Obama Budget Lays Out "Hard Choices"

He's not being timid, that's for sure.

President Barack Obama's first federal budget lays out the most far-reaching agenda for American life since Lyndon Johnson's Great Society. But paying for it by having upper-income earners shoulder much of the cost quickly provoked cries of class warfare in Congress.

The Obama priorities reflected in the $3.6 trillion budget guarantee a fierce political battle ahead over taxes and spending. And despite the administration's agonizing over the depth and global nature of the worst recession in decades, the new president's budget forecasts a rapid U.S. recovery.

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CBS News Chief Political Consultant Marc Ambinder provides a summary of Obama's budget

CBS White House Correspondent Mark Knoller reports that the budget plunges U.S. further into debt

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In what would be a major redistribution of wealth, the President proposes taxes on high income Americans totaling about $637 billion dollars over the next ten years, reports CBS News Chief White House correspondent Chip Reid. That includes allowing the Bush tax cuts to expire in 2011 for families making more than $250,000 a year

Middle and low-income families, on the other hand, would get tax breaks. The recently passed $800 tax credit for working families would be increased to $1,000 dollars and would be permanent.

The White House says the goal is to reverse the trend during the Bush years, when the rich got richer, and the middle class got poorer.

But, Republicans say the tax increases will make the economy even worse, Reid reports.

"This is a job killer, plain and simple, and it will increase taxes on all Americans," said Rep. John Boehner.

It would boost taxes on the wealthy, oil companies and other businesses while cutting Medicare and Medicaid payments to insurance companies and hospitals to make way for a $634 billion down payment on universal health care. It would also limit charitable and other tax deductions for the affluent and trim spending on government subsidies to big farms.

Predictably, Republicans complained, much as they had done during last year's presidential campaign, that Obama was pitting the haves against the have-nots.

"The era of big government is back, and Democrats are asking you to pay for it," said House Republican leader John Boehner of Ohio. He suggested Obama's proposed tax increases would reach deep into the middle class, despite repeated administration statements that tax hikes would be limited to families making more than $250,000 a year.

Proposed new excise taxes on offshore drilling and plans to cap greenhouse gas emissions and require polluters to buy permits could affect "all Americans who drive a car, who have a job, who turn on a light switch," Boehner said.

Boehner and other Republicans also said it was folly to raise taxes during a recession.

But the administration's own economic forecasts suggest that the brunt of the tax increases, including allowing existing tax cuts from the Bush administration to expire, will fall only after the nation is in recovery.

The Obama budget forecasts that, despite the depth of the current recession, the economy will recover and grow by 3.2 percent in 2010 and then climb to an even more robust 4 percent in the three following years.

Most of the proposed Obama tax hikes, including the permit levy on greenhouse gas emissions, would not take effect until a presumably post-recession 2012.

Christina Romer, chairman of the president's Council of Economic Advisers, defended the administration's upbeat forecast for recovery, saying it "reflects the administration's assessment that the comprehensive recovery program outlined by the president on Tuesday night will be effective."

But some deficit hawks suggested that Obama was being too optimistic given the severity of the recession.

"He is relying on a strong economic comeback very quickly. And he's assuming that a lot of the new issues will be paid for," said Robert Bixby, the executive director of the Concord Coalition, a bipartisan fiscal watchdog group.

Bixby said the budget has "a lot of downside risk" that spending increases will not be fully offset by higher tax revenues. Obama's budget plan projects a record $1.75 trillion deficit for 2009, largely swollen by stimulus and bank bailout spending. Obama has said he hopes to sharply reduce the annual shortfall by the end of his term.

In remarks, Obama said his budget was an attempt to fairly "come to grips with the hard choices that lie ahead."

But in written comments accompanying the budget, he struck a far more defiant and populist tone, blaming much of the government's budget woes on his predecessor, President George W. Bush.

"Prudent investments in education, clean energy, health care, and infrastructure were sacrificed for huge tax cuts for the wealthy and well-connected," Obama wrote. "There's nothing wrong with making money, but there is something wrong when we allow the playing field to be tilted so far in the favor of so few."

Asked whether the class-warfare argument could complicate White House efforts to win support for some of its big priorities, White House spokesman Robert Gibbs said, "No. And I think it's important to understand that what the president has enumerated in his budget today is precisely the blueprint and series of promises that he made over the course of two years in a campaign ... that the American people voted for."

Still, Stanley Collender, a longtime budget expert, predicted a huge battle in Congress over the proposed tax cuts and Medicare changes. But he noted that, with Democrats in control of the House and Senate, there's probably not much Republicans can do to keep the expiring Bush tax cuts from ending on their own.

Furthermore, said Collender, in the current economic and political climate, "the wealthy are not as well thought of as they have been in the past."

He also noted that exit polls from last year's presidential election showed those making more than $200,000 a year tended to vote for Obama rather than Republican Sen. John McCain.