Obama to unveil budget proposal, latest offer in deficit talks

WASHINGTON — President Obama will unveil a budget proposal Wednesday that curbs spending on Social Security, raises the minimum wage, closes tax loopholes for top earners and invests in infrastructure — an overdue document that the White House described as its final offer to Republicans in the deadlocked deficit reduction talks.

The fiscal year 2014 budget will add the president’s view to the spending priorities already put forward by Republicans in the House and Democrats in the Senate. Senior administration officials, previewing the plan Tuesday, cast it as the farthest the president would go to reach a long-term debt deal.

“We don’t view this as the starting point for negotiations,” said one official, who asked not to be named in discussing the proposal before its formal release. “This is our sticking point. The question is, ‘Are Republicans going to be willing to come to us?’”

PHOTOS: President Obama’s past

Obama’s budget appeared to be largely a list of familiar policies, such as the $9 per hour minimum wage, and other previously disclosed positions. The White House acknowledged last week that the president would take on some in his party by proposing to cut spending on Social Security, a point amplified Tuesday as protesters and some lawmakers rallied against the proposal outside the White House.

Under the president’s budget, cost-of-living adjustments would be lowered for Social Security recipients, veterans and others who receive government benefits, an overture to Republicans who have pushed for entitlement reform as part of any long-term debt deal. The cost-of-living change also would apply to the tax code.

Administration officials said the proposal, which would carve out exemptions for some low-income veterans and older recipients, would save $230 billion over the next decade.

Obama’s budget, which arrives two months after a statutory deadline, will also include programs touted by the president in his State of Union address, such as an expansion of public preschool programs paid for by increased tobacco taxes and $50 billion in immediate infrastructure spending, officials said.

On the tax side, Obama is reviving his call for measures aimed primarily at the wealthy. His budget includes the so-called Buffett Rule, under which households earning more than $1 million a year would pay at least 30% of their income, after charitable giving, in taxes.

DOCUMENT: President Obama’s 2014 budget

It also would tax income from “carried interest” as regular income, closing a loophole that allows Wall Street financial managers to claim a much lower rate. The budget also takes aim at a loophole that allows some wealthy taxpayers to accumulate millions in tax-preferred retirement accounts. Both measures were issues in the president’s campaign against Mitt Romney, a former head of a private equity firm.

The tax changes — elements certain to be rejected by Republicans — would raise $580 billion in revenue for deficit reduction, officials said.

Overall, the budget would reduce the deficit by $1.8 trillion in a decade, officials said, and would continue the current downward trajectory. The budget would bring the deficit to $744 billion in 2014. Under current law, the deficit is expected to fall to $845 billion this year, the first deficit under $1 trillion in five years, according to the Congressional Budget Office.

That’s largely due to the tax increase passed by Congress early this year and automatic spending cuts that started in March over the objections of the president and some in both parties. Obama’s budget would undo the so-called sequester cuts and replace them with other savings, officials said.

Obama’s budget cuts $200 billion from domestic programs, including trims to farm subsidies and reductions in some federal retirement benefits. The proposal counts $400 billion in health savings and Medicare changes. It includes another $200 billion in savings from defense and non-defense programs.

kathleen.hennessey@latimes.com

Twitter: @khennessey