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Fiscal Year 2013:

The President’s Budget

 

In our By the Numbers document, we outlined the key numbers behind the President’s Budget, released on February 13.   Now, we would like to go into a bit more detail, explaining some of the priorities and policies behind the numbers

Presidential Priorities

• Taxes
• Deficit
• Spending
• Social Security, Medicare, and Medicaid

Taxes

The President’s proposals for increasing taxes contained very few surprises. In his budget, he proposes:

• Ending all of the tax cuts he extended in 2010 for those making more than $250,000 a year.  The current rates expire at the end of this year.
• Increasing death taxes for certain estates.
• Elimination of “special tax breaks for oil and gas companies; [and] preferred treatment for the purchase of corporate jets…”
• Taxing carried interest as regular income.
  • Carried interest is a complex tax concept, which means if you manage an investment fund, the money you make from managing the fund
    is taxed as a capital gain instead of being taxed as ordinary income.
  • For example, the majority of billionaire Warren Buffett’s earnings are from long-term capital gains (assets he’s held for longer than a year), so
    he is taxed at the 15 percent capital gain tax rate, instead of the highest ordinary income tax rate of 35 percent.
• Corporate tax reform “that will close loopholes, lower the overall rate, encourage investment here at home, simplify taxes for America’s small businesses….”¹

Deficit

The President defended his failure to cut the deficit in half as promised, stating that policies passed before he became president added to the deficit² and international events³ stunted the economy. Additionally:

• President Obama blamed “partisan divides” and the “unwillingness by Republicans in Congress to ask the wealthiest among us to pay their fair share through any revenue increases prevent a comprehensive deficit reduction agreement…”⁴
• As we outlined in our By the Numbers fact sheet, Obama’s budget projects $4.97 trillion in added deficits over the next five years.

Spending

The President’s budget proposes:

• “… To consolidate six [federal] agencies into one Department…”⁵
• Increasing the employee contribution for federal civilian worker retirement costs by 1.2 percent.⁶
• Increasing federal civilian pay by 0.5 percent in 2013.⁷
• Eliminating direct payments to farmers and reducing crop insurance subsidies.⁸
• Allowing the Postal Service to access $10.9 billion from retirees’ pensions.⁹
• Reducing mail delivery to five days.¹⁰

Additionally, his budget claims deficit reduction from the Iraq and Afghanistan drawdown and from a $487 billion cut from last year’s defense spending projections.¹¹

Social Security, Medicare, and Medicaid

The “big three” make up most of mandatory spending, or spending required by law that is funded on autopilot. The president proposes:

• Few reforms to Social Security.¹²
• Increasing certain premiums for Medicare Parts B and D.
• Increasing the deductible for Medicare Part B.¹³

Are the President’s proposals enough? Maya MacGuineas, President of the bipartisan Committee for a Responsible Budget, doesn’t think so: “Their plan isn’t actually big enough yet to fix the problem. It has a lot of good components. But they haven’t done enough to make sure that plan becomes the beginning of a national discussion so that we actually get the job done.”¹⁴