President Barack Obama's new budget predicts a $1.3 trillion deficit for the ongoing fiscal year but that would drop to $575 billion in 2018 if the president gets his wish to raise taxes and if policymakers can live within tight restraints on the Pentagon and other Cabinet agency budgets, the White House said Friday.
After four consecutive years of trillion dollar-plus deficits, next year's budget shortfall would drop to $901 billion under the administration's tax and spending policies.
In his budget submission on Monday, the president will also call for a "Buffett Rule" -- that would guarantee that households making more than $1 million a year pay at least 30 percent of their income in taxes. Billionaire financier Warren Buffett has made headlines proposing the idea, saying that it's unfair for him to pay a lower tax rate than his secretary.
Obama will also call for Congress to enact a tax reform plan that would raise about $1.5 trillion over the coming decade by eliminating numerous tax preferences and assuming revenues from the expiration of Bush-era tax cuts for people in the upper brackets. The president is also going to call for lower corporate tax rates as well as an end to many corporate tax loopholes; details will come later in the month.
The election-year document is sure to get a brushoff from Republicans controlling the House. The White House says that Monday's budget will contain many items from a September submission to a failed congressional deficit "supercommittee," which deadlocked over tax increases and how much to cut popular benefit programs like Medicare.
The Obama budget will also reflect tight "caps" on agency operating budgets forged in last summer's budget and debt limit pact between Obama and House Speaker John Boehner. Those include a $6 billion cut in the budget for core Pentagon operations and cuts to many domestic agencies as well.
But it's commonly assumed that presidential politics will prevent Democrats and Republicans from renewing efforts for a broader budget agreement, though negotiations on Capitol Hill are under way in efforts to renew jobless benefits for the long-term unemployed and a 2 percentage point cut in payroll taxes and prevent a 27 percent cut in Medicare payments to doctors that's the product of an outdated funding formula.
Administration officials briefed reporters and issued a fact sheet after several figures were reported in The Wall St. Journal, which viewed leaked draft budget documents.
White House talking points said the budget will put "the nation on a path to live within our means -- by cutting wasteful spending, asking all Americans to shoulder their fair share and making tough choices on some things we cannot afford, while keeping the investments we need to grow the economy and create jobs."
The president will also propose a six-year, $476 billion highway and surface transportation bill and $360 billion from curbs to federal health care programs like Medicare and Medicaid. There's $278 billion more in savings from non-health benefits programs like farm subsidies and federal civilian worker pensions.
There's also an immediate $350 billion for job-creating measures, about $100 billion less than presented in Obama's September jobs plan because the administration is giving up on increasing the 2 percentage point payroll tax cut to 3.1 percent and giving it to businesses. Ideas like school modernization and road projects haven't gained traction in Congress, however.
The White House warned earlier this week that its economic assumptions -- predictions of the unemployment rate averaging 8.9 percent this year -- now look too pessimistic. They were made in mid-November, before a recent spate of positive news about the economy. If the economy performs better than officially projected, it'll mean a better fiscal performance for the government since greater growth means increased tax revenues.
"The forecast of the unemployment rate that will accompany the budget should be considered stale and out of date," White House economist Alan Krueger said Thursday.