President Barack Obama's election year budget called for tax increases on the wealthy to support new spending on infrastructure projects. Read below for coverage as it happened
• Read our main Obama budget news story here
That's it for today – here's a summary of the main events, and you can also read our main news story.
• President Barack Obama has released his election year budget, which seeks to increase spending on infrastructure by increasing taxes on the wealthy. Taxes on dividend income for the wealthiest taxpayers would increase from 20% to 36.9%, the rate for ordinary income. The move would raise about $206bn over 10 years, according to Obama, but will doubtless be blocked by Republicans.
• The latest budget is gloomier than the one Obama unveiled last September. Annual deficits are now expected to exceed $600bn every year except 2018. And the budget estimates that the portion of the debt held by outside investors will grow to $18.7 trillion by 2021, $1 trillion higher than last September's figure.
• Republicans criticised the budget, with Mitt Romney saying before it was even released that the document "won't take any meaningful steps toward solving our entitlement crisis". Rick Santorum said Obama had "failed to lead on budget deficit", while Ron Paul drew attention to the $1trn deficit.
• The budget would almost double investment on the US infrastructure over the next six years. Obama is proposing spending $476bn through 2018 on highways, bridges and mass transit projects, which would "create thousands of new jobs and modernize a critical foundation of our economic growth".
• The US stock markets appear to have largely shrugged the fight off. The Dow Jones Industrial Average is up a bit, but not so you'd notice. Given the political deadlock in Washington, economists are not expecting Obama's budget to pass anyway.
Barack Obama knew a budget proposal to end $40bn in tax breaks for the oil and gas industry would get him into an election-year fight with Republicans over his energy agenda, writes the Guardian's US environment correspondent Suzanne Goldenberg.
It's at least the fourth time the president has called for rolling back the subsidies.
And predictably Republicans and the oil industry were spoiling for a fight. The main industry lobby, the American Petroleum Institute, attacked the proposal as "punitive and unfair".
Like Obama's earlier proposals to cut subsidies to the fossil fuel industry, this one is highly unlikely to pass through Congress.
What the revival of the proposal demonstrates, however, is that Obama despite his earlier half-hearted support for action on climate change and other environmental measures, is willing to put up a fight now.
He has just chosen to redefine the battle lines, using the budget to highlight clean energy while trimming support for environmental regulation.
The energy budget proposes a 3.2% increase over the current year to $27.2bn in spending including a big bump in research funds, 21% or $2.3bn, for energy efficiency, advanced vehicles, and biofuels.
Republicans House Speaker John Boehner, Majority Leader Eric Cantor, and Majority Whip Kevin McCarthy have issued a joint statement on the budget, criticising Democrats for refusing to accept "virtually any" spending cuts:
Republicans have attempted to reach an agreement and negotiated in good faith for months, and we will continue to do so. Unfortunately, to date, Democrats have refused virtually every spending cut proposed – insisting instead on job-threatening tax hikes on small business job creators – and with respect to the need for an extension of the payroll tax cut, time is running short.
"Because the president and Senate Democratic leaders have not allowed their conferees to support a responsible bipartisan agreement, today House Republicans will introduce a backup plan that would simply extend the payroll tax holiday for the remainder of the year while the conference negotiations continue regarding offsets, unemployment insurance, and the 'doc fix.'
Democrats' refusal to agree to any spending cuts in the conference committee has made it necessary for us to prepare this fallback option to protect small business job creators and ensure taxes don't go up on middle class workers.
Good piece from Suzy Khimm at the Washington Post on "five things you missed in Obama's budget".
The president has doubled down on his previous statements that banks must pay for TARP (the Troubled Asset Relief Program to strengthen the financial sector), the article says – although there is expected to be dispute over the amount he wants banks to pay. Khimm also says the budget would "strengthen enforcement against illegal immigrants while reducing the number in detention".
Interestingly, the president also wants to change the composition of nickels and pennies as a cost-saving measure:
The president's budget would give the Treasury Department the ability to "change the composition of coins to more cost-effective materials," pointing out the current cost of making the penny is 2.4 cents and the nickel is 11.2 cents. Of course, the value of the U.S. dollar isn't pegged to the materials that it's composed of, but it's still a compelling argument on its face. The composition of U.S. coins hasn't changed since 1981, the Wall Street Journal notes, while major components like zinc have become more expensive. Industry lobbyists stalled the proposal when Obama brought it up in 2010, but it may have new appeal to the frugally-minded.
