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Obama unveils 'fair shot' election-year budget

Update: February, 14/2012 - 11:19

WASHINGTON – US President Barack Obama unveiled a US$3.8 trillion budget on Monday packed with tax hikes on the rich and jobs programs, fleshing out a populist vision that he hopes to ride to a second term.

But the blueprint immediately sunk into the toxic mire of Washington politics, with Republicans branding it an "insult" to taxpayers, a mere "campaign document" and an example of an America "drowning in debt".

Obama said his 2013 budget would sustain new economic growth, create jobs, change an economic system tilted towards the wealthy and make long-term cuts to deficits now set to top $1 trillion four years in a row.

"We have got to do everything in our power to keep this recovery on track," Obama said, as he unveiled the document, the embodiment of his election message of restoring a "fair shot" for average Americans in a recovering economy.

"The last thing we need is for Washington to stand in the way of America's comeback," said Obama, in symbolic territory in swing-state Virginia, which he hopes to win in November's election.

There is little chance of much of the document becoming law in a divided Congress in an election year. But Obama used the budget to set political snares for Republicans he wants to brand as obstructionist foes of the middle class.

He called for more than $600 billion in construction, research and development, training and innovation spending designed to create jobs, and nurture a newly skilled American work force and 21st century infrastructure.

Obama would modernize 35,000 schools, repair roads, railways and airport runways; pour billions of dollars into education; and require the Pentagon to reconfigure missions and spend $487 billion less than planned in 10 years.

But the Defense Department's request of $613 billion for 2013 still holds military spending steady after a war-torn decade.

Thrown into the complex document was a request for $800 million to boost political and other reforms in Arab countries undergoing pro-democracy revolutions.

The plan projects a $1.3 trillion deficit for the current fiscal year and sees the shortfall dipping below the $1 trillion dollar mark in fiscal year 2013 at $901 billion. But Republicans charged the deficit cutting was too slow.

"We've got a choice. We can settle for a country where a few people do really, really well and everybody else struggles to get by," Obama said.

"Or we can restore an economy where everybody gets a fair shot, everybody does their fair share, everybody plays by the same set of rules, from Washington to Wall Street to Main Street."

Obama plans to pay for his proposals by repealing tax cuts for those earning more than $250,000 a year passed by his predecessor George W. Bush.

He would try again to bring in a Financial Crisis Responsibility Fee on banks and finance firms to compensate taxpayers for bailouts during the financial crisis.

The proposal calls on Congress to back the Buffett rule, named after billionaire financier Warren Buffett, designed to ensure no household earning more than $1 million a year pays less than 30 per cent in taxes.

Officials also put forward a $206 billion proposal to tax dividends of the richest taxpayers at the rate of the top level of income tax.

Obama's previous attempts to hike taxes on the wealthy have foundered on calls of "class warfare" from Republicans who warn they will slow growth and harm small businesses which are the engine of job creation.

Mitt Romney, Obama's possible Republican opponent in November, branded the document "an insult to the American taxpayer" and said it failed to secure long-term solvency for social programs.

Republican fiscal guru Paul Ryan, who chairs the House Budget Committee, decried "more spending, more borrowing and more debt."

"Instead of an America built to last this is an America drowning in debt," he said.

Obama aides however argued that the budget got the long-term balance between spending, to secure rebounding economic growth, and austerity needed to pay down long-term deficits right.

The plan also includes cost-cutting, including $364 billion in health savings, and a $226 million chop for NASA's Mars robotic exploration program, likely axing a planned partnership with Europe.

According to the fiscal 2013 budget's assumptions, unemployment will remainn above six per cent until 2017.

But the jobs forecasts were finalised in November, before a sharp down tick in the unemployment rate to 8.3 per cent last month, so officials said they could prove to be too pessimistic. AFP

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