Obama budget seeks to spread the wealth; GOP calls it a pipe dream

President Obama launched the first clash in a series of budget battles Monday as he unveiled his nearly $4-trillion spending plan and accused Republicans of putting national security at risk over a political fight.

Laying out his budget proposal, Obama came down hard on Republicans who have held up money for the Homeland Security Department out of opposition to his plan to defer deportation for millions of immigrants living in the U.S. illegally.

“Don’t jeopardize our national security over this disagreement,” Obama said in remarks at the department. “What we can’t do is play politics with folks’ economic security or with our national security.”

He spoke a day before the Senate was to take a crucial vote to fund the Homeland Security Department. Last fall, hoping to block the White House immigration plan, House Republicans temporarily approved funding for the department on the condition that none of it be used for Obama’s immigration program. The funds run out at the end of this month.

Though Obama used the formal introduction of his budget to demand that the Homeland Security Department be funded as the clock ticks, his spending plan more broadly was an effort to bolster his own political posture by spreading the wealth from the top down the income ladder.

His blueprint for the fiscal year that begins Oct. 1 beefs up programs that benefit lower- and middle-income Americans and proposes to pay for them with tax increases on the wealthiest taxpayers, major corporations and financial firms.

The tax increases make a good chunk of Obama’s plan essentially a nonstarter in the Republican-controlled Congress. But other elements — a new offshore profits tax and a push to exceed mandatory spending caps set to go into effect in October — showed the White House is looking for a way to work with Republicans.

The document completes Obama’s shift from years of grim economic forecasts and austerity cuts into what he has labeled “America’s resurgence.” His budget projects a rosier employment picture in the near future, with the unemployment rate falling to 5.4% in 2016 and then to 4.9% over the next two years before climbing slightly again.

It aims essentially to hold steady the current deficit as a share of the economy — at about 2.5% of gross domestic product — a figure that has fallen fast since spiking during the Great Recession. The plan proposes no major structural changes to entitlement programs, the chief drivers of the nation’s debt, leaving the debt to continue to grow in the next decade, although at a pace slightly slower than the overall economy.

Obama also made the case for increased spending on early child care, community college, paid leave programs for workers and expanded tax credits for working families, arguing that the stronger economy meant the hard choices between investment and deficits were a thing of the past.

“We can afford to make these investments while remaining fiscally responsible.... We can’t afford not to,” he said.

Republicans dubbed his plan a pipe dream.

“President Obama promised in the State of the Union to deliver a budget filled with ‘ideas that are practical, not partisan,’” Senate Majority Leader Mitch McConnell said. “Unfortunately, what we saw this morning was another top-down, backward-looking document that caters to powerful political bosses on the left and never balances — ever.”

Despite the criticism, the budget did include elements designed to open talks. Obama proposed to overhaul how companies pay taxes on offshore profits with a one-time 14% tax and a 19% tax rate going forward. The plan would pay for roughly half of a new $478-billion public-works program. Republicans have signaled their openness to such a proposal in the past.

Obama’s budget calls for ending the so-called sequestration restraints set to take effect this spring. Republicans also have expressed interest in removing the spending caps — although only for defense funding.

Obama indicated Monday that he was ready to use that support as leverage to win money for domestic programs.

“I’m not going to accept a budget that locks in sequestration going forward,” Obama said, adding that he would oppose a deal that “severs the vital link” between defense spending and domestic priorities.

“Those two things go hand in hand,” he said.

Outside budget hawks, though, gave Obama poor marks for his approach to entitlement programs.

“Failing to address the drivers of the debt will ultimately undermine the president’s other priorities,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. “The focus on promoting investment today will do little good if our massive debt is choking the investments of tomorrow.”

The budget does propose changes to Medicare designed to curb its share of total government spending. The administration is planning to expand initiatives designed to further slow Medicare spending, which has been growing at historically low levels in recent years.

Administration officials also suggested that an immigration overhaul — which the White House included in the budget, although it failed to pass the last Congress — would shore up Social Security.

Obama advisors say the immigration changes will strengthen the U.S. economy by boosting GDP growth, reducing the deficit, raising average wages for U.S.-born and immigrant workers, and increasing the size of the labor force and the number of workers paying into the system to support retirees.

Such arguments have done little to persuade Republicans to jump on a comprehensive overhaul of the immigration system, much less the deferred deportation program Obama announced after such legislation died last year.

Republicans view his move as an overreach of executive authority that must stop. The House pounced on the strategy of tying $39.7 billion for the Homeland Security Department to the requirement that none be used to implement Obama’s immigration executive action.

The Senate is expected to reject this approach. Though Republicans have a majority in the chamber, they are short of the votes needed to overcome a Democratic filibuster.

Opposition may not come just from Democrats; Republican senators also bristle at the House approach. Stopping the president’s immigration action would add $7.5 billion to the deficit over the next decade, largely because of lost tax revenue from the immigrants, a Congressional Budget Office report shows. That could amplify Republican concerns.

Elsewhere in the administration, the State Department’s proposed budget sets aside $3.5 billion to counter Islamic State militants, including efforts to strengthen opposition groups and to help refugees. It would devote $640 million to addressing “Russian aggression” in Eastern Europe, including $514 million to help Ukraine, officials said.

Foreign aid overall would increase 3%.

The Pentagon is set to receive $585 billion under a budget that seeks to rearm the military with weaponry for ongoing operations in Iraq and Syria, as well as provide funding to deal with escalating conflicts around the world.

And the Justice Department would see an increase of more than 5%. Much of the new money would go to ward off cyberthreats as seen with the recent hacking of Sony Pictures, to increase information-sharing among law enforcement agencies, and to fight violent extremism in the U.S.

kathleen.hennessey@latimes.com

christi.parsons@latimes.com

Times staff writers Lisa Mascaro, Noam N. Levey, W.J. Hennigan, Richard A. Serrano and Paul Richter contributed to this report.