Obama unveils election year 'growth and jobs' budget

President Barack Obama on Tuesday proposed a budget for the coming fiscal year that had less to do with managing US finances than with stemming Democratic losses in congressional elections. The mildly expansionary $3.9 trillion plan will not pass Congress unscathed, but Obama will use it as a platform to underline his populist voter-friendly narrative ahead of the November polls. "Our budget is about choices. It is about our values," Obama told supporters, in a speech at a Washington elementary school. "As a country, we have to make a decision, if we are going to protect tax breaks for the wealthiest Americans, or create jobs, grow our economy, and expand opportunity for every American." Senior White House officials admit the document is largely aspirational, given that the president's top priorities are routinely blocked by Republicans in Congress. Broad spending levels have also already been set by a two year budget agreement reached by top Democratic and Republican negotiators in Congress in December. But Obama will use the budget to showcase ideas that he thinks will give him, and his beleaguered supporters in Congress, the edge. He proposed an extra 56 billion dollars in spending above agreed budget levels, to be financed by closing tax loopholes which benefit the rich and in mandatory spending reform. The budget foresees the American economy growing by 3.1 percent this year and by 3.4 percent the next, with inflation remaining under control, rising to only 2.0 percent in 2015. It also predicts growing revenue, so that the government can reach a primary surplus -- spending excluding debt service -- by 2018. It suggests the country's budget deficit, which boomed after the 2008 crisis, can be brought down to $564 billion, or 3.1 percent of GDP, in the fiscal year beginning October 1 and to 2.2 percent by 2020. While the absolute level of US debt -- now $17.3 trillion -- will continue to grow, its ratio to the overall size of the economy will fall, from nearly 75 percent this year to 69 percent by 2024. The White House said the budget would expand the Earned Income Tax credit, which would cut taxes for 13.5 million working Americans and expand tax cuts to finance child care and college education. And the plan would close a loophole that allows wealthy people to treat investment income as capital gains, and thus avoid the 40 percent top federal tax rate on this income. Obama is also pinning his hopes for November's poll, in which a third of the Senate and all of the House of Representatives is up for grabs, on a rise to the federal minimum wage from $7.25 to $10.10. The proposal is popular with voters but opposed by Republicans, who say it would squeeze small businesses and cost jobs. A new poll on Tuesday revealed the challenge facing Democrat, as they defend vulnerable seats while hampered by a president with a 41 percent approval rating and an unpopular health care law. The Washington Post/ABC News poll found that of 34 states with Senate races, 50 percent of voters favor Republicans and 42 percent favor Democrats. Democrats have almost no chance of winning back the House and are in grave peril of losing the Senate -- a scenario that would guarantee a miserable last two years in office for Obama. The spending blueprint effectively rescinds an offer from Obama to Republicans to recalculate inflation in a way that would gradually reduce benefits to senior citizens from social programs. The offer -- known as chained CPI -- was included in the budget last year as Obama held out hope of concluding a "grand bargain" on taxes, spending and the deficit with Republicans on Capitol Hill. But negotiations have collapsed, and senior Obama aides say they have omitted the concession. In effect, the move means that there is now little chance of a lasting fiscal agreement between Obama and his Republican foes for the rest of his presidency, which ends in January 2017.