Obama to Present Familiar-Looking Budget Plan

(Wall Street Journal) - WASHINGTON -- President Barack Obama will release his budget plan next week, calling for $3 trillion in deficit reductions over 10 years, including $1.5 trillion in tax increases to fall mostly on the wealthiest Americans.

If that sounds familiar, it is because the president essentially laid out his budget plan in September, following a failed bipartisan deficit-reduction deal. Obama's plan for fiscal year 2013, which starts Oct. 1, will mirror the September proposal, senior administration officials said.

In presenting his plan, Obama will argue for new spending in targeted areas, tax cuts to spur manufacturing and new investments in education. He will build on his State of the Union message, saying his plan would foster an "America built to last," aides said.

None of Obama's major proposals are expected to become law before November's elections, given both partisan divides in Congress over priorities as well as election-year politics. Still, the budget proposal serves as a political document in which Obama will set out his vision for how he would manage government taxes and spending should he win a second term.

On taxes, about half the $1.5 trillion in revenue comes from ending Bush-era tax cuts for families earning more than $250,000 a year. Much of the rest comes from additional tax increases on families earning over $1 million a year, by taking away popular deductions and mandating a minimum 30 percent effective tax rate. Obama would end certain tax breaks for corporations, including breaks for oil and gas companies, as well as benefits for those who use corporate jets.

Obama's tax proposals for upper-income Americans set the stage for a debate with the Republican presidential nominee. All contenders for the GOP nomination have opposed additional tax revenue, saying it would hurt the fragile economy.

There's little mystery in the total spending that Obama will propose for discretionary programs -- which are funded annually by Congress -- ranging from small grant programs to large weapons systems. The White House and Congress agreed over the summer to caps on discretionary spending -- reducing the deficit by about $1 trillion over a decade -- and his budget will reflect those limits, officials said.

That means he will propose $686 billion for security spending in fiscal year 2013, a small increase from $684 billion in this fiscal year. And he will propose a total of $362 billion for non-security spending, up from $360 billion this year. Those levels will require spending cuts for many programs, given inflation and Obama's desire to increase spending for his priorities, such as infrastructure and helping homeowners refinance their mortgages.

On the security side, the White House is requesting $525 billion to cover basic operating costs of the Department of Defense in fiscal 2013, plus an additional $88.4 billion to pay for the war in Afghanistan. The proposed 2013 spending plan is built around a smaller overall military, but one that maintains a global presence and continues to invest in high-end weaponry such as drones and missile defense.

In coming days, Obama is expected to spell out principles for overhauling the corporate tax code, but those details were not available Monday.

It also was not clear what the White House will project for future budget deficits. In September, the president said his plan would result in the deficit falling from 8.8 percent of gross domestic product to 2.3 percent. But given changes in economic assumptions and other factors since then, those projections are likely to have shifted.

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