March 4 (Bloomberg) -- President Barack Obama sent Congress a $3.9 trillion budget request with increased spending for employment, education and job-training programs to boost the economy, financed partly by trimming tax breaks for upper-income families and some businesses.

The sixth budget of Obama’s presidency, released eight months before the November midterm election, would enhance tax- credit programs for some families and childless workers and pump about $302 billion over four years into infrastructure projects such as roads and bridges. It would allocate $25 billion less for weapons and research than projected a year ago.

“The budget is not just about numbers, it’s about our values,” Obama said at a Washington elementary school today. “It’s a roadmap for creating jobs” in part through education, while it “adheres to the spending levels” agreed to by Congress.

The budget projects a $564 billion deficit this year, down 13 percent from a year ago. The budget deficit is projected to fall in each of the next three years to a low of $413 billion in 2018 before rising again.

The deficit-to-gross domestic product ratio is projected at 3.7 percent this year, dropping to 3.1 percent next year, a level most economists consider manageable. It measured 9.9 percent when Obama took office in 2009. The budget shows steady declines in the following years to a low of 1.6 percent in 2024.

The president’s budget projections assume total acceptance of the entire package by Congress, which never happens. Such assumptions allow the White House to be optimistic in its outlook. In addition, the forecast deficits and their share of the economy don’t take into account recessions or wars, which can skew the budget.

Obama’s spending blueprint for the fiscal year starting Oct. 1 is a snapshot of his political priorities that often align with those of Democrats seeking re-election in November. At the same time, it underscores the differences with congressional Republicans, who will reject the Obama budget and likely soon offer one of their own.

“This budget isn’t a serious document; it’s a campaign brochure,” House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, said in an e-mailed statement.

Fiscal challenges

Obama’s budget is a “disappointment” that “would demand that families pay more so Washington can spend more,” Ryan said. “The president has just three years left in his administration, and yet he seems determined to do nothing about our fiscal challenges.”

Obama’s plan touts $56 billion in what the White House calls “additional investments,” split evenly between defense and domestic priorities and including education, research and development.

The White House emphasized $598 billion in tax increases for the wealthy over 10 years that includes adopting the so- called Buffett Rule that imposes a “fair share tax” on upper- income families and would collect a projected $53 billion over a decade.

As part of a $302 billion plan for transportation and public works projects, the budget includes a four-year fix to patch a gap between receipts from the 18.4 cents-per-gallon federal gas tax and planned spending from the Highway Trust Fund, which covers roads, bridges and transit spending.

Highway spending

The Transportation Department projects the Highway Trust Fund will run out of money before the end of September without new revenue.

Projects would be funded by a one-time tax repatriation of offshore earnings. Republican House Ways and Means Committee Chairman Dave Camp had a similar proposal in his tax plan unveiled last week.

It’s not a permanent fix, though, and the budget plan is silent on how it would address a long-term shortfall between gas taxes and road funding that widens as automakers increase the fuel efficiency of their fleets.

The White House, as it did last year, proposed $66 billion to provide low- and moderate-income 4-year-old children with access to preschool, to be paid for with increased taxes on tobacco that the administration said would raise $78 billion over 10 years. Congress took no action on either plan last year.

Tax credits

The president’s plan calls for automatic enrollment in individual retirement accounts costing $14.7 billion over a decade, and expansion of child care and dependent tax credits for $9.6 billion over 10 years.

The president is proposing a $143 billion package of incentives for manufacturing research and clean-energy programs to create jobs. Of that amount, $108 billion would be earmarked for a research and experimentation tax credit.

The $56 billion for additional investments would be offset with spending cuts or tax increases. For example, the administration would limit crop insurance subsidies to save $14 billion over 10 years. It proposes to raise airline security fees by $5 billion, capping tax-preferred savings accounts like IRAs and blocking those receiving disability benefits from also collecting unemployment benefits.