Reuters is reporting that the Republicans are proposing to waive through an extension on tax cuts for 160 million workers without any agreement to offset the cost with spending cuts elsewhere in the budget, writes Dominic Rushe.
The plan is to simply extend the payroll tax cut while negotiations would continue on separate proposals to extend jobless benefits for the long-term unemployed and to avert a 27 percent pay cut for doctors treating elderly Medicare patients, the news agency said.
It looks like another political move, one that would allow Republicans to argue that they are compromising on one issue, payroll tax, while they stand firm on issues where they are more likely to clash with Democrats, especially long-term unemployment benefits. Perhaps this should come as no surprise given that Newt Gingrich has taken to calling Obama the "food stamp president".
At Talking Points Memo, Brian Beutler writes that Obama has kept annual deficits around $1 trillion, with the challenge now being to draw down the deficit. Much of the money will come from allowing Bush's tax cuts for the wealthy to expire, Beutler says:
That's where framing comes in. The budget is at pains to explain that many of the cuts Obama supports aren't to wasteful or failed programs, but rather "valuable programs that we would not cut if not for the fiscal situation."
It calls out Republicans nearly a dozen times for their adamant refusal to take a penny in new revenue from wealthy Americans, dooming recent administration efforts to reduce deficits or stimulate the economy with new spending.
In his budget message, Obama alludes to the GOP's alternative vision: to use the mushrooming national debt as an excuse (or opportunity, if you're so inclined) to phase out some of the most popular services the government provides while reducing taxes on wealthy Americans.
"I am proposing more than $360 billion in reforms to Medicare, Medicaid, and other health programs over 10 years. The goal of these reforms is to make these critical programs more effective and efficient, and help make sure our health care system rewards high-quality medicine," Obama writes. "What it does not do—and what I will not support—are efforts to turn Medicare into a voucher or Medicaid into a block grant. Doing so would weaken both programs and break the promise that we have made to American seniors, people with disabilities, and low-income families—a promise I am committed to keeping."
The contrast is key both to Obama's election year pitch, and to the policy choice voters will face in November. That's why the White House includes some rosy out-year predictions, and paints a picture of the current environment that's bleaker than reality — a tactic, perhaps, to make developments in the months and weeks ahead appear healthier than they actually are.
More from Dominic Rushe:
Grover Norquist, Washington's powerful anti-tax lobbyist, tells me this budget is a "make-believe document" and likely to be a loser to Obama.
"We are in the second year of Obama's re-election campaign. This is not an economic document, it's not a policy document, it's a political document. Obama claims he's going to save a lot of money from not continuing the war in Iraq and Afghanistan for the next 50 years and now he wants to spend it. This is the sort of thing made for 30-second sound bites and it doesn't pass any serious analysis. More taxes, more spending, more debt, more of the same. He's not Clinton. He didn't learn anything."
Here's the "key budget facts" section of today's proposal – thanks to Dara Healy on Storyful for the link.
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Nancy Pelosi's pleased:
POTUS budget is balanced, fair & responsible--invests in economic growth, job creation, & a stronger, thriving middle class.
— Nancy Pelosi (@NancyPelosi) February 13, 2012
Obama is proposing taxing the dividends of the top 2% of income earners as ordinary income – which is subject to the highest tax rate of 39.6%. This would raise $206bn over the course of 10 years. However, the president did not propose any changes for taxing dividends of Americans with taxable income less than $250,000.
Obama also aims to eliminate corporate tax breaks, primarily for oil and gas companies.
Dominic Rushe is in good fooling this afternoon:
Rush Limbaugh (no relation) has weighed in on the Obama budget: "Obama put out his budget this morning, a week late and a trillion dollars short. You'll be shocked to hear, ladies and gentlemen, that Obama's budget actually increases spending. I know I was shocked when I saw that. Well, based on what he's said in the past. You take him at his word, what he said in the past, this is outrageous. You guys are just now getting your lunch delivery? Boy, am I glad I don't depend on that. Jeez."
Within the budget were plans to help "Arab Spring" countries swept by revolutions with more than $800 million in economic aid, while maintaining US military aid to Egypt, Reuters reports:
In his annual budget message to Congress, President Barack Obama asked that military aid to Egypt be kept at the level of recent years -- $1.3 billion -- despite a crisis triggered by an Egyptian probe targeting American democracy activists.
The proposals are part of Obama's budget request for fiscal year 2013, which begins October 1. His requests need the approval of Congress, where some lawmakers want to cut overseas spending to address U.S. budget shortfalls and are particularly angry at Egypt.
Obama proposed $51.6 billion in funding for the U.S. State Department and foreign aid overall, when $8.2 billion in assistance to war zones is included. The "core budget" for the category would increase by 1.6 percent, officials said.
Most of the economic aid for the Arab Spring countries -- $770 million -- would go to establish a new "Middle East and North Africa Incentive Fund," the president said in his budget plan.
Analysts said it was difficult to tell how much of the proposal was actually new money.
"As presented it's very difficult to determine if the Arab spring fund is new wine in new bottles or old wine in new bottles," said John Norris, a former U.S. foreign aid worker now at the Center for American Progress.
The New York Times has a handy guide to where the money will be spent in the budget.
Barack Obama has set out the battles lines over the economy in this year's presidential election by proposing a budget that favours stimulus spending over austerity, and commits to the increasingly popular demand to raise taxes on the rich, writes the Guardian's Chris McGreal.
The president laid out $4tn in cuts to the deficit over the next decade as he seeks to reassure the large number of swing voters and conservative Democrats that he is serious about reining in government spending – a primary source of attack by Republican presidential contenders.
But, in a speech in Virginia in support of the proposals on Monday, Obama said a fresh wave of cuts should be delayed until the economy is in better shape to absorb them. In the meantime he proposes new investment in education, jobs and infrastructure, in part paid for by cuts to military spending with the end of the war in Iraq.
Read Chris's full news story here.
At the Office of Management and Budget press conference the speakers are now taking questions.
As one might expect, there's plenty of Twitter reaction to Obama's speech. We'll start with reaction from the right:
Obama's $1 trillion deficit – Paul's $1 trillion cut: ow.ly/92q1v #gop2012 #gop #tcot #RonPaul
— Ron Paul (@RonPaul) February 13, 2012
A rather wooden line from House majority leader Eric Cantor:
President Obama says he wants an economy that's built to last but the budget he released today outlines a plan that's built to come in last
— Eric Cantor (@GOPLeader) February 13, 2012
The right's tax tsar Grover Norquist, president of Americans for Tax Reform:
Obama's "new" budget: higher taxes, higher spending, higher debt. Who is surprised?
— Grover Norquist (@GroverNorquist) February 13, 2012
A press conference is beginning at the Office of Management and Budget – watch it at the White House website or above.
Here's a summary of the main points of Obama's election budget by Dominic Rushe and me. You can now read the budget in full on the White House website.
• Taxes on dividend income for the wealthiest taxpayers would increase from 20% to 36.9%, the rate for ordinary income. The move would raise about $206bn over 10 years, according to Obama, but will doubtless be blocked by Republicans.
• The latest budget is gloomier than the one Obama unveiled last September. Annual deficits are now expected to exceed $600bn every year except 2018. And the budget estimates that the portion of the debt held by outside investors will grow to $18.7 trillion by 2021, $1 trillion higher than last September's figure.
• The much-vaunted Buffett Rule would ensure no household making more than $1 million a year pays less than 30 percent of their income in taxes. Obama reiterated his desire to end temporary tax cuts for the wealthy: "Warren Buffett's doing fine, I'm doing fine," the president said. "We don't need the tax breaks. You need them."
• The budget would almost double investment on the US infrastructure over the next six years. Obama is proposing spending $476bn through 2018 on highways, bridges and mass transit projects, which would "create thousands of new jobs and modernize a critical foundation of our economic growth".
But whether these proposals will harm or help the economy may be a moot point. Paul Dales, US economist at Capital Economics, says Obama is playing the political game but as far as the US economy is concerned his budget proposals mean "diddly squat".
"The big thing here is that there is very little chance that this budget will get passed into law. It just won't get through the House. What we have here is a budget that is very similar to budgets he has tried to pass before. We have some deficit reductions, some tax hikes and some spending cuts. There's nothing particularly new here. And again it is unlikely to get passed by his Republican colleagues."
Obama's 2013 budget looks set to be the battle ground for the election, writes Dominic Rushe.
Higher taxes for the wealthy and more taxes for the oil and gas industry should play well with the president's Democrat supporters but have already attracted fierce criticism from the right.
One of the ideas most likely to grab headlines is the Buffett rule – a 30% tax on incomes of more than $1 million, that was suggested after billionaire investor Warren Buffett said the government was "coddling the super-rich."
Here in America the story has never been about what people can do for themselves, Obama says. It's about what people can do for each other. About how we can pull each other up.
Returning to that tradition will remind people around the world why America is The Greatest Nation On Earth™, Obama says. And then he's off.
"We've got to renew the American values of fair play and shared responsibility"
The budget today is one of shared responsibility, Obama says.
"But we've got to make some choices. We're scheduled to spend $1tn more on what was intended to be a temporary tax cut for the most welcome Americans."
"Keep in mind that a quarter of all millionaires pay less tax than middle class households, Obama says. (Handily a certain Mitt Romney is among those millionaires.)
"That's not fair. I don't need a tax break."
On to the Buffett Rule, which is "just common sense."
"Warren Buffett's doing fine, I'm doing fine. We don't need the tax breaks. You need them."
Obama giving the story of Mike Phillips – who introduced him – who left a career in the building industry to retrain in cyber security.
Is "Mike the cyber-security expert" the new "Joe the plumber"?
Mike earned two certificates after going back to school. Obama says. Lots of applause for Mike.
Segue into allowing people to train for careers in growth industries – at community colleges just like the one Obama is speaking at now.
"This should be an engine of job growth across the country."
Affordability of education now. Students and taxpayers can't just keep on subsidising sky-tocketing tuition.
Schools and colleges must do their part. "We're putting them on notice".
Higher education is "cannot just be a luxury, it is an economic imperative that every family in America should be able to afford".
Obama is making the case for cutting the deficit over the longer term. By paying the money back over the long term, the president says, it allows us to grow the economy in the short term.
But how? On to education. And skills.
When businesses are looking for skilled workers:
"I don't want to find them in India, or China", Obama says. He wants business to find people "right here, in the United States."
"Those skills begin with educating our young men and women." Obama calls for Congress to give schools flexibility. (And money).
Obama says he outlined a blueprint in his State of the Union address. This will outline the details.
"Don't worry I will not read it to you," he adds. "It's long and it's got a lot of numbers."
Here is the budget by the way, having its picture taken in the House Budget Committee room on Capitol Hill earlier this morning.
We're off.
"The last thing we can afford to do right now is to go back to the very policies that got us in this mess in the first place", Obama says.
"Congress needs to stop taxes from going up on 163m Americans" at the end of this month.
Here's Obama. "I love you," shouts a female voice from the crowd.
"I love you back," the president says. Hope it was Michelle.
The Guardian's business guru Dominic Rushe:
It isn't just Republican critics that Obama must face off. Emanuel Cleaver, chairman of the Congressional black caucus, took to CNN this morning warning that if the president cuts spending too far the budget will be "a nervous breakdown on paper."
Cleaver says the US is suffering from "spendicitis" and that budget cuts threaten to worsen the economy. "We're still in a recession, we're still struggling. Unemployment is still too high," he said.
Obama's on in two. Watch it on the White House website or right here:
At the moment we've got a load of people stood on a stage waiting for the president.
Obama is visiting a school in Virginia at 11am where he is expected to make remarks on the budget, and the budget itself will be released at 11.15am. Follow here for live coverage, analysis and reaction.
President Barack Obama's election year budget will be released this morning as the president seeks to make the case for increased stimulus as opposed to the spending cuts favoured by his Republican rivals.
Obama's budget for the fiscal year 2013 is expected to call for new spending on roads and other infrastructure projects, as well as tax increases on the wealthy. The president will make the case for deferring major deficit cuts until the economy recovery is back on track.
Plans for the so-called "Buffett Rule" are expected to form part of the budget, under which millionaires would pay a minimum tax rate of 30 percent. Obama will also identify $4 trillion in deficit reduction over 10 years, similar to the plan he laid out in September.
Reuters reported that the president will propose using half of the money from ending America's involvement in Iraq and Afghanistan to subsidize investment in infrastructure.
This includes tax breaks for companies and individuals that would be worth more than $300 billion in 2012 if passed into law. That could provide additional fiscal stimulus for economic growth as Obama campaigns around the country for re-election.
One of the biggest boosts would come from extending a payroll tax cut for 160 million Americans for all of 2012, which expires on Feb. 29 unless Congress acts. The White House estimates this could add a percentage point to 2012 GDP.
• This article was amended on 13 February 2012. It originally included incorrect figures. These have now been changed.