February 27, 2009|By Maura Reynolds and Peter Nicholas | Maura Reynolds and Peter Nicholas,Tribune Washington Bureau
WASHINGTON -With the $3.55 trillion budget outline unveiled yesterday, President Barack Obama finally showed where he's prepared to spend his political capital and what the battle lines will be in the months ahead.
It was the political equivalent of an "all in" moment in a high-stakes poker game.
After weeks of appealing for bipartisanship and selecting Cabinet secretaries and other officials that worried some of his most liberal supporters in the process, the president came out into the open with his new budget plan.
And he laid down controversial markers on almost every major issue facing the country, saying that only bold action now can end the current economic crisis and set the U.S. on the path to long-term prosperity.
"The time has come to usher in a new era - a new era of responsibility in which we act not only to save and create new jobs, but also to lay a new foundation of growth upon which we can renew the promise of America," Obama wrote in the preface. "This budget is a first step in that journey."
The fiscal 2010 budget will rack up a $1.17 trillion deficit, in the wake of an estimated $1.75 trillion deficit for 2009 - a shortfall that Obama described as unfortunate but necessary in the short term to jump start the economy.
"We inherited these twin trillion-dollar deficits," budget director Peter Orszag said, noting that two stimulus packages aimed at the continuing economic crisis were big contributors to the flood of red ink.
Mindful of costs, the budget tries to launch some of Obama's signature initiatives - such as a "cap-and-trade" program to combat global warming and proposals for reducing health care costs - by paying for them with new revenues described as fair policy trade-offs.
Obama also plans to plow new money into aiding college students and reshaping the electric power transmission grid to make greater use of wind power and other renewable energy sources - investments that he said will yield important dividends in the future.
On taxes, the budget proposes a broad effort to shift a greater share of the burden onto rich and affluent Americans, including a proposal to limit home mortgage interest deductions for those with high incomes.
Among those likely to oppose his plans: large agribusiness, drug companies, and oil and gas companies.
"We will each and every one of us have to compromise on certain things we care about but which we simply cannot afford right now. That's a sacrifice we're going to have to make," Obama said as he issued the outline.
"What I won't do is sacrifice investments that will make America stronger, more competitive and more prosperous in the 21st century, investments that have been neglected for too long."
Republicans expressed dismay at the size of the budget commitments, even as they acknowledged they bear some blame for the problems Obama is trying to fix.
"There has been too much spending under Republicans over the last couple years," said House Minority Leader and Ohio Rep. John Boehner. "But, if you begin to look at what happened over the last month, and what's being proposed in this budget, this president's beginning to make President Bush look like a piker."
With the financial crisis still intensifying, Obama's budget anticipates the government might need to more than double the existing $700 billion financial rescue fund.
To err on the side of caution, the budget creates a reserve fund, Orszag said.
"We hope that it will not be necessary," he said. "We have no plans to go to Congress at this point to ask for additional money."
The reserve fund is listed as $250 billion in the budget because the government estimated it would get back about two-thirds of the money it spends to acquire assets from banks and financial institutions.
Obama's budget creates winners and losers. Among the winners are the middle class and the poor, whose taxes will be eased. Among the losers are the wealthy, whose taxes will increase.
The budget plan would make permanent the temporary "Making Work Pay" payroll tax cut that Congress approved in the stimulus package. For families with incomes under $150,000, it would reduce their payroll taxes by $800.
But as promised during the campaign, Obama will increase the tax burden on families with incomes above $250,000. It would do that by changing how the wealthiest Americans itemize deductions including charitable donations, state taxes and interest payments on a home mortgage.
Under the president's proposal, joint filers making more than $250,000 a year would recoup only 28 percent of the value of qualified deductions, rather than 35 percent under current law.
How the budget plan would affect Maryland and Marylanders. PG 19
BUDGET AT A GLANCE
Here are some highlights of President Barack Obama's 140-page budget proposal released yesterday:
$3.55 trillion
Spending in Obama's budget proposal
$1.17 trillion
Budget deficit projected by Obama's team, in wake of an estimated $1.75 trillion deficit for the 2009 fiscal year
TAXES
