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Obama budget to focus on infrastructure, education spending

By Kathleen Hennessey and Christi Parsons, Tribune Washington Bureau –

WASHINGTON — President Barack Obama will call for new spending on infrastructure, education and manufacturing research, as well as higher taxes on top earners, in a budget proposal aimed at underlining his top economic priorities as he gears up his re-election campaign.

Senior administration officials on Friday offered a preview of the president’s 2013 budget proposal, which is due to be formally unveiled Monday.

The blueprint outlined pulls heavily from proposals previously put forward by the president — including his jobs bill, most of which is stalled in Congress, and his deficit-reduction plan, which fizzled in the failed congressional “super committee” charged with reducing the deficit.

Officials said the budget would abide by spending caps set by the August budget deal with Congress, keeping discretionary spending levels essentially flat in 2013.

Over the decade, discretionary spending will drop from 8.7 percent of gross domestic product to 5 percent, officials said.

To achieve that drop, the August deal mandates steep and unpopular cuts in defense and domestic spending, a result of the super committee’s failure to forge a broader deficit-reduction plan. The president’s budget seeks to head off those cuts by offering up, for a second time, a version of his deficit-reduction package first offered in September.

The plan claims more than $4 trillion in deficit reduction. It would achieve this through the expiration of President George W. Bush-era tax cuts on upper-income Americans, closing tax loopholes, winding down the military spending in Iraq and Afghanistan and cutting costs in Medicare and Medicaid.

The plan will reiterate a call for tax reform to be guided by the so-called “Buffett rule,” the principal advocated by billionaire Warren Buffett that no household making more than $1 million a year should pay less than a 30 percent tax rate. But officials said the budget would not estimate how much revenue such a rule would generate.

Administration officials said that proposal would cut the deficit to a more stable 3 percent of GDP by 2018.

The president’s budget projects a $1.33-trillion deficit in 2012, 8.5 percent of GDP. That number would fall to $901 billion — 5.5 percent of GDP — in 2013.

Republicans are poised to pounce on the president’s plan, which seeks to cut $360 billion from Medicare and Medicaid over the next decade, but does not call for a structural reforms of the entitlement programs.

“The president needs to tell the American people what his plan is to get us out of this fiscal mess, and I think it will continue to be a major irresponsibility not to propose changes to the major entitlement programs,” said Sen. Jeff Sessions, an Alabama Republican and ranking member of the Senate budget committee.

The Obama budget would funnel new spending to areas highlighted by Obama in his State of the Union speech.

Research and development for advanced manufacturing would see a 19 percent increase to $2.2 billion. The budget seeks $30 billion to modernize at least 35,000 schools and $30 billion to help states hire teachers and police and firefighters, an element of his American Jobs Act.

The president will call for the creation of a $5-billion program that will challenge school districts and states to better train and recruit the teachers. His budget seeks $300 million in new funding to improve child care and school preparation.

A six-year, $476-billion surface transportation bill would be paid for by user fees and by some of the savings from winding down the operations in Iraq and Afghanistan.

The proposal would support plans to put 1 million electric vehicles on the road by 2015 and double the share of electricity from clean energy sources by 2035. Elimination of 12 tax breaks to oil, gas and coal companies would raise $41 billion over the next decade, according to administration projections.

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