforts to renew jobless benefits for the long-term unemployed and a two percentage point cut in payroll taxes and prevent a 27 percent cut in Medicare payments to doctors that’s the product of an outdated funding formula.

The figures were first reported in The Wall St. Journal, which viewed leaked draft budget documents.

The Journal also says the president will propose a six-year, $476 billion highway and surface transportation bill and $360 billion from curbs to federal health care programs like Medicare and Medicaid.

There’s also an immediate $350 billion for job-creating measures, less than presented in Obama’s $447 billion September jobs plan.

The White House warned earlier this week that its economic assumptions — predictions of the unemployment rate averaging 8.9 percent this year — now look too pessimistic. They were made in mid-November, before a recent spate of positive news about the economy. If the economy performs better than officially projected, it’ll mean a better fiscal performance for the government since greater growth means increased tax revenues.

“The forecast of the unemployment rate that will accompany the budget should be considered stale and out of date,” White House economist Alan Krueger said Thursday.

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