White House Chief of Staff Jack Lew discusses the importance of combining tax cuts with spending cuts.
President Obama’s budget proposal for the next fiscal year, FY2013, was delivered to Congress on Monday.
Obama proposes that millionaires pay a minimum tax rate of 30 percent and projects a budget deficit of $901 billion in FY2013, representing 5.5 percent of gross domestic product (GDP), down from $1.33 trillion, or 8.5 percent of GDP this year, White House officials say.
But that deficit forecast assumes that Congress will allow income tax rates on people earning more than $250,000 a year to increase at the end of this year, an outcome that seems highly unlikely, given congressional Republicans' opposition to the idea.
Obama's budget blueprint requests over $800 billion in spending over several years on transportation infrastructure and economic stimulus programs. "We can't just cut our way into growth," Obama said at a community college in Virginia Monday as he made the case for his budget proposal.
What’s the purpose of this proposal and how much effect will it have in an election year? Here’s a guide to what you’ll see on Monday:
To what year does this proposal apply?
Monday’s budget presents Obama’s proposals for the fiscal year which begins on Oct. 1, Fiscal Year 2013.
Are the spending numbers in the president’s budget blueprint the ones that Congress will eventually enact in FY2013?
Not necessarily, but Stan Collender, a former staffer for both the House and Senate Budget Committees, said, “Ninety-five percent of what any president proposes in his budget is noncontroversial,” so the spending numbers he spells out in his proposal will usually be close to what Congress eventually spends.
Of course, if Obama proposes to spend $3 billion in FY2013 on the National Park Service and the House committee chairman with jurisdiction over the Park Service wants to spend only $2.8 billion, in the end the chairman may get his way.
In effect, the budget is Obama’s chance to spell out what he’d do if he had a free hand, and how he’d propose to pay for his new initiatives.
The president will use his budget blueprint to put specific dollar numbers on the cost of proposals he unveiled in his State of the Union address three weeks ago. He proposed, for instance, a new tax incentive for manufacturing and another one for “clean energy.”
White House Chief of Staff Jack Lew tells NBC's David Gregory the Republican Party has blocked the Senate from passing a budget in the past three years.
But some of what Obama has proposed in his past budgets has never been enacted. In his first budget in 2009, Obama assumed that, from 2012 to 2019, the Treasury would collect more than $645 billion in revenue from the government auctioning off carbon emissions permits to companies. But that idea died in the Senate in 2010.
Is Congress required to vote on Obama’s proposal?
No. In fact it might be politically preferable for some Democrats up for re-election this November to not vote on any Obama budget proposal for a tax increase. So don’t expect that the proposals in the Obama budget blueprint will be voted on in Congress.
Congress is supposed to adopt its own annual budget resolution, which sets the framework within which Congress considers revenue-raising legislation and spending bills, but for the past two years Congress has been unable or unwilling to pass a budget resolution.
What about mandatory spending, such as Medicare or retirement benefits for federal workers? Can Obama’s budget proposal raise or lower those mandatory spending numbers?
The president could propose changes in spending on Medicare, for instance, but it would require legislation by Congress to change the structure or financing of that program, something that looks unlikely in an election year.
For the most part, spending on the mandatory programs is driven by the basic design of those programs (who’s eligible to get benefits), by demographics (how many Americans are age 65 or older, and thus qualify for Medicare), and by the cost of the services the government purchases – for example, the cost of coronary artery bypass surgery for an 70-year old man.
In his budget, is the president likely to revive some of the ideas he proposed last September when he sent a deficit reduction package to the House-Senate “super committee” – ideas such as requiring upper-income retirees to pay more for their Medicare benefits?
Yes, said Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget. “I think the president is still looking to put forward a plan that includes substantial deficit reduction. Asking higher earners to pay more for Medicare is one of those areas with potential for bipartisan support and one of those areas I think the presidential will include in his budget.”
Does 2012 being a presidential election year change anything about Obama’s budget proposal?
It might. Since the proposal applies to the fiscal year which begins on Oct. 1, 2012 and ends on Sept. 30, 2013, he would not get a chance to try to enact his plans if he loses the November election.
But with November in mind, Obama’s budget blueprint is a chance for him to define for voters his ideological differences with the Republicans.
“Every budget proposal is partly a serious policy document and partly a political statement,” Collender said. Given that this is an election year, “this budget proposal will be much more a campaign document” than in a non-election year.