Obama’s budget proposes $100-billion jobs plan, higher taxes on wealthy

Reporting from Washington — 

President Obama on Monday sent Congress a $3.8-trillion federal budget that includes a $100-billion jobs package, more education spending, higher taxes on families earning more than $250,000 a year and a focus on controlling the deficit.

The spending blueprint for fiscal 2011, which starts Oct. 1, is 3% more than the government is spending this year, according to the White House Office of Management and Budget.

“It’s a budget that reflects the serious challenges facing the country,” Obama said Monday morning at the White House. “We’re at war. Our economy has lost 7 million jobs over the last two years. And our government is deeply in debt after what can only be described as a decade of profligacy.”

The budget now goes to Congress, where it can expect a cool reception from Republicans who oppose tax and fee increases and who will seek more cuts in some areas to bring down the deficit.

In presenting his budget, Obama reached out to Republicans but, in a theme he has used in recent days, warned against political gamesmanship.

“In order to meet this challenge, I welcome any idea, from Democrats and Republicans. What I will not welcome -- what I reject -- is the same old grandstanding when the cameras are on, and the same irresponsible budget policies when the cameras are off.”

Many of the budget details have been known for days, including Obama’s call for a three-year freeze on discretionary spending, about 17% of the budget. This morning, he focused on jobs and the deficit.

“When I first walked through the door, the deficit stood at $1.3 trillion,” the president said.

Although the Congressional Budget Office has estimated the level of the current year’s federal deficit at $1.35 trillion, the Office of Management and Budget pegs the existing 2010 deficit at $1.56 trillion, a runaway record.

The OMB also projects that the annual deficit for 2011 will be pared to $1.27 trillion. By 2012, it is projected at $828 billion. By 2013, it’s $727 billion.

The projections are based on assumptions, however, including the president’s proposed ending of some of the 2001 and 2003 tax cuts that former President George W. Bush won. Obama’s plan would end those cuts for households earning more than $250,000 a year. Over a decade, the OMB says, that restored tax on the wealthiest Americans could generate nearly $700 billion in revenue.

At the same time, the president said Monday, some tax breaks are necessary to stimulate the economy. His proposed budget includes about $100 billion in tax breaks in to spur investment in small business and help create jobs.

OMB Director Peter R. Orszag maintains that the White House is attempting to chart a “glide path” for lower deficits without thrusting the economy into another recession.

“If we had taken office during ordinary times,” Obama said, “we would have started bringing down these deficits immediately.”

But a rescue was necessary, the president said, “and that rescue was not without significant costs.”

“We won’t be able to bring down this deficit overnight,” Obama said. “We will continue, for example, to do what it takes to create jobs. ... The budget includes new tax cuts for people who invest in small business.”

Still, Obama said, “the irresponsibility” that led to the accrued deficit must be addressed. “We have to do what families across America are doing, save where we can,” he said.

That includes about $20 billion in sending cuts in the proposed 2011 budget, with a freeze on the overall level of discretionary spending outside of defense and mandatory programs such as Social Security, Medicare and Medicaid. That still allows for increases in some areas, such as a 6% boost in overall education spending.

“We’re not simply photocopying last year’s budget,” Obama said. “We’ve gone through every department budget line by line, item by item.

“Like any business, we’re also looking for ways to get more bang for our buck,” he said.

“The bottom line is this,” the president said. “We simply cannot continue to spend as if deficits don’t have consequences, as if waste doesn’t matter, as if the hard-earned tax dollars of the American people can be treated like Monopoly money.”

Calling on Congress to join in reining in spending, the president plans to create a commission to examine taxation and spending down the road.

The $3.834-trillion spending plan also includes:

* $270 million to buy and upgrade an Illinois prison where the administration hopes to house some detainees from Guantanamo, as part of its effort to close the prison in Cuba.

* The elimination of some capital gains taxes, along with tax breaks for oil, gas and coal companies.

* A $3-billion increase in the Elementary and Secondary Education Act for public school funding, raising the total to $28 billion, plus $1.35 billion more for the Race to the Top program for schools to increase student performance.

* $17 billion for Pell Grant funding for college aid.

* $100 billion for investments in small-business tax cuts, infrastructure and clean energy, all designed to create jobs. This includes a new “small business jobs and wages tax cut” to spur small-business hiring and wage increases, at a cost of $33 billion.

Jobs were a main topic on the Sunday talk shows.

White House spokesman Robert Gibbs expressed hope on CNN’s “Late Edition” that a jobs package “in the $100-billion range” would be the next order of business before the Senate.

“We need to recognize what’s on the mind of the American people, which is jobs,” Rep. Chris Van Hollen of Maryland, who heads the House Democrats’ campaign effort, said on “ Fox News Sunday.”

And Senate Minority Leader Mitch McConnell (R-Ky.) said on “Late Edition” that as long as the legislation creates jobs, “we’re willing to take a look at it.” But he and other Republicans suggested that Democrats could improve economic recovery by dropping their healthcare overhaul and extending the tax cuts enacted under Bush, which expire at the end of the year.

“The best thing that we could do with respect to jobs is put that massive healthcare expansion on the shelf,” Sen. John Thune (R-S.C.) said on CBS’ “Face the Nation.” He added that lawmakers also should “make it clear to small businesses that we’re not going to raise their taxes in the middle of a recession,” a reference to the expiring Bush tax cuts.

Reducing the deficit is one of the reasons the administration has focused on overhauling healthcare, Orszag said Sunday. “It will not be possible to restore long-term fiscal balance to the government without getting control over . . . healthcare costs,” he said.

Creating jobs was a major theme of Obama’s State of the Union address last week as he strove to reassure ordinary Americans that he understood their plight. He noted that the economy was improving but that too many people remained out of work, despite the $787-billion stimulus plan he signed into law a year ago.

But getting another jobs bill through Congress has proved difficult. In December, the House approved a $154-billion measure without a single Republican vote.

Senate Democratic leaders are expected to unveil their plans on jobs legislation this week, looking to pass a series of measures rather than one large package. The final legislation is expected to include money to fund infrastructure projects, promote green jobs and keep teachers, police officers and other public workers employed.

Democrats hope to win Republican support by including tax cuts for small businesses.

But a number of Obama’s proposals are sure to face resistance on Capitol Hill.

“If borrowing and spending all this money led to more jobs, then we’d be at full employment already,” Rep. Paul D. Ryan of Wisconsin, top Republican on the House Budget Committee, said on “Fox News Sunday.”

Even the three-year freeze on discretionary spending will draw its share of criticism.

House Minority Leader John A. Boehner (R- Ohio), appearing on NBC’s “Meet the Press” Sunday, called the freeze a “good first step,” but added, “I think we can do much better.”

Congress rejected a number of spending cuts that the White House sought last year, including an effort to end federal payments to states for jailing illegal immigrants convicted of crimes. California is the largest beneficiary of those payments.

mdsilva@latimes.com

richard.simon@latimes.com

Christi Parsons in the Washington bureau contributed to this report.