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Monday August 3rd, 2015 11:09AM

Obama budget focuses on boosting economy

By The Associated Press
WASHINGTON (AP) -- President Barack Obama is unwrapping a nearly $4 trillion budget that gives Democrats an election-year playbook for fortifying the economy and bolstering Americans' incomes. It also underscores how pressure has faded to launch bold, new attacks on federal deficits.

Obama's 2015 fiscal blueprint, which he is sending Congress Tuesday, was expected to include proposals to upgrade aging highways and railroads, finance more pre-kindergarten programs and enhance job training. The White House said it would also enlarge the earned income tax credit to cover 13.5 million low-earning workers without children, expand the child care tax credit for some parents and make it easier for workers to contribute to Individual Retirement Accounts.

A revamping of corporate income taxes and higher tobacco levies would help pay for some of the initiatives.

White House aides say Obama's blueprint would obey overall agency spending limits enacted in December that followed a pact between Rep. Paul Ryan, R-Wis., and Sen. Patty Murray, D-Wash., the heads of the House and Senate budget committees.

Yet Obama will propose an additional package of $56 billion in spending priorities, the aides say, half for defense and half for domestic programs. It would be fully paid for by cutting spending and narrowing tax loopholes, such as boosting collections from U.S. firms doing business overseas, they said.

That package, like much of the president's plan, seemed sure to draw catcalls from Republicans. Their recipe for accelerating economic growth includes cutting taxes or overhauling the entire tax code, and they criticize higher spending as wasteful.

With the Democratic-led Senate and GOP-run House gridlocked, much of Obama's plan is likely to go nowhere in Congress or be whittled down. Lawmakers want to avoid anything that would help the other party or hurt their own prospects in this November's elections, when Republicans are expected to retain House control and might capture the Senate majority.

Obama's budget starts what should be a relatively peaceful year on Washington's fiscal front lines. That is because land mines embedded in the budgetary landscape have been defused this time around after cliffhanger, partisan showdowns in recent years.

Instead of the annual fight over spending limits - which last year helped produce a 16-day partial government shutdown - Murray and Ryan's bipartisan compromise set an overall agency spending cap for the next two years. That has eliminated the need for lawmakers to do anything but provide the details in later spending bills, easing the threat of another federal closure.

Also missing this year is a need to extend the government's debt limit, which in the past has sparked battles that threatened economy-jarring federal defaults. Congress has given Treasury authority to borrow money into next March, eliminating a must-pass legislative vehicle that either side might use to make demands.

Obama is delivering his proposal to lawmakers as federal deficits, though still sky-high, have fallen dramatically. Last year's shortfall of $680 billion was far smaller than initially expected and ended a skid of four straight years in which the annual red ink exceeded $1 trillion.

That has made it easier for lawmakers to avoid considering the politically painful tax increases and spending cuts needed to significantly reduce deficits.

Thus, the president's budget will not renew last year's offer - hated by many fellow Democrats - to save money by slowing increases of Social Security benefits. The White House says that plan was advanced only to entice congressional Republicans into deficit-reduction talks and was excluded this year after GOP leaders refused to reciprocate by offering tax increases.

To live within curbs Congress has imposed on agency spending, Defense Secretary Chuck Hagel has said the Pentagon would reduce the Army's size to levels last seen before World War II. The Navy would buy fewer ships and a new round of base closings would begin in three years.

As a result, the extra military spending that Obama is offering would be welcomed by many Republicans.

They have complained that Pentagon coffers have been whittled dangerously as the Iraq war ended and the U.S. presence in Afghanistan has shrunk. Such cries have only amplified in recent days as Russia seized control of Ukraine's Crimea peninsula and GOP lawmakers demand that Obama stand up to Russian President Vladimir Putin.

But under Obama's budget, the political trade-off for extra defense spending would include beefed-up domestic programs - a step many in the GOP will oppose.

On the domestic side, extra expenditures Obama wants would address Democrats' campaign-year emphasis on closing the income gap between rich and poor.

These would include opening 45 new manufacturing institutes, connecting colleges and private employers and improving Head Start, the preschool program for low-income families.
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