Obama Projects $901 Billion Deficit Next Year With Tax Increases ...

February 10, 2012, 6:30 PM EST

By Roger Runningen and Brian Faler

Feb. 10 (Bloomberg) ? President Barack Obama will call for raising taxes on the wealthy and boosting jobs spending as part of a fiscal 2013 budget request that envisions the deficit shrinking next year to $901 billion.

Obama is seeking $350 billion in short-term measures to create jobs, most of them repackaged from the spending and tax proposals submitted by the administration and rejected by congressional Republicans last year. He also would raise $61 billion over 10 years from the largest financial institutions to offset the cost of the Troubled Asset Relief Program and his mortgage refinance plan.

The deficit forecast is based on the assumption Congress accepts previous White House policy recommendations, including ending Bush-era tax cuts for families earning $250,000 or more and eliminating some corporate tax breaks.

?The budget targets scarce federal resources to areas critical to growing the economy and restoring middle-class security,? a White House fact sheet released today says.

In addition to setting out Obama?s priorities, the election-year spending plan for the fiscal year beginning Oct. 1 is intended to highlight different priorities from the Republicans seeking to run against him in the November election.

?It?s going to be 99.7 percent a political document,? said Roy Meyers, a former Congressional Budget Office analyst.

Program Cuts

Obama would cut $360 billion out of Medicare and Medicaid over the next decade while paring another $278 billion from farm subsidies, federal workers? retirement plans and other savings.

It forecasts this year?s deficit to be $1.3 trillion, or 8.5 percent of the nation?s gross domestic product. The 10-year plan would reduce the budget shortfall to $575 billion, or 2.7 percent of GDP by 2018, according to an administration summary.

A shortfall of $901 billion next year translates to 5.5 percent of GDP, according to the administration, and would be the first time since Obama took office that the deficit would be less than $1 trillion.

The government posted a deficit of $1.3 trillion last year, which is 8.7 percent of the economy, the third largest share of GDP since 1945, according to the nonpartisan Congressional Budget Office. The agency projected a shortfall this year of about $1.1 trillion if current policies remain in place, or about 7 percent of the economy.

Obama?s four-volume package, which goes to Congress on Feb. 1, is based in part on the 10-year, $3 trillion deficit- reduction proposal he offered unsuccessfully to Congress in September.

?Editors: Bob Drummond, Jim Rubin.

To contact the reporters on this story: Brian Faler in Washington at bfaler@bloomberg.net; Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

Source: http://g7finance.com/global-news/obama-projects-901-billion-deficit-next-year-with-tax-increases/

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