Obama budget moves toward universal health care

WASHINGTON – President Barack Obama is sending Congress a "hard choices" budget that would boost taxes on the wealthy and curtail Medicare payments to insurance companies and hospitals to make way for a $634 billion down payment on universal health care.

Obama's first budget, which will top $3 trillion, predicts the deficit for this year will soar to a whopping $1.75 trillion, according to administration officials who spoke on condition of anonymity before the public unveiling of the budget Thursday. The huge deficit reflects the massive spending being undertaken to battle a severe recession and the worst financial crisis in seven decades.

As part of the effort to end the financial crisis, the administration will propose boosting the deficit by an additional $250 billion this year, enough to support as much as $750 billion in increased spending under the government's financial rescue program. That would more than double the $700 billion bailout effort passed by Congress last October.

Obama, in a morning briefing, spoke of "hard choices that lie ahead." He called his budget "an honest accounting of where we are and where we intend to go."

One administration official called the request for additional bailout resources a "placeholder" in advance of a determination by the Treasury Department of what will actually be needed.

The spending blueprint Obama is sending Congress is a 140-page outline, with the complete details scheduled to come in mid to late April, when the new administration sends up the massive budget books that will flesh out the plan.

However, the submission of the bare budget outline was certain to set off fierce debate in Congress over Obama's spending and tax priorities. The document includes additional requests for the current year and Obama's proposals for the 2010 budget year, which begins Oct. 1.

The budget balances efforts to fulfill Obama's campaign pledges to deliver tax cuts to the middle class, expand health care coverage and combat the economic crisis with an effort to keep an exploding deficit over the next few years from becoming a permanent drag on the economy. However, Republicans assailed the budget for the tax increases and some Democrats worried that Obama was not doing enough to get the deficit under control.

"I would give him good marks as a beginning, but we have to do a lot more to take on this long-term debt buildup," said Senate Budget Committee Chairman Kent Conrad, D-N.D.

Republicans zeroed in on the tax increases to fund half of Obama's health care expansion.

"Everyone agrees that all Americans deserve access to affordable health care, but is increasing taxes during an economic recession, especially on small businesses, the right way to accomplish that goal?" asked House Minority Leader John Boehner, R-Ohio.

The $634 billion down payment on expanding health care coverage would come from a $318 billion increase over 10 years in taxes on the wealthy, defined as couples making more than $250,000 per year and individuals making more than $200,000. The tax increase would occur by reducing the benefit the wealthy get on tax deductions. As one example, taxpayers in the current top tax bracket of 35 percent would see their tax deduction for every $1 given to charity drop from 35 cents to 28 cents.

The other half of the down payment on Obama's drive toward universal health care — $318 billion — would come from curtailing payments to hospitals and insurance companies under Medicare and drug payments under Medicaid.

To meet his pledge of tax cuts for the middle class, the president wants to make permanent the $400 annual tax cut due to start showing up in workers' paychecks in April as part of the $787 billion stimulus package just passed by Congress. Obama's budget also extends the middle class tax cuts passed by the Bush administration in 2001 and 2003. Those cuts were due to expire at the end of 2010. If Congress approves Obama's recommendations, the Bush tax cuts would expire only for couples making more than $250,000 per year.

The cost of the stimulus bill and the increased bailout support would push the deficit for this year to $1.75 trillion, nearly four times last year's record $455 billion and a percentage of the economy — just over 12 percent — not seen since World War II. The deficit is expected to remain around $1 trillion for the next two years before starting to decline to $533 billion in 2013, according to budget projections.

Obama's plan proposes achieving $634 billion in savings on projected health care spending and diverting those resources to expanding coverage for uninsured Americans. The $634 billion represents a little more than half the money that would be needed to extend health insurance to all of the 48 million Americans now uninsured.

Americans now spend a total of $2.4 trillion a year on health care.

Obama also will ask for an additional $75 billion to cover the costs of wars in Iraq and Afghanistan through September, the end of the current budget year. That would be on top of the $40 billion already appropriated by Congress.

The administration will also ask for $130 billion for Iraq and Afghanistan in 2010 and will budget the costs of operations in Iraq and Afghanistan at $50 billion annually over the next several years.

Obama's budget proposal would effectively raise income taxes and curb tax deductions on couples making more than $250,000 a year, beginning in 2011. By not extending former President George W. Bush's tax cuts for such wealthier filers, Obama would allow the marginal rate on household incomes above $250,000 to rise from 35 percent to 39.6 percent.

