March 31, 2013 8:10 pm

Obama seeks middle ground in budget plan

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Barack Obama will aim for the middle ground between Republicans and Democrats in Congress in his drive for a bipartisan deficit deal when he releases his budget proposal next week.

The president’s team has been weighing whether to propose new cuts and reforms to big government health and pension programmes – giving formal backing to some measures supported by Republicans but looked on warily by his Democratic allies in Congress.

Mr Obama offered some of these concessions, such as a less generous measure of inflation used in the calculation of social security retirement cheques, during previous failed budget talks behind closed doors. But he has never officially laid them out in his budget proposals.

However, he is not expected to yield in his demands for new revenue to be generated from a reduction in tax breaks on the wealthiest families. The Republican leadership in Congress has rejected this on the grounds that tax rates on high-income households were increased in January.

The president’s budget will be released on April 10 – the same day that Mr Obama holds his second dinner in two months with a group of Republican senators as he tries to mend fences during the US budgetary wars.

While Washington managed to avoid a crisis over the debt ceiling in late February, and a government shutdown last week, it was unable to prevent sequestration – the $85bn in automatic, spending cuts that began last month.

Moreover, a new borrowing limit increase is due over the summer in order to prevent a default on US debt, which will require a fiscal compromise that seems elusive. Josh Earnest, the deputy White House press secretary, last week blamed Republican intransigence for the impasse.

“For some time now, the chief impediment to reaching a grand bargain has been the refusal of Republicans to ask the wealthiest and well-connected to pay even a dime more to help us deal with our deficit challenges,” he said.

Republicans have been mocking Mr Obama for delaying his budget for more than two months – it is usually released in early to mid-February – saying it was evidence of the president’s lack of urgency on dealing with US debt.

A spokesman for John Boehner, the Republican speaker of the House of Representatives, said late last week that some fresh health and pension savings were the least he could do to show his good faith. “Having already walked back from so much, anything less than these modest entitlement savings would fully evaporate what little credibility the president has left,” the spokesman said. “In reality, much more is needed to save these programmes,” he added.

The White House budget is normally delivered before congressional budgets but this year it is following the passage of the House Republican fiscal platform, which generates a small surplus within a decade amid deep spending cuts, and the Senate Democratic plan, which raises taxes by $1tn and cuts an equal amount of spending.

The last budgetary update from the White House came in the summer, when it predicted that annual deficits would gradually fall to below 3 per cent of gross domestic product by 2017, with economic growth of 2.6 per cent in 2013 and 2014. Congress has since reached the fiscal cliff agreement, which set a baseline with slightly lower revenue than Mr Obama had intended. That is because his earlier proposal raised taxes on families earning more than $250,000 a year rather than $450,000 a year, which was ultimately agreed.

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