The budget would increase by 19 percent financing for the Labor Department’s Wage and Hour Division, to $269 million, allowing the unit to hire 300 investigators to crack down on overtime abuses. The division that enforces the minimum wage, overtime, child labor and other laws would target “industries and employers most likely to break the law,” according to a White House statement.

Spending cap

Under an existing agreement passed by Congress, discretionary spending -- about 29 percent of the 2015 budget -- is capped at $1.014 trillion, excluding war funding. The White House says its budget stays below that ceiling, with some specific additions.

Adding funds for repairs and improvements to the nation’s highways and transit systems may be an area that appeals to both Congress and the White House, Representative Chris Van Hollen, a Maryland Democrat, said in an interview on CNBC today.

“We need to boost our infrastructure investment in this country in order to remain competitive,” he said. “If we can find a way to do it where we don’t increase the deficit” it may be one area where Republicans and Democrats can agree.

The budget plan includes $7 billion for disaster relief and another $1 billion annually for wildfire suppression, reflecting an increasing fire risk in the Western U.S.

Childless workers

The plan includes $60 billion over 10 years to expand the earned income tax credit for childless workers and $66 billion to support preschool programs for all children.

After two years of focusing on deficit reduction, the president is taking a detour to pump new money into core Democratic programs that may help rally the party in the November elections.

“This year, the administration is returning to a more traditional budget presentation that is focused on achieving the president’s vision for the best path to create growth and opportunity for all Americans, and the investments needed to meet that vision,” the White House said in a statement Feb. 20.

Obama told the Democratic National Committee Feb. 28 that his budget will create jobs in manufacturing, energy and infrastructure, and “we’ll pay for every dime of it by cutting unnecessary spending, closing wasteful tax loopholes.

Spending limits

Lawmakers, in a budget deal signed into law in January, have set spending limits for 2015, essentially setting a truce in the annual budget wars. House Republicans plan to write an alternative budget, and the Senate has no plans to do so, according to Senator Patty Murray of Washington, chairman of the budget committee.

Ryan, the House budget chairman, is looking to revamp almost 100 anti-poverty programs that he says encourage people to remain on welfare.

“For too long, we have measured compassion by how much we spend instead of how many people get out of poverty,” said Ryan, the Republican vice presidential nominee with Mitt Romney in 2012. “We need to take a hard look at what the federal government is doing and ask, ‘Is this working?’”

That stance may be a counterweight to Obama and congressional Democrats making the battle against income inequality a centerpiece of the 2014 election, illustrated by proposals to raise the federal minimum wage to $10.10 an hour from $7.25 and extend long-term unemployment benefits.

Unemployment forecast

In economic forecasts that were made in November, the budget projected the U.S. economy will probably increase by 3.1 percent this year and 3.4 percent in 2015, budget figures show. The unemployment rate may average 6.9 percent this year, falling to an average of 6.4 percent next year. The current jobless rate is 6.6 percent. An update from the Labor Department is scheduled March 7.

Elsewhere, Obama proposes $65.3 billion in discretionary funding for the Department of Veterans Affairs, up 3 percent from this year. The request includes more than $300 million in funding to help speed claims processing as the VA seeks to end a backlog that has left some veterans waiting more than a year for decisions on disability benefits.

The National Aeronautics and Space Administration would receive $17.5 billion in budget authority for fiscal 2015, down from $17.6 billion this year, including funds to take astronauts to the moon and beyond.

The proposal includes $1.9 billion for the Space Launch System, whose contractors include Chicago-based Boeing Co. and Rancho Cordova, California-based GenCorp Inc.’s Aerojet Rocketdyne. The SLS will carry a manned capsule into space, the Orion, whose prime contractor is Bethesda, Maryland-based Lockheed Martin Corp. The budget also includes $1.2 billion for the capsule.

With assistance from Kathleen Miller and Jonathan D. Salant in Washington and Jim Efstathiou Jr. in New York.

Instant Insights /

Obama sends Congress $3.9 trillion budget

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