President Barack Obama’s final budget proposal is a clarion call for Democratic progressivism — a $4 trillion spending blueprint that would pour billions into clean energy, education and Medicaid, and pay for it by raising taxes on big banks and the wealthy.
But in an election season where both parties are being pushed away from their moderate centers, Obama’s proposal is sure to inflame opposition from Republicans. Even before they’d seen the document, the congressional GOP declared the proposal dead and said they had no interest in hearing testimony from the top White House budget official — a sharp break with years of tradition.
And given that the budget entrenches core tenets of liberal ideology, it seems Obama has little hope for any major deals with Republicans over his final year in office.
On the deficit, for example, the president envisions trimming the deficit by $2.9 trillion over 10 years while keeping budget shortfalls below 3 percent of gross domestic product.
To achieve those targets, the budget includes hundreds of billions in new taxes, including raising the top tax rate on capital gains, slapping a new fee on the biggest financial firms and imposing the “Buffett Rule,” which would require wealthy millionaires to pay at least 30 percent of income in taxes. Obama also wants a new $10-a-barrel tax on oil, which would raise $319 billion over 10 years.
In the past, unsurprisingly, these proposals have met with violent opposition from the GOP, and they remain nonstarters in this Congress. And Obama is also counting on savings from an overhaul of the U.S. immigration system, a proposal that’s not going anywhere in the current partisan climate.
Still, Obama’s proposal isn’t all just a prelude to battle. Lawmakers and the administration will have to strike some sort of deal to keep the government running when the current fiscal year ends on Sept. 30 — most likely a continuing resolution to keep the lights on through the election and early into 2017.
And, in a sign that Obama isn’t looking for a knock-down spending fight this year, the president’s proposal abides by the discretionary caps for fiscal 2017 set by last year’s bipartisan budget deal.
“The Budget makes critical investments in our domestic and national security priorities while adhering to the bipartisan budget agreement signed into law last fall, and it lifts sequestration in future years so that we continue to invest in our economic future and our national security,” the White House said in a fact sheet accompanying the budget. “It also drives down deficits and maintains our fiscal progress through smart savings from health care, immigration, and tax reforms.”
At a more granular level, Obama’s blueprint is a grab-bag of Democratic priorities. For example, the administration is once again calling for expanding early education in his 2017 budget, asking for more pre-K grants, a child care expansion and a small boost to Head Start.
On the environment, the White House is renewing its call to make permanent wind and solar tax incentives, which Congress in December brokered a deal to phase out as part of its omnibus budget deal.
The production tax credit, which primarily benefits wind, will be phased out by 2020, and the investment tax credit that goes mostly to solar will fall to zero by 2022 as part of the sweeping tax-and-spending bill enacted last year. The budget calls for those incentives to be made permanent and refundable, a longstanding proposal from the administration.
The administration’s budget proposal for fiscal year 2017 also seeks to double its investment in clean energy programs to $12.8 billion in 2021 from $6.4 billion in 2016. «While we have made significant progress in deploying clean energy technologies, accelerating clean energy innovation is essential to addressing climate change,» the proposal says, noting that the U.S. joined with other countries in December in the Paris climate change accord.
And Obama also wants to spend $1.3 billion on international climate change assistance through the Global Climate Change Initiative, including $750 million for the Green Climate Fund, the program aimed at helping poor countries cope with the effects of climate change. Obama has pledged $3 billion to the GCF over several years and he requested $500 million for it in his last budget.
The Pentagon would see some significant amounts of cash moved around between major programs. The Defense Department’s budget request for next fiscal year cuts procurement spending by nearly $7 billion from this year, to $112 billion. The department’s budget for operations and maintenance would grow by almost the same amount, $6.5 billion, to $251 billion.
So in effect, the Pentagon wants to sacrifice some of its weapons purchases, or modernization, to fund more military operations around the globe — including an increased presence in Eastern Europe to deter Russia and an ongoing air campaign against the Islamic State.
Overall, the Pentagon’s $582.7 billion spending request represents a $2.4 billion increase from this year — an increase which would be used to fund the development of new technologies that Defense Secretary Ash Carter says are crucial to maintaining a military edge over near-peer competitors like China and Russia.
Finally, looking ahead, the White House envisions a fairly rosy economic future. If the policies in the president’s budget were adopted, the administration projects the economy would grow solidly over the next 10 years with the deficit holding steady and debt ticking up slightly.
The White House projects the budget would produce GDP growth of 2.6 percent this year and next, with growth holding at around 2.3 percent per year in the early 2020s. Debt held by the public would tick up to 76.5 percent of GDP in fiscal 2017 but fall to 75.3 percent by 2026.
The administration also says the deficit would gradually shrink, going from 3.3 percent of GDP in fiscal 2016 to an average of 2.6 percent per year over the next decade. That would put the deficit in line with historical averages.
POLITICO staff contributed to this report.
Benton Ives
Politico February 9, 2016
