Tuesday, February 12, 2013

Obama to pitch new spending in State of the Union, says it won't add to deficit

President Obama is planning to pitch new spending proposals in his State of the Union address Tuesday night, saying in prepared remarks that he wants to invest in “broad-based growth” and fuel a “rising, thriving middle class."

Even before the address, Obama’s plan to call for “investments” was panned by House Speaker John Boehner. "If government spending were the tonic for all our ills, this would have been solved a long time ago,” Boehner told reporters.

But Obama stressed that his proposals would not add to the deficit.

“Tonight, I’ll lay out additional proposals that are fully paid for and fully consistent with the budget framework both parties agreed to just 18 months ago,” Obama said in prepared remarks. “Let me repeat -- nothing I’m proposing tonight should increase our deficit by a single dime. It’s not a bigger government we need, but a smarter government that sets priorities and invests in broad-based growth.”

At the beginning of his second term, Obama is pushing anew to make economic growth a priority. In his remarks, he says it is this generation’s task “to reignite the true engine of America’s economic growth -- a rising, thriving middle class.”

Regardless of whether Obama’s proposals add to the deficit, he is sure to face a mixed reception in putting the emphasis on new government programs when many -- particularly House Republicans -- are more interested in paring back the spending out of Washington. Some argue this could even help the economy by sending a signal that the federal government is at last tackling the budget deficit.

The president is expected to speak at 9 p.m. ET.

While Obama's aides say Tuesday night is all about the economy, he is expected to hit several other themes during the hour-long speech. First lady Michelle Obama’s guest list, announced Tuesday afternoon, provided a glimpse into what those agenda items might be -- gun control, immigration, education, science and technology funding, and more.

In each guest's biography is reflected a theme, almost certain to make its way into the president's speech.
Among those in Michelle Obama's guest box are Alan Aleman, a so-called "DREAM student" -- someone who arrived in the U.S. as a young illegal immigrant, but has been given a reprieve to pursue an education by the administration. Aleman's presence will be symbolic as the president pushes for immigration reform which, if he gets his way, will include some permanent provision dealing illegal immigrants who came to the U.S. as children.

Also in the guest box is Cleopatra Cowley-Pendleton, mother of Hadiya Pendleton who was killed in Chicago in late January. The first lady attended Hadiya's memorial service over the weekend. Cowley-Pendleton, together with other victims of gun violence in the crowd Tuesday night, represents the president's push for new gun control measures.

Several other guests speak to Obama's stance on the budget. Highlighting the president's push for science funding, the flight director for the Mars Curiosity Rover will be in the crowd. And highlighting the president's push for tax cuts on the middle class (and hikes on top earners), the guest box will include Lisa Richards, a single mom who voiced concern to the White House about taxes rising on the middle class.

The president will have several other weighty issues to address Tuesday night, not the least of which is North Korea's latest nuclear test. The president also plans to announce 34,000 U.S. troops will be brought home from Afghanistan within a year.

That will bring the force size to roughly half what it is now, in the run-up to the withdrawal deadline of the end of 2014.

The centerpiece of the address, though, is still expected to be the economy. The president is expected to revive his calls Tuesday for government "investments" in infrastructure and education -- meaning spending. While the recurring push, for Republicans, brings back bad memories of the stimulus law they opposed, White House economic adviser Gene Sperling told Fox News on Tuesday that closing the deficit "doesn't mean you pull back on everything."

"I don't think that laying the foundation for future growth (with research and highway spending) is anything to discount in any way," Sperling said. "What you need to do is be smart."

Boehner, though, dismissed the push. "If government spending were the tonic for all our ills, this would have been solved a long time ago," he said Tuesday. Boehner said the president added "$5 trillion in new debt over the last four years. How much further is he going to run us into the sewer?"

Boehner also claimed the president doesn't have the "guts" to tackle the budget deficit.

Obama and Congress are scrambling to find a way to avoid automatic spending cuts poised to hit March 1 unless a deal is reached to replace them.

Obama, to the chagrin of Republicans, wants to replace those cuts with a blend of tax hikes and separate cuts. Republicans, citing the tax-hike concessions they gave during the fiscal crisis talks, are averse to more tax increases -- even if this time, those increases do not come in the form of rate hikes.

