Covering the budget proposal

President Obama unveiled Wednesday his $3.78 trillion budget proposal, which is destined to be picked over and debated. Let’s take a look at the initial coverage of the proposal.

Here’s the story from the Wall Street Journal:

President Barack Obama‘s $3.778 trillion spending proposal for next year incorporates for the first time a number of measures to slow the growth of spending on Social Security, Medicare and other federal benefits, hoping to draw Senate Republicans to the table for negotiations.

The White House has said it would accept many of the benefit changes only if they are part of a broad deficit-reduction package that combines spending cuts with tax increases. But with many Republican lawmakers opposed to any more tax increases, the odds of a large-scale budget deal remain low.

“I will not agree to any deal that seeks to cut the deficit on the backs of middle class families,” Mr. Obama wrote in the budget blueprint released Wednesday. “I am willing to make tough choices that may not be popular within my own party, because there can be no sacred cows for either party.”

These budget decisions loom at a time when the economic recovery remains fragile. The stock market is at record levels and tax receipts are rebounding, but unemployment and the budget deficit remain high.

Mr. Obama’s budget proposal, for the fiscal year that begins Oct. 1, calls for more than $700 billion in new taxes over 10 years, and seeks increased spending on highways and other infrastructure, early-childhood education and mental health programs.

The Bloomberg coverage started with the proposal to raise taxes on the highest earners, appropriate angle for their clients:

President Barack Obama wants to again rely on the top-earning U.S. households for most of the tax increases he’s proposing.

Obama’s budget plan, released today in Washington, would cap tax deductions for top earners, increase the estate tax, eliminate private-equity managers’ ability to receive lightly taxed carried interest and require those earning more than $1 million to pay a minimum tax rate.

In a break from past budgets, Obama wants to reserve most business tax increases to pay for a cut in the corporate tax rate rather than designate the revenue for deficit reduction.

Under Obama’s budget plan, in 2023 the federal government would collect 20 percent of the gross domestic product as revenue, the first time it would hit that mark since 2000.

That’s compared with 16.9 percent this year and 19.1 percent projected for 2023 if Congress does nothing, according to the Congressional Budget Office. Congressional Republicans want to rewrite the U.S. tax code without adjusting overall revenue levels from the CBO projection.

New tax provisions scattered through the budget plan accompany many repeated proposals that Obama has made since 2009.

The New York Times story was the most general, leading off with a bit of information for everyone. Here are some excerpts:

In his fifth annual budget proposal to Congress on Wednesday, President Obama once again has put forward a fiscal mix of investments in infrastructure, education and research with further deficit reduction through tax increases and spending cuts. But for the first time he has included changes to Medicare and Social Security intended to entice Republicans back to the bargaining table.

The main new element of the budget is his proposal, offered previously in private negotiations with Speaker John A. Boehner, for a new cost-of-living formula that would reduce future Social Security benefits. On the spending side, Mr. Obama wants to help states make prekindergarten available universally, paid for by higher taxes on tobacco products.

Mr. Obama incorporated the compromise offers on Social Security and Medicare into his annual budget for the first time — over vehement objections from many Democrats — in part after earlier private discussions with individual Republican senators about what he could do to assure them of his seriousness about reaching a long-term deal to stabilize the national debt.

The 10-year budget plan would cut spending by about $1.2 trillion over that time to replace the indiscriminate across-the-board cuts, known as sequestration, that took effect March 1 when Mr. Obama and Republican leaders failed to agree on alternative deficit-reduction measures.

One of the more interesting sidebars was in the Wall Street Journal and touched on overhauling the tax code. This is an issue that most corporations, small businesses and individuals are keenly interested in seeing resolved, so kudos to WSJ for writing a separate story:

Notably, the budget proposal endorses the idea of overhauling both the individual and business tax systems at the same time, something that Republicans say is necessary to prevent political battles that could kill the effort.

The budget blueprint also effectively declares a truce with Republicans on the president’s longstanding goal of raising income-tax rates on people making more than about $250,000. The fiscal-cliff compromise at the end of 2012 set that level at around $450,000 for couples and the administration budget basically accepts the parameters of that deal, although it proposes revisiting the deal on the estate tax, and raising estate-tax levels starting in 2018.

“The President believes that today’s tax code has become overly complex and inequitable and that we should immediately begin the process of reforming the individual and business tax systems,” says a White House fact sheet accompanying the release.

Lawmakers in both parties are hoping that a tax overhaul will become part of the elusive grand budget bargain that President Barack Obama and lawmakers continue to seek.

Little about a tax overhaul would be simple, and obstacles abound in the budget. Perhaps the biggest stumbling point for Republicans is the administration’s continuing demand for about $600 billion in additional taxes from high-income individuals.

Most of that money would come from the administration’s proposal to reduce the value of tax breaks for couples making more than $250,000, according to the new budget. The affected breaks would include itemized deductions as well as other breaks for workplace health care, retirement-savings contributions and others.

The administration’s proposal would reduce the value of these breaks to 28%. For example, $100,000 in tax deductions would produce a break of $28,000 for a very-high-income household, compared with $39,600 currently based on the top tax rate of 39.6%. That change is projected to raise about $529 billion over a decade.

Let the debate (and the see-saw coverage) begin. It’s likely to be a fierce battle to consensus.