US President Barack Obama has announced his plans for US expenditure in 2014, calling them fiscally responsible. The trickier task, convincing the opposition not to torpedo the budget, comes next.
President Barack Obama sought to appeal to the opposition Republican calls for reducing the US deficit, hoping that would make changes in the tax code for wealthy Americans more palatable. The Democrat President said a key source of income in the budget for "fiscal 2014," which begins on October 1 this year in the US, would be the removal of loopholes in the tax code more typically exploited by the rich.
"If you're serious about deficit reduction, then there's no excuse to keep these loopholes open," Obama said on Wednesday. He said that the budget as a whole would reduce the country's annual budget deficit from 6 percent to 4.4 percent of total economic output - a figure still well above the enforced levels institutionalized recently by most European Union members.
"For years, the debate in this town has raged between reducing our deficits at all costs and making the investments necessary to grow our economy," Obama said. "This budget answers that argument, because we can do both. We can grow our economy, and shrink our deficits."
The proposal would also scrap a series of automatically-triggered emergency cuts, known as the sequester, which began in March as politicians failed to find a bipartisan solution before a deadline they had set themselves for previous spending talks.
The 2014 budget was based on figures predicting an increase in US economic growth, from 2.3 to 3.2 percent, and a reduction in unemployment, from 7.6 to 7.2 percent.
According to Obama's figures, the budget would represent a 2.5-percent increase in government spending for 2014, a rise slightly higher than inflation levels of 2.2 percent.
The government said Obama's proposal already incorporated several key Republican demands and therefore represented a middle of the road solution.
"We don't view this budget as a starting point," a senior White House official said on Wednesday. "This is an offer where the president came more than half way towards the Republicans in an attempt to get a deal."
Slow process in store?
Still, Republicans in the lower house, Congress, are expected to reject the proposal as it stands and push for further spending cuts. The so-called "Buffett Rule," a measure meaning that families with a combined income of more than a million dollars (764,000 euros) each year would pay at least 30-percent income tax, was included in the proposal. It effectively sets a limit on the extent to which high-earners can utilize loop holes and creative accounting to minimize their tax payments. It is named after business magnate Warren Buffet, who made the proposal while pointing out that he pays less tax than his secretary. Republicans have opposed this policy in the past.
Defense spending is liable to be another contentious area. The Pentagon on Wednesday published its latest proposal for the next fiscal year, saying it had made changes to ensure that key projects would remain intact. However, the Pentagon's proposal still came in $52 billion (almost 40 billion euros) heavier than the amount allowed for within Obama's proposal.
"This budget made important investments in the president's new strategic guidance – including rebalancing to the Asia-Pacific region and increasing funding for critical capabilities such as cyber, special operations and global mobility," Defense Secretary Chuck Hagel said in a statement. The Pentagon had complained that a previous spending proposal was unworkable.
The 2014 budget would also propose an increase in government spending on renewable energy projects like electric cars and wind and solar power. The expansion would be funded, in part, by a reduction in subsidies and tax breaks for oil, gas and coal industries. With the proposed budget, the US Energy Department would be one of the few to enjoy a year-on-year budget increase - of around 8 percent.
msh/ccp (AFP, AP, Reuters)