The plan also contains a contentious proposal to raise hundreds of billions of dollars by auctioning off permits to exceed carbon emissions caps, which Obama wants to impose on users of fossil fuels to address global warming.

Some of the revenues from the pollution permits would be used to extend the "Making Work Pay" tax credit of $400 for individuals and $800 for couples beyond 2010, as provided in the just-passed economic stimulus bill.

About half of what officials characterized as a $634 billion "down payment" toward health care coverage for every American would come from cuts in Medicare. That is sure to incite battles with doctors, hospitals, health insurance companies and drug manufacturers.

Some of the Medicare savings would come from scaling back payments to private insurance plans that serve older Americans, which many analysts believe to be inflated. Other proposals include charging upper-income beneficiaries a higher premium for Medicare's prescription drug coverage.

To raise the other half, Obama wants to reduce the rate by which wealthier people can cut their taxes through deductions for mortgage interest, charitable contributions, local taxes and other expenses to 28 cents on the dollar, rather than the 35 cents they can claim now. Even more money would be raised if the top rate reverts to 39.6 percent, as Obama wants.

Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, called Obama's proposal to tax the wealthy to finance health care reform a starting point. But he wants to also examine taxing some of health insurance benefits provided by employers — an idea rejected by Obama in last year's presidential campaign.

Obama's promise to phase out direct payments to farming operations with revenues above $500,000 a year is sure to cause concerns among rural Democrats.

Even after all those difficult choices, cutting about $2 trillion from the budget over 10 years, Obama's budget still would feature huge deficits.

The $1.75 trillion deficit projected for this year would represent 12.3 percent of the gross domestic product, double the previous post-war record of 6 percent in 1983, when Ronald Reagan was president, and the highest level since the deficit totaled 21.5 percent of GDP in 1945, at the end of World War II.

At $533 billion, the deficit in 2013 would be about 3 percent of the size of the economy.

Obama to address Congress, nation on economy

WASHINGTON – Barreling ahead on a mammoth agenda, Barack Obama is ready to offer a detailed sketch of the first year of his presidency, casting the nation's bleeding economy as a tangle of tough, neglected problems.

In a prime-time speech to Congress and millions watching at home, Obama will make his case Tuesday that much more has to be done to turn around the economy — a message he knows he must explain.

White House spokesman Robert Gibbs said Tuesday that Obama will provide more details about his financial stability plan and measures to help the economy while delivering "a sober assessment about where we are and the challenges we face."

"He'll say we're on the right path to meeting these challenges, and there are better days ahead," Gibbs said.

Obama approaches this moment riding a strong, upbeat sentiment among the public. Overall, 68 percent of people approve of his job performance, a new Washington Post-ABC News poll finds. A New York Times/CBS News polls finds that more than three-quarters of those surveyed were optimistic about the next four years with Obama in charge, and similar majorities said they were confident in his ability to make the right decisions about the economy.

Still, the president faces steep challenges. The nation is nearly dizzy keeping up with what's emerged from Washington during Obama's first weeks as president, from a staggering $787 billion stimulus plan to a revamped bailout for the financial sector to a rescue plan for struggling homeowners.

And investors are dour. Wall Street took another pounding Monday, with the Dow Jones industrial average tumbling to its lowest close since 1997.

Although Obama is too new in office to be delivering a State of the Union address, his speech will have all the same trappings. It comes two days before he delivers a budget blueprint to Congress. Unlike that detail-driven document, his address will be broad, spelling out what he wants and how he will do it.

The economy, in its worst tailspin in decades, will dominate. Obama will touch on foreign policy, but that will largely be left for other upcoming speeches. This will not be a rollout of one policy initiative after another.

Obama will make clear that the trillion-dollar-plus deficit is one he "inherited." In other words, he wants to remind people that President George W. Bush and the previous Congress left him a big hole, forcing him to pursue the costly stimulus package.

The president will push for movement on ensuring health coverage for all Americans. He will seek to expand educational opportunities, and diversify the country's energy sources, and contain sacred entitlements like Social Security, and halve the soaring budget deficit in four years.

His rhetorical mission is to show not only how all those pieces connect to the health of the economy, but why they must be pursued simultaneously.

Gunning for so much at once is complicated, both in terms of the issues themselves and the politics. Senior presidential adviser David Axelrod acknowledged Monday there is a risk in taking on too much.

"I think the bigger concern," he said, "is to not be aggressive at a time when a tepid approach could really consign us to a long-term economic catastrophe. We believe the times demand vigor and aggressive action, and so we're having to do a lot of things at once."

