President Barack Obama will reprise previously rejected deficit-reduction plans and tax increases on the wealthy while proposing new incentives for companies to return jobs to the U.S., as part of his fiscal 2013 budget, administration officials said.
The election-year spending plan, due to be presented to Congress Feb. 6, is intended to demonstrate the administration’s intent to chip away at the nation’s long-term deficits.
The nation is at a turning point, Obama told business leaders yesterday at a White House event, where he promised to seek tax breaks for companies that make new investments in the U.S. or bring jobs back from overseas. He didn’t give details.
“After shedding jobs for more than a decade, American manufacturers have now added jobs for two years in a row,” Obama said. “But when a lot of folks are still looking for work, now is the time for us to step on the gas.”
Economic growth and job creation are expected to be the main issues in the presidential campaign this year. Mitt Romney, a former Massachusetts governor and the front-runner for the Republican nomination, is making criticism of Obama’s stewardship of the economy a prime focus of his stump speeches.
The unemployment rate has declined for four straight months to 8.5 percent in December, and the Labor Department has reported six consecutive months of job gains of 100,000 or more. Still, the rate has been above 8 percent for almost two years, and little headway has been made in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009.
Only one U.S. president, Ronald Reagan, has been re-elected since World War II with a jobless rate above 6 percent. Reagan won a second term with the rate on Election Day 1984 at 7.2 percent, having dropped almost three percentage points in the previous 18 months.
Obama also is seeking to make headway on the deficit, which hit $1.3 trillion in fiscal 2011, the third highest as a percentage of gross domestic product since 1945.
The president will offer a plan for deficit reduction along the lines of the $4 trillion proposal that he outlined last September. Two administration officials confirmed the plan on condition of anonymity because they weren’t authorized to discuss it before it’s announced.
The previous plan called for $1.5 trillion in tax increases over the next decade, including the expiration of Bush-era tax cuts for families earning $250,000 or more a year. It also would make changes in mandatory spending programs, cutting Medicare and Medicaid and farm subsidies, selling government assets and reducing federal worker benefits.
A spokesman for House Speaker John Boehner said Congress would reject the deficit plan, just as it did last September.
“The president isn’t serious if all he’s offering are the same job-killing tax hikes that even Democrats in the Senate have already rejected,” Brendan Buck, the spokesman for the Republican leader, said in an e-mailed statement. “Our debt is threatening the economy as well important programs many seniors rely on. We cannot afford another punt by the president.”
Obama’s last budget said the deficit in the current fiscal year would be $1.1 trillion, or 7 percent of GDP. By 2015 it would decline to $607 billion, or 3.2 percent of GDP, according to the administration’s forecast.
Because a 12-member so-called supercommittee of lawmakers failed to agree on a deficit-reduction plan in November, the agreement between the White House and Congress requires more than $1 trillion in automatic, across-the-board cuts in discretionary spending beginning in January 2013. Obama has threatened to veto any attempts to get around the spending cuts and blamed Republicans for refusing to compromise.
One official dismissed speculation Obama would offer two budgets next month: a conventional version and a second one reflecting automatic cuts, known as sequestration. The Budget Control Act of last August doesn’t require the Obama administration to submit a budget that includes specific details from a sequester, should it occur.
Stan Collender, a budget expert and managing partner at Qorvis Communications LLC in Washington, told reporters at a Jan. 9 seminar that Congress will spend weeks after the elections trying to avoid automatic budget cuts.
“This will be the year of avoiding the sequester,” he said.
Many of the tax and spending proposals in Obama’s $3.7 trillion budget last year were ignored or rejected by Congress. His fiscal 2013 spending plan probably will encounter even more resistance in an election year when the presidency, every seat in the U.S. House and one-third of those in the Senate will be decided.