Worries of class warfare

WASHINGTON - President Obama's first federal budget lays out the most far-reaching agenda for American life since Lyndon B. Johnson's Great Society. But paying for it by having upper-income earners shoulder much of the cost has provoked cries of class warfare in Congress.

The Obama priorities reflected in the $3.55 trillion budget guarantee a fierce political battle over taxes and spending. And despite the administration's agonizing over the depth and global nature of the worst recession in decades, the new president's budget forecasts a rapid U.S. recovery.

The budget outline includes activist initiatives on energy, health care, education, and climate change.

It would boost taxes on the wealthy, oil companies, and other businesses while cutting Medicare and Medicaid payments to insurance companies and hospitals to make way for a $634 billion down payment on universal health care. It also would limit charitable and other tax deductions for the affluent and trim spending on government subsidies to big farms.

Predictably, Republicans complained - much as they had done during last year's presidential campaign - that Obama was pitting the haves against the have-nots.

"The era of big government is back, and Democrats are asking you to pay for it," House Minority Leader John A. Boehner (R., Ohio) said. He suggested Obama's proposed tax increases would reach deep into the middle class, despite repeated administration statements that tax hikes would be limited to families making more than $250,000 a year.

Proposed new excise taxes on offshore oil drilling and plans to cap greenhouse gas emissions and require polluters to buy permits could affect "all Americans who drive a car, who have a job, who turn on a light switch," Boehner said.

He and other Republicans also said it was folly to raise taxes during a recession. But the administration's own economic forecasts suggest that the brunt of the tax increases, including allowing existing tax cuts from the Bush administration to expire, will take effect only after the nation is in recovery.

The Obama budget forecasts that, despite the depth of the recession, the economy will recover and grow by 3.2 percent in 2010 and then expand at an even more robust rate of 4 percent in the three following years.

Most of the proposed Obama tax hikes, including the permit levy on greenhouse gas emissions, would not take effect until 2012.

Christina Romer, chairman of the president's Council of Economic Advisers, defended the administration's upbeat forecast for recovery, saying it "reflects the administration's assessment that the comprehensive recovery program outlined by the president on Tuesday night will be effective."

But some deficit hawks suggested that Obama was being too optimistic given the severity of the recession. "He is relying on a strong economic comeback very quickly. And he's assuming that a lot of the new issues will be paid for," said Robert Bixby, the executive director of the Concord Coalition, a bipartisan fiscal-watchdog group.

Bixby said the budget had "a lot of downside risk" that spending increases would not be fully offset by higher tax revenues.

In his remarks, Obama said his budget was an attempt to fairly "come to grips with the hard choices that lie ahead." But in written comments accompanying the budget, he struck a far more defiant and populist tone, blaming his predecessor, George W. Bush, for much of the government's budget woes.

"Prudent investments in education, clean energy, health care, and infrastructure were sacrificed for huge tax cuts for the wealthy and well-connected," Obama wrote. "There's nothing wrong with making money, but there is something wrong when we allow the playing field to be tilted so far in the favor of so few."

Asked whether the class-warfare argument could complicate White House efforts to win support for some of its big priorities, White House spokesman Robert Gibbs said: "No. And I think it's important to understand that what the president has enumerated in his budget today is precisely the blueprint and series of promises that he made over the course of two years in a campaign . . . that the American people voted for."