Budget is bold 'first step' President puts his political capital on line for major issues facing the country

The Baltimore Sun

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

Wealthy Americans would be affected most by the plan to raise taxes on individuals making over $200,000 and couples making over $250,000 a year for the next 10 years. It would raise more than $636.7 billion.

HEALTH CARE

In the proposal, $630 billion would be put into a reserve fund during a 10-year period. The fund would be paid for by reducing Medicare "overpayments" to private insurers, reducing Medicaid drug rebates to manufacturers and reducing the tax break on Americans making at least $200,000 and households making at least $250,000. This plan essentially puts into place the building blocks for a national health care program to benefit Americans who cannot afford health insurance. There are an estimated 48 million uninsured Americans.

TAX CREDIT

This would make permanent the $400-per-person, $800-per-family Making Work Pay tax credit. It would also make permanent the $2,500 tax credit for college education that's contained in the stimulus plan.

FARMERS

The proposal would phase out direct subsidies to farmers who make more than $500,000 a year.

MILITARY

The budget plan would give a 2.9 percent pay raise to all uniformed service members and a 2 percent raise for all other federal employees.

From Sun news services

WHAT'S IN IT FOR MARYLAND?

President Barack Obama's budget outline doesn't contain a state-by-state breakdown of his 2010 spending plan, and the details won't be completed until April. But there are a number of items of interest to Marylanders in the blueprint made public yesterday.

Federal pay

Members of the armed services would receive a 2.9 percent pay raise. Civilian workers would get a 2 percent increase. In the past, Congress has worked to align those numbers, and this year ended up providing a bigger increase than the administration had requested. Congressional sources say the 2010 compromise is likely to be no higher than the military request and might end up between the two figures.

Social Security Administration

A $1.1 billion budget boost, or 10 percent, is aimed at reducing the processing backlog for retirement and disability claims. A significant portion of that amount - $485 million - would go toward a new five-year plan to fight fraud by reducing the backlog of continuing disability reviews. The spending is likely to result in new hiring by the agency, mainly at state field offices.

BRAC

The Defense Department's base realignment and closure process, which will greatly expand military facilities in Maryland, remains on schedule. The Obama budget plan calls for enough spending to meet the September 2011 implementation deadline, according to the Office of Management and Budget.

Cancer research and food safety

Obama is proposing to spend more than $6 billion on cancer research in 2010, as part of a long-range plan to double such funding. The money represents an increase of about $1 billion over the current budget and is in addition to $10 billion for new National Institutes of Health research over the next two years provided under the recently enacted stimulus law. The budget also calls for unspecified increases in funding for food and medical safety by the Food and Drug Administration.

Police, charter schools, home weatherization, nurse home visitation, clean water

The budget provides funding to begin hiring additional police officers and more money for nonprofit charter schools. Also, additional funding to weatherize homes of low-income residents, a new nurse home visitation program to reduce medical costs and provide better care, and new grants to the state for wastewater and drinking water projects are included. Obama also proposes to provide more money to help farmers conserve their land and reduce pollution runoff.

Source: Tribune Washington bureau; Office of Management and Budget

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