Obama Budget Racks Up $1 trillion More in Debt Over a Decade Than Projected

In his final budget request before November’s presidential election, President Obama called for $350 billion in new stimulus to keep payroll taxes low, bolster domestic manufacturing, bring jobs back from overseas, hire teachers, retrain workers and fix the nation’s crumbling infrastructure.

Obama wants to reduce deficits by raising taxes by nearly $2 trillion over the next decade on corporations and the wealthy and by letting the Bush tax cuts expire on households making over $250,000 a year. The president is also encouraging congress to eliminate the alternative minimum tax, which hits many middle-class families, while requiring millionaires to pay at least 30 percent of their annual income to the Internal Revenue Service. To deal with healthcare entitlements the president wants to cut spending on federal health-care programs by about $360 billion over the next decade, primarily by reducing payments to drug companies and other providers. Starting in 2017, Obama also proposes to raise Medicare premiums for new retirees and seniors with higher incomes, start charging co-payments for home health-care services, and penalize patients who buy Medigap policies to take care of Medicare co-payments and deductibles.

The president says his proposal would save at least $4 trillion over the next 10 years and stabilize government borrowing, but  budget deficits would stay well above $600 billion a year for most of the next decade. The portion of the debt held by outside investors would climb to $18.7 trillion by 2021, or 76.5 percent of the overall economy, twice the size of the debt before the recession hit in 2007 and $1 trillion higher than the president’s September forecast.

The Administration blamed that increase on more dire economic projections which tend to depress tax collections, increase government spending and drive up deficits. Since the budget was prepared though, job growth has proved stronger than expected, officials said, adding that the picture would look brighter today, but White House economic adviser Gene Sperling said the administration added “our aspirations” to the $3.8 trillion request.

New initiatives would increase 10-year deficit projections by about $350 billion. They include an extra $125 billion for road and rail projects, as well as permanently extending tax breaks that provide families up to $10,000 for college tuition and reward businesses for doing research in the United States.

Republicans say that Obama was able to meet his debt-reduction goals with tax increases and accounting gimmicks while ignoring the massive cost increases that are looming as the nation’s population ages.

“Instead of an America built to last, this is a plan for an America drowning in debt,” House Budget Committee Chairman Paul Ryan (Wis.) said. “All we’re getting is more spending, more borrowing.”

Last year, the president declined to endorse the recommendations of a bipartisan fiscal commission he appointed to develop a debt-reduction strategy.

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