Key Budget Takeaways

February 15, 2012

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

To view this fact sheet as a .pdf, click here.

  1. White House: President’s FY 2013 Budget. February 13, 2012. Pp. 4-6. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
  2. White House: President’s FY 2013 Budget. February 13, 2012. P. 23. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
  3. White House: President’s FY 2013 Budget. February 13, 2012. P. 9. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
  4. White House: President’s FY 2013 Budget. February 13, 2012. P. 10. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
  5. White House: President’s FY 2013 Budget. February 13, 2012. P. 6. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
  6. White House: President’s FY 2013 Budget. February 13, 2012. P. 27. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
  7. White House: President’s FY 2013 Budget. February 13, 2012. P. 27. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
  8. White House: President’s FY 2013 Budget. February 13, 2012. P. 28. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
  9. White House: President’s FY 2013 Budget. February 13, 2012. P. 31. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
  10. White House: President’s FY 2013 Budget. February 13, 2012. P. 31. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
  11. White House: President’s FY 2013 Budget. February 13, 2012. P. 25-26. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
  12. For more information on the “big three” and why they matter to the budget, see our Budget Briefing Book Volume Two
  13. White House: President’s FY 2013 Budget. February 13, 2012. P. 34-35. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf
  14. Washington Post. National Debt will be Obama Budget: National Debt Will Be $1 Trillion Higher In A Decade Than Forecast. February 13, 2012. http://www.washingtonpost.com/business/economy/obama-budget-national-debt-will-be-1-trillion-higher-in-a-decade-than-previously-forecast/2012/02/13/gIQA2Rn1AR_story.html?wprss

Leave a Reply

Your email address will not be published. Required fields are marked *