Obama sets up fiscal clash with budget proposal

WASHINGTON – Setting up a showdown with the new Republican-controlled Congress, the Obama administration said Thursday that the president's proposed 2016 federal budget would include a $74 billion increase in discretionary spending that blew past the limits in place under current budget law.

The fiscal 2016 budget plan, which would take effect Oct. 1, will be released by the White House on Monday. It proposes spending that is 7 percent above the levels agreed to under a multiyear budget deal in 2011.

Obama's pitch in this year's budget comes with the added oomph of an improving economy and big recent declines in federal deficits.

To sweeten the proposal for Republicans, President Obama would boost military and domestic spending almost equally. The White House said military spending would total $561 billion and nondefense $530 billion; each increasing by $38 billion and $37 billion.

Taking a defiant tone, Obama vowed not to stand on the sidelines as he laid out his opening offer to Congress during remarks in Philadelphia, where House Democrats were gathered for their annual retreat.

"We need to stand up and go on offensive and not be defensive about what we believe in," Obama said. Mocking Republicans for their leaders' newfound interest in poverty and the middle class, he questioned whether they would back it up with substance when it mattered.

Republicans promise to produce a balanced budget blueprint this spring even as they worry about Pentagon spending. The Senate's No. 2 Republican, John Cornyn of Texas, dismissed the Obama proposals as "happy talk." And Sen. Pat Toomey of Pennsylvania chided the president for "abandoning spending discipline."

Neither party has tender feelings for the sequester, which cut bluntly across the entire federal budget and was originally designed more as a threat than as an actual spending plan. With the economy gaining steam while deficits decline, both parties have signaled they want to roll some of the cuts back. A bipartisan deal struck previously softened the blow by about a third for the 2014 and 2015 budget years.

Both parties are generally inclined to boost spending for the military, which is wrestling with threats from terrorism and extremist groups and has been strained by budget limits and two long wars. "At what point do we, the institution and our nation, lose our soldiers' trust?" asked Gen. Raymond Odierno, the Army chief of staff, at a Senate hearing Wednesday.

Yet among congressional Republicans, there's no unanimity about where more Pentagon funds should come from — a division within the GOP that Obama appeared eager to exploit. Some House Republicans want to cut domestic agency budgets to free money for the military — an approach that failed badly for Republicans two years ago. Some are eyeing cuts to so-called mandatory programs such as Social Security and Medicare, while others want to ignore the spending restraints altogether.

"Whatever it takes within reason to get this problem fixed is what I'm willing to do," said Sen. Lindsey Graham, R-S.C., adding that he would be willing to consider more tax revenue "just to get the damn thing done."

The budget constraints stem from the hard-fought budget and debt bill of August 2011 that both parties negotiated and Obama signed into law. The threat of across-the-board cuts to virtually every federal agency was supposed to force Democrats and Republicans to compromise on smarter, less onerous spending cuts, but the measure kicked in when a supercommittee failed to reach an overall fiscal deal.

Finding middle ground may prove harder now because the wave that swept Republicans into control of both chambers was fueled in part by promises of fiscal discipline.

The White House said Obama's budget would be "fully paid for" by cutting inefficient programs and closing tax loopholes — particularly a trust fund provision the White House has been eyeing. But spokesman Josh Earnest was quick to concede, "No president has ever put forward a budget with the expectation that Congress is going to pass it in its current form."

A series of fiscal showdowns is coming, starting with an end to Department of Homeland Security funding on Feb. 28, a sharp cut in physician payments under Medicare on March 31, the depletion of the highway trust fund on May 31, a debt-ceiling showdown this summer or fall and the return of across-the-board mandatory cuts known as sequestration on Oct. 1.