President Obama released his sixth budget proposal, requesting $3.9 trillion in fiscal year 2015. His proposal would relieve sequestration cuts by adding back $56 billion in discretionary spending next year in an “Opportunity, Growth, and Security Initiative.”
The new spending would be evenly split between military and domestic discretionary programs, and the additional funding will come from cuts to federal crop insurance, changes to TSA passenger fees, by closing some individual and corporate tax loopholes.
President Obama’s budget arrived over a month after the legal deadline of the first Monday in February. Meanwhile China is roaring with military futures and it is getting harder to swallow.
As most of the world’s biggest militaries scale back their budgets, China is planning on increasing theirs. The world’s second-biggest economy may already have the largest military in terms of manpower, but technologically it lags the U.S.
According to defense consulting and analysis company IHS Jane’s, this year China will be spending $148 billion on defense funding, up from $139.2 billion last year, spending more money on its military than any other country in the world except for one: the United States.
Though the U.S. holds on tightly to the No. 1 position, budget cuts of $90 billion this year will bring the American defense budget down to $574.9 billion, so China is slowly closing in.
IHS also reported that by next year China is expected to spend more money on the military than Britain, Germany and France combined. By 2024, it will spend more than the entirety of Western Europe.
Now back at home – after the great recession there was no budget passed for several years – from 2010 til now, not many concurrent budgets were passed.
Currently I am skeptical on what exactly all the big spending will result in our America being somewhat better or somewhat worse. Here is what Obama wants to do in 2015:
Spending and Cuts
In addition to the spending levels set out in the Bipartisan Budget Act of 2013, President Obama proposes a total of $56 billion in new spending in fiscal 2015 for a total of $1.19 trillion in discretionary spending, an increase of about 1 percent relative to 2014 enacted levels.
The budget includes $28 billion in additional military spending and $28 billion in new spending for energy efficiency programs in the states, job training, expanded Head Start, and universal pre-kindergarten.
The president also proposes $302 billion in additional infrastructure spending over the next four years, which would improve roads and bridges as well as fund transit projects. Yet he proposes to pay for this new spending with a one-time opportunity for corporations to bring money stashed overseas back into the U.S., and is tantamount to a corporate tax break.
Nearly eight in 10 American voters (79 percent) want to close tax loopholes that ensure corporations pay as much on foreign profits as they do on domestic profits. [i]
The president’s budget proposal would run a deficit of $561 billion in 2015. That’s equivalent to 3.1 percent of the U.S. economy, down from a high of 10 percent in 2009 following the Great Recession. Over the past 50 years, budget deficits have averaged around 2.8 percent of the economy.
Deficit reduction has dropped as a top priority for Americans in 2014.
Sixty-three percent say reducing the budget deficit should be a top priority for Congress and the president this year, down from 72 percent who thought so last year. [ii]
Taxes and Revenue
The president projects $3.34 trillion in tax revenue in fiscal 2015, an increase of 11 percent relative to 2014.
The president would close the “carried interest” loophole, which is known for benefiting hedge-fund and private-equity managers to raise $14 billion over 10 years, and he would limit the ability for corporations to deduct interest expenses for their overseas operations, which would raise $43 billion over a decade.
In total, the president’s proposals to limit tax deductions and loopholes for top income earners would raise $651 billion over 10 years, including $37 billion 2014.
The budget would expand the Earned Income Tax Credit (EITC), a successful anti-poverty program, for low-income childless workers. The change would benefit an estimated 13.5 million additional Americans and cost $60 billion over 10 years.
A recent survey shows two-thirds of American voters support a budget plan that would close corporate tax loopholes and limit tax breaks for the wealthy
The president proposes to reduce payments to private health insurance companies that participate in Medicare Advantage, the program that allows Medicare beneficiaries to receive their insurance coverage through a private health insurer.
The budget also maintains a past proposal from the president to ask wealthy seniors to pay more for their Medicare coverage.
Six in 10 Americans say making the Medicare system sound should be a top priority for Congress this year. [v]
In 2015, the president opted to exclude a proposal included in his fiscal 2014 budget that would measure cost-of-living adjustments (COLAs) differently.
In 2014, President Obama proposed measuring COLAs through the chained consumer price index (CPI), which is an alternate measure of inflation that would result in lower annual cost of living adjustments and, in turn, would reduce Social Security benefits. While some economists argue that the chained CPI is a more accurate overall measure of inflation, some research suggests that elderly Americans – who make up the majority of Social Security beneficiaries – experience a faster rate of inflation because more of their income goes to medical care and housing, and prices in health care and housing have risen faster than prices for other goods.
Many options exist to raise new or additional tax revenue to support Social Security, a program that enjoys broad public support. The president’s budget did not include any measures to raise new or additional tax revenue to support Social Security, even though Americans have said they are willing to both increase the amount of tax they and their employers pay into the system and increase the taxable wage cap, the amount of earnings subject to the Social Security tax. Currently, Social Security tax applies only to an individual’s first $117,000 in wage income.
Two-thirds of Americans say making the Social Security system sound is a top policy priority this year. [vi]
The president’s budget proposal would also prevent individuals from collecting Social Security Disability Insurance and Unemployment Insurance during the same period of time. This is projected to save $3.2 billion over 10 years.
The president’s “Opportunity, Growth, and Security Initiative” includes funding for job training programs that would pair a college education with apprenticeships, as well as the president’s signature proposal to provide pre-kindergarten to every student and expand the existing Head Start program, which provides early childhood education to low-income families.
The president’s budget requests $66 billion over 10 years to expand pre-kindergarten education under his Preschool for All Initiative. This initiative would be paid for by raising the cigarette tax from $1.01 per pack to $1.95.