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Wednesday, July 24, 2024

The budget battle: Is there really room to negotiate?

Office of Management and Budget Director Shaun Donovan, left, with  Domestic Policy Council Director Cecilia Muñoz, talks about President Barack Obama’s Fiscal Year 2016 Budget, during a news conference in the White House.  (AP Photo/Manuel Balce Ceneta)
Office of Management and Budget Director Shaun Donovan, left, with Domestic Policy Council Director Cecilia Muñoz, talks about President Barack Obama’s Fiscal Year 2016 Budget, during a news conference in the White House.
(AP Photo/Manuel Balce Ceneta)

There are reasons President Barack Obama and his aides will argue that his new budget can be the start of a negotiation with the Republican controlled Congress. For one, some of his proposals are thematically in the same sphere as those of the GOP. For another, he can block their initiatives.

Wielding a hockey stick given to him by the National Hockey League champions, the Los Angeles Kings, Obama on Monday bit his lower lip and swung. “This is even better than a veto pen,” he declared just hours after sending his budget to Congress. “You don’t want to mess with somebody who’s got one of these.”

No doubt Obama’s ability to veto is a power that can be just as conducive to deals as it is to gridlock. But Obama’s priorities and those of Republicans find overlapping common ground on proposals to increase defense spending, upgrade the nation’s aging infrastructure and fix the corporate tax system.

Agreement on any one of those is a long shot; there are significant differences between Obama and Republicans over scale and scope in each of their intersecting interests. How far apart could begin to become evident Tuesday when Treasury Secretary Jack Lew and White House budget office director Shaun Donovan testify before key congressional committees about the president’s budget.

Obama is also meeting with his Cabinet Tuesday, with the budget as a top agenda item.

Here’s a look at key areas of Obama’s budget that could be opening bids in talks with Republican congressional leaders.


Obama wants to loosen the budget cuffs on military and domestic programs that Congress applied as part of a budget deal in 2011. Deficits had hit $1.4 trillion in 2009 and cutting spending was a top political priority. Now deficits are nearly a third of that high-water mark and Obama has declared he wants to move away from “mindless austerity.”

Obama would boost spending by $74 billion — divided equally between the military and domestic programs — in 2016.

Republicans have voiced interest in increasing only the defense side of the equation. But Obama’s veto pen could force a deal. On the domestic side, Obama wants free community college for up to 9 million students and expanded child care for low- and middle-income families.

“I will not accept a budget that severs the vital links between our national security and our economic security,” Obama said. “Those two things go hand in hand.”


Obama and Republicans both say they want to overhaul the U.S. corporate tax system. The nation’s top rate of 35 percent is the highest among developed economies, even though tax breaks significantly reduce the tax burden on some industries.

Both sides say they would be willing to eliminate tax breaks to bring down rates and make the system more equal for all industries. But finding what tax breaks and incentives to eliminate and which ones to retain could lead to a lobbying frenzy that halts the process in its tracks.

Republicans want to reduce the top rate to 25 percent. Obama would reduce it to 28 percent, but set it at 25 percent for manufacturers. Rep. Paul Ryan, the new Republican chairman of the House Ways and Means Committee, has indicated he is open to negotiations.

In a potential sticking point, Obama wants a 19 percent tax on the overseas profits of U.S. companies, with a credit for taxes paid in the foreign country where they were earned.

Republicans and many in the business community object to foreign earnings being subject to taxes abroad and in the U.S. The U.S. is one of only a few countries that require corporations to pay taxes at home for their overseas earnings.

Organized labor leaders, meanwhile, say Obama’s tax plan doesn’t go far enough. AFL-CIO President Richard Trumka said Monday that corporations would still have incentives to shift jobs or profits overseas. “The actual proposals in President Obama’s budget don’t match the rhetoric,” he said.


Obama’s budget proposes spending $478 billion over six years on upgrading highways, bridges and ports and modernizing transit systems. Lawmakers, most of whom have a public works needs in their districts or states, have been struggling to find ways to increase spending on infrastructure.

Obama would cover half of his spending with a mandatory, one-time 14 percent tax on the nearly $2 trillion in profits that U.S. companies have already accumulated overseas. That would generate about $238 billion, with the remaining $240 billion coming from the federal Highway Trust Fund, which is financed with a gasoline tax.

The former chairman of the House Ways and Means Committee, now-retired Rep. Dave Camp, R-Mich., proposed a similar idea last year with a lower mandatory tax, but the plan did not make headway in Congress. A bipartisan group of House and Senate members support a plan that would allow companies to bring their overseas profits to the U.S. tax free in exchange for purchasing infrastructure bonds. And Sens. Rand Paul, R-Ky., and Barbara Boxer, D-Calif., have proposed paying for highway and bridge fixes by letting companies voluntarily pay taxes on foreign earnings at a one-time low rate of 6.5 percent.

The White House staunchly opposes such voluntary “tax holidays,” however, and critics say that without broader tax fixes, such holidays simply encourage companies to park their foreign profits overseas.

Other lawmakers have proposed boosting the Highway Trust Fund with a higher gasoline tax, an idea considered more palatable now that gas prices are low.


Associated Press writer Nedra Pickler contributed to this report.


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