A Obama budget of dramatic changes

WASHINGTON - President Obama submitted his first federal budget proposal yesterday, a $3.55 trillion plan for 2010 that would start to alter the course of American government dramatically.

He sought to put his imprint on the coming decade with an agenda sharply different from that of the eight years under Republican George W. Bush, including universal health care, broad tax cuts, and a helping hand for the working and middle classes; greater regulation of business, and an aggressive plan to limit emissions that cause global warming.

Obama proposed a massive transfer of the nation's tax burden, saying that wealthier people and businesses that benefited unfairly in recent years should pay more to help those losing ground at the bottom of the economic ladder. He would raise taxes on those with family incomes of $250,000 or more by $955 billion over 10 years and cut taxes for other families by $770 billion.

Obama also signaled a shift in the way the United States projects power, calling for expanding the Foreign Service, which sends diplomats around the globe, and doubling foreign aid. His spending plan anticipates the war in Iraq winding down, even as he sends more troops to Afghanistan.

"I don't think that we can continue on our current course," Obama said at the White House. "I'm determined to bring the change that the people voted for last November. And that means cutting what we don't need to pay for what we do."

Only weeks into his presidency, Obama offered broad outlines of what he wants in a 134-page overview. His detailed proposals for fiscal year 2010, which starts Oct. 1, and nine years beyond will be released in April.

Still, the overview offered enough detail to fill in the broad brushstrokes Obama has used in recent weeks to talk about what he wants to do. It elated many Democrats in Congress and alarmed Republicans.

"What an exciting day it is for us," said House Speaker Nancy Pelosi (D., Calif.).

House Minority Leader John A. Boehner (R., Ohio) countered, "The era of big government is back, and Democrats are asking you to pay for it."

The era of big government never went away; spending and debt grew under Republican rule from 2001 to 2007. There was little doubt, however, that the role of that government is poised to change.

Stan Collender, a veteran Washington budget analyst, said: "You have a government that is getting involved in everything from car dealers to dry cleaners. All that implies a substantive change in government activity. Then you've got an outline for health care, which by itself would be a substantial change in government's role. . . . What we don't know is how permanent these changes will be."

Obama said the deficit for fiscal year 2009 - which started last Oct. 1, before he took office - would reach $1.75 trillion. That would equal 12.3 percent of the economy, the largest deficit since it was 21.5 percent of the gross domestic product in 1945, the final year of World War II.

He stressed that some of that huge deficit stems from the recession and efforts to end it, including $700 billion allocated last fall to shore up banks. He said he might need an additional $250 billion to pay for a new bank bailout.

Anticipating a growing economy in fiscal 2010, Obama said he would start lowering the deficit next year. Under his projection, it would come down to $533 billion in fiscal year 2013, then start rising again.

Even as he stressed anew that he would cut some spending to rein in the deficits, Obama said he and the nation could not afford to wait to reshape the government.

He proposed spending $634 billion over 10 years as a "down payment" toward overhauling health care, including expanding insurance coverage to the 46 million Americans now lacking it.

He did not detail how he would expand health care, preferring to work that out with Congress as well as interest groups, starting with a White House meeting next week.

Aides acknowledged that his health-care plan would cost more than $634 billion but said Obama wanted to start identifying where the money would come from.

He would pay for that by raising taxes on upper-income Americans - those who earn more than $250,000 a year - and cutting government payments to some health-care providers, such as private companies that administer Medicare Advantage plans, as well as drug makers.

The tax increases to pay for health care would come by further limiting deductions for upper-income taxpayers, a plan that he said would raise $318 billion over 10 years.

Obama also said he would raise taxes on the same taxpayers by letting the Bush cuts in the top marginal tax rates expire as scheduled at the end of 2010. That would raise $339 billion over nine years.

On the other side of the tax ledger, he proposed making permanent the temporary tax credit of $400 per person and $800 per family in the recent stimulus package. Extending that tax credit, which is meant to offset the Social Security and Medicare payroll taxes, would cost $537 billion over nine years.

Throughout his plan, Obama and his aides said they would use the tax code to help reverse a long trend of the rich getting richer and the poor getting poorer.

"The past eight years have discredited once and for all the philosophy of trickle-down economics," the budget said. ". . . In its place, we need economic opportunity to trickle up."

Obama also proposed using what is often called a carbon tax, not only to regulate emissions of carbon dioxide but also to finance tax cuts for those earning less than $140,000.

He said "climate revenue" would total $646 billion over eight years, starting in fiscal year 2012. Of that, $120 billion would go to developing clean-energy technology, and $526 billion would go to tax cuts and credits.

Among the many programs that would receive generous boosts are education and cancer research. The size of Pell Grants would automatically rise every year by inflation plus 1 percent, while Obama promises to double cancer research over several years.

Senate Budget Committee Chairman Kent Conrad (D., N.D.) predicted that Congress would pass much of Obama's plan, though with significant revisions.EndText