Monday, February 4, 2013

Obama Fiscal 2014 Budget Said to Be Delayed Until March

President Barack Obama probably will delay sending his fiscal 2014 budget to Congress until sometime in March, according to a defense official with knowledge of the budget process.

The spending blueprint was supposed to be delivered to lawmakers yesterday, prompting Republicans and the administration to trade criticism.

“For the fourth time in five years this White House has proven it does not take trillion-dollar deficits seriously enough to submit a budget on time,” House Speaker John Boehner, an Ohio Republican, said in a statement.

White House press secretary Jay Carney, while declining to say when the budget would be ready, accused House Republicans of putting forward “highly partisan” spending plans that have “no support among the American public.”

The defense official asked for anonymity because the administration hasn’t officially announced when the budget would be ready.

The administration has been signaling that the annual spending blueprint wouldn’t meet the deadline because of the protracted debate in Washington over taxes, spending and the deficit, especially the dispute at year’s end that focused on over tax rates. Congress ultimately approved a measure averting income-tax increases for most Americans while allowing rates to rise on taxable income of individuals up to $400,000 and of married couples of up to $450,000.
‘Forced to Delay’

Acting White House budget director Jeffrey Zients wrote in a letter last month to Representative Paul Ryan, the Wisconsin Republican who is chairman of the House Budget Committee, that because the tax deal wasn’t reached until Jan. 1, the administration was “forced to delay some of its FY2014 budget preparations, which in turn will delay the budget’s submission to Congress.”

Obama is also negotiating with Congress a way to avoid the $1.2 trillion in automatic federal spending cuts scheduled to take effect March 1.

Congress created the automatic cuts in August 2011 as part of an agreement to raise the U.S. debt ceiling. In the legislation passed Jan. 1, Congress delayed the spending cuts for two months.
Stock Market

Stocks have rallied since the start of the year, with the Dow Jones Industrial Average and the Standard & Poor’s 500 Stock Index (SPX) hitting five-year highs on Feb. 1. The S&P dropped 1.2 percent to 1,495.71 at 4 p.m. yesterday in New York, and the Dow retreated 129.71 points to 13,880.08 after climbing above 14,000 last week for the first time since 2007. Ten-year U.S. Treasury yields lost six basis points to 1.96 percent.

Even if the budget is late by a month or more, it’s unlikely to change the political debate over fiscal issues. Obama has said he’s planning to again seek funding for many of the proposals contained in last year’s $3.8 trillion budget, which was never fully adopted by Congress.

“It’ll look a lot like the old one,” Michael Linden, director of tax and budget policy at the Center for American Progress, said yesterday at a conference in Washington focused on fiscal issues. Any spending cuts or revenue increases, he said, will be “basically the same” as last year’s budget blueprint.
Carried Interest

Obama reinforced that during an interview with CBS News broadcast on Feb. 3. He said he wants to seek additional revenue by trimming tax breaks for top earners and the treatment of profits in buyout deals, known as carried interest. Those profits are often taxed as capital gains, which receive preferential rates under the tax code compared with levies on wages; Obama has advocated treating the profits as ordinary income for tax purposes.

“There is no doubt we need additional revenue, coupled with smart spending reductions, in order to bring down our deficit,” the president said.

Taxing private equity managers’ carried interest as ordinary income would raise about $16.8 billion, according to the nonpartisan Joint Committee on Taxation.

Obama has proposed limits on the value of deductions, capped at 28 percent for households earning more than $250,000, and has proposed ending tax breaks for oil and natural gas companies, which would collect $41 billion over 10 years, according to last year’s budget estimate.

The government is currently operating under a stopgap budget that expires March 27. If spending authority isn’t extended, government agencies face a shutdown.

Panelists at the conference on budget issues said any proposals on taxes in Obama’s fiscal 2014 budget would take at least a year or more to get through Congress.

Stan Collender, a former congressional budget analyst, said that while “they may be talking about it” this year, he tells his financial clients at Qorvis Communications LLC that nothing serious will happen on tax changes until the end of 2014 or into 2015.

“The president’s budget is just a proposal,” he said. “It has no meaning other than a political statement at the time it’s made.”