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Obama Budget Seeks End to 'Mindless Austerity' (Updated)

(Tom Williams/CQ Roll Call)

Updated 12:55 p.m. | President Barack Obama’s opening salvo in this year’s budget wars with the new Republican Congress aims to shift the conversation away from four years of austerity. He received a predictably frosty reception.  

Obama’s $4.066 trillion budget would unshackle discretionary spending from the legislative tourniquet known as the sequester. That allows about a 7 percent increase in defense and domestic discretionary programs — or $74 billion. "I want to work with Congress to replace mindless austerity with smart investments," Obama said Monday at the Department of Homeland Security as he announced his fiscal 2016 budget.  

"I'm not going to accept a budget that locks in sequestration going forward. It would be bad for our security and bad for our growth," Obama said in what is effectively a veto threat setting the stage for a yearlong fight with the GOP. He added he wouldn't allow Republicans to increase defense spending without also increasing domestic "investments," which he implied would pay for themselves.  

Obama would impose about $2 trillion in assorted tax hikes over a decade mostly targeting the wealthy and corporations, while showering the middle class with $277 billion in new tax breaks. Much of the rest would pay for new spending, targeted tax breaks and deficit reduction.  

That effectively sets the starting point for talks with the GOP, with administration officials hoping it eventually leads to a budget deal at least along the lines of the modest two-year agreement reached in 2013 by Rep. Paul D. Ryan, R-Wis., and Sen. Patty Murray, D-Wash.  

As in previous budgets, Obama makes no effort to eliminate the deficit — merely keeping it below 2.5 percent of gross domestic product.  

“Since I took office, we have cut our deficits by about two-thirds,” Obama said.  

He emphasized investments in research, college and other domestic programs instead. “We would be making a critical error if we avoided making these investments," he said.  

Federal coffers would see another $5.6 trillion in accumulated deficits over the coming decade, never dropping below $463 billion in a year. (It would be $474 billion in 2016.)  

Total spending would be $50.3 trillion over a decade, versus $44.7 trillion in revenue.  

Gross debt, which includes items such as student loans not counted in the deficit, would jump to $26.3 trillion in 2025, Republicans noted. A blizzard of Republican press releases coming from Speaker John A. Boehner of Ohio and on down the ranks dismissed the blueprint for proposing more spending and more taxes and promised a different approach.  

But there are new proposals that challenge Republicans to come to the table — including a new corporate tax plan to would avert a funding cliff for transportation set to hit by summer. That plan would impose a 14 percent tax on about $2 trillion in corporate profits stashed overseas.  

Republicans have at least entertained the idea of getting one-time revenue from bringing those profits back to America — and GOP leaders also have made averting the transportation funding cliff a priority.  

An administration official emphasized the plan, unlike a “holiday” proposed by some in Congress, would not be voluntary and would provide enough money to boost transportation spending for the next six years.  

The budget also puts details on the president’s “middle-class” agenda, including the aforementioned tax breaks for everything from two-parent worker households to child care, free community college and a recycled proposal aimed at providing universal pre-K education paid for by a tobacco tax hike.  

To pay for eliminating the remaining years of the sequester and to modestly shrink the deficit, Obama proposes a $1.8 trillion deficit reduction package. That's highlighted by a combination of $400 billion in health care savings, $160 billion from passing an immigration overhaul and taxes on the wealthy. Those are ideas that have repeatedly crashed and burned, of course.  

His proposed cuts aren’t as deep as Obama had entertained back in the “grand bargain” days, when he proposed such items as chained CPI, which would have the effect of shrinking increases in Social Security checks and numerous other programs.  

Instead, the budget does a victory lap on the slowing growth in health care costs, which the administration attributes in part to provisions in the Affordable Care Act, and on the deep reductions in the deficit from the $1 trillion-plus deficits he posted in his first years in office.  

Obama’s deficit reduction package also would not keep up with what his own budget expects will be soaring interest costs on the $18 trillion federal debt. Interest costs would more than triple from $229 billion in 2015 to $785 billion in 2025.  

Indeed, soaring interest payments account for all of the deficit in Obama’s budget by 2022. That’s due to an expectation that record low interest rates will start to rise, as well as the addition of trillions in additional debt.  

Republican lawmakers vow to do what they have done in recent years and propose a budget that eliminates the deficit by the end of the 10-year window, and many have backed a balanced budget amendment to the Constitution that would mandate eliminating the deficit even sooner.  

"It may be Groundhog Day, but the American people can’t afford a repeat of the same old top-down policies of the past," Boehner said in his statement.  

“Like the president’s previous budgets, this plan never balances — ever. It contains no solutions to address the drivers of our debt, and no plan to fix our entire tax code to help foster growth and create jobs. Worse yet, President Obama would impose new taxes and more spending without a responsible plan to honestly address the big challenges facing our country."  

The effective starting line for the upcoming budget talks, then, will be the status quo — full sequestration level caps on the $1 trillion-plus discretionary budget and the nearly $3 trillion mandatory budget operating on autopilot.  

Republican leaders have already made clear Obama will have to agree to spending cuts elsewhere to avoid sequestration, without forcing them to pay a tax hike ransom.  

In 2013, Obama spent nearly the entire year demanding another tax hike as his price for cutting a big budget deal without success.  

His leverage has been extremely limited because of his decision during the fiscal cliff negotiations in late 2012 to agree to permanent tax relief for 99 percent of Americans.  

Obama said he's interested in talking with the GOP. "I welcome their ideas, but their numbers have to add up," he said.  

He also used the event to focus attention on last year's unfinished budget business — with Homeland Security funding expiring on Feb. 27 as Republicans try to undo his executive actions on immigration.  

Obama urged Republicans not to partially shut down the department, which would halt paychecks for thousands of workers.  

Katy O'Donnell and Paul M. Krawzak contributed to this report. Related: The 114th: CQ Roll Call's Guide to the New Congress Get breaking news alerts and more from Roll Call in your inbox or on your iPhone.