Rep. Darrell Issa of California, the top Republican on the House Committee on Oversight and Government Reform, said Obama's speech amounts to a coming-out party.

"You never know what a salesman's going to sell you until he shows up at your door," Issa said of his expectations. "If he gives us a narrow set of priorities that can be executed, and they don't just involve more spending, then I think it will be refreshing. If he gives us a long laundry list, which most presidents do, then although it will set the agenda ... it won't be as meaningful."

In many ways, though, Obama will be speaking directly to the American people. Daily followers of Obama's rhetoric are not likely to be surprised by Obama's words, some of which will be repeats. He is trying to reach millions of people who don't get to hear him every day.

So Obama will say that the crises facing the nation are so large they can only be solved in bipartisan ways. He will be blunt about the country's woes but try to balance that talk with optimism. He will talk about his travels as president so he can focus on the stories of communities outside Washington.

Asked in an MSNBC interview how the president plans to make good on his pledge to cut the deficit in half by the end of his first term, Gibbs said, "The biggest thing we're going to do is cut the amount of money we spend each year in Iraq."

He said Obama also planned to talk about necessary investments and about taxes.

"I think the president believes very clearly that we have to be honest about where we are," Gibbs said. "Tonight, he will tell the country that we've faced greater challenges than we face now and we've always met those challenges."

There is sure to be ceremony as Obama arrives in the well of the House. His speech is tentatively at 45 minutes, accounting for applause time.

Obama poised to sign stimulus into law

AP – President Barack Obama waves as he boards Air Force One at Andrews Air Force Base in Maryland., Tuesday, …

WASHINGTON – President Barack Obama is poised to sign into law the most sweeping economic package in decades, a rescue plan designed to create millions of jobs, spur consumer spending and revive the nation's outlook.

Capping the biggest victory of his month-old administration, Obama will sign the economic legislation Tuesday in Denver.

The setting, the Denver Museum of Nature & Science, is meant to underscore the investments the new law will make in "green" energy-related jobs. It also allows Obama to get away from Washington, where the bill's passage was a mostly partisan affair, and be among people who may benefit from the huge government intervention.

The flailing economy continues to dominate Obama's time.

Tuesday is also when General Motors Corp. and Chrysler LLC, which are living off a combined $13.4 billion in federal bailout loans, are due to hand in plans to Obama's government about how they can remain viable.

And on Wednesday in Arizona, Obama will unveil another part of his economic recovery effort — a plan to help millions of homeowners fend off foreclosure.

But first comes the $787 billion economic stimulus bill, which tries to address the nation's economic free fall on multiple fronts.

It pumps money into infrastructure projects, health care, renewable energy development and conservation, with twin goals of short-term job production and longer-term economic viability.

There's a $400 tax break for most individual workers and $800 for couples, including those who do not earn enough to pay income taxes. It dishes out tens of billions of dollars to states so they can head off deep cuts and layoffs. It provides financial incentives for people to start buying again, from first homes to new cars.

And it provides help to poor people and laid-off workers, with increased unemployment benefits and food stamps, and subsides for health insurance.

What is not expected to do is change the nation's economic fortunes quickly. So part of the White House's goal has been managing expectations.

Presidential spokesman Robert Gibbs said over the long holiday weekend that "things have not yet bottomed out. They are probably going to get worse before they improve. But this is a big step forward toward making that improvement and putting people back to work."

The unemployment rate is now at 7.6 percent, the highest in more than 16 years. Analysts warn the economy will remain feeble through 2009.

Republican lawmakers, meanwhile, largely balked at the economic package. It drew no GOP votes in the House and only three in the Senate, albeit vital ones. Many Republicans said it was short on cutting taxes and the spending measures didn't target the vast sums of money well enough toward short-term job creation, which was the major goal of the bill.

But with the economy shedding jobs, there was widespread consensus in Washington for some sort of stimulus, and fast.

Yet the government's action comes at a cost down the line.

Many private economists are forecasting that the budget deficit for the current year will hit $1.6 trillion, including the stimulus spending. That's about three times last year's shortfall, and such year-to-year deficits contribute toward a mounting national debt.

Moderates seek bipartisan OK of stimulus package

AP – President Barack Obama speaks to the House Democratic Issues Conference Thursday, Feb. 5, 2009 in Williamsburg, …

WASHINGTON – Senate moderates seeking to pare back Barack Obama's economic plan are rekindling their efforts in hopes of building a bipartisan vote that eluded the president in the House.

A group of nearly 20 moderates from both parties — more Democrats than Republicans — huddled off and on all day Thursday in hopes of cutting as much as $100 billion from Obama's plan, which ballooned to $937 billion on the Senate floor, with further add-ons possible during a long day of votes Friday.

Senate Majority Leader Harry Reid, D-Nev., displayed impatience with the moderates, led by Susan Collins, R-Maine, and Ben Nelson, D-Neb., at a midday news conference, but he lent them encouragement as he sent senators home later Thursday.

"It's gotten more encouraging and that's because the leadership has indicated that they have some appreciation for the work that this bipartisan group is doing," said Sen. Mary Landrieu, D-La. "It's still got life. It's still breathing."

A roster of $88 billion worth of cuts was circulating, almost half of which would come from education grants to states, with an additional $13 billion in aid to local school districts for special education and the No Child Left Behind law on the chopping block as well. Some $870 million to fight the flu was among the first items to go, but other items divided the group.

At the same time, the group also was hoping to add perhaps $25 billion in additional infrastructure projects.

"We've added more tax cuts and tax relief. We've trimmed out some of the fat and now we have to add a little muscle," Landrieu said, referring to additional infrastructure spending.

If the group fails to reach an accord — or if it won't fly with Democratic loyalists — the alternative for Reid is to try to ram the measure through with just a few GOP supporters, such as Olympia Snowe of Maine. He expressed confidence he has the 60 votes needed to press it through if need be.

The massive measure is a key early test for Obama, who has made it the centerpiece of his fledgling presidency. Obama embraced the moderates' efforts, saying he would "love to see additional improvements" in the bill.

Speaking to a House Democratic retreat in Williamsburg, Va., Obama pushed Democrats to avoid political gamesmanship and get a stimulus bill to his desk by next week.

Voters who ousted Republicans from power "didn't vote for the status quo," he said. "They sent us here to bring change. We owe it to them to deliver."

The Collins-Nelson group is hoping to bring the measure's cost down to the $800 billion range, though they were working from the $885 billion measure that came to the floor — ignoring the more than $50 billion in add-ons added over the past three days. A recalculated cost for a popular plan to award a $15,000 homebuyer tax credit pushed the overall price tag to $937 billion.

On the Senate floor, Democrats continued to flex the muscle of their expanded 58-41 majority, easily killing efforts by GOP conservatives to replace the bill with versions containing more tax cuts and less spending.

Sen. John McCain, R-Ariz., Obama's vanquished rival for the White House, said that public opinion was shifting in the GOP's favor as he advanced a $421 billion plan, less than half the White House-backed measure. It lost 57-40.

McCain's plan contained a one-year cut in the payroll tax, which would help all wage-earners, as well as reductions in the two lowest income tax brackets that would benefit only those who earn enough to pay income taxes.

Another proposal, by Sen. John Ensign, R-Nev., was designed to reduce mortgage rates to as low as 4 percent for millions of homeowners. It was defeated on a vote of 62-35.

Despite their numbers, many Democrats, including newly elected freshmen such as Mark Begich of Alaska and Mark Udall of Colorado, want to see less long-term spending and more items directly related to job creation.

And while polls show Obama is popular and the public supports recovery legislation, Republicans have maneuvered in the past several days to identify and ridicule relatively small items in the bill.

Obama's engages in diplomacy to retain BlackBerry

WASHINGTON: US President Barack Obama, who is famous for his love of his BlackBerry, has described the negotiations with security officials to keep the smartphone as one of his "toughest" diplomatic challenges till date.

"In just the first few weeks, I've had to engage in some of the toughest diplomacy of my life. And that was just to keep my Blackberry," the tech savvy president said at an exclusive gathering of America's political movers and shakers on Saturday.

Traditionally, American presidents have kept away from using hi-tech communications such as email and mobile phones for a variety of reasons - including security and possible interception from foreign powers.

"I finally agreed to limit the number of people who could email me. It's a very exclusive list," the first African-American president was quoted as saying by the Daily Telegraph newspaper.

"How exclusive?" he continued. "Everyone look at the person sitting on your left. Now look at the person sitting on your right. None of you have my email address," Obama joked as he shared headline billing with Alaska Governor Sarah Palin at the exclusive gathering.

Obama was at a light-hearted evening as part of a nearly century-old tradition of the prestigious Alfalfa Club, where participants try their hand at comedy.

According to reports citing participants, Palin was the object of jovial ribbing, on the heels of the Alaska Governor last year becoming the first woman on a Republican Party presidential ticket.