Face-off in Washington over Obama's budget

Obama's 2016 spending blueprint proposes to boost spending on infrastructure and social programs for middle-income Americans, funded in part by tax hikes on the wealthy and corporations.

The budget is "a broader blueprint for America's success in this new global economy," Obama said on Monday in Washington.

"We've got some fundamental choices to make about what kind of country we want to be," he added.

Among other things, the budget proposes to: spend hundreds of billions on public works through a tax offset on the profits US companies have amassed overseas; impose a tax hike on the wealthy and trust funds in return for tax credits for lower income earners; create a new infrastructure bank; consolidate US government agencies - and increase the capital gains rate from 23.8 to 28 percent.

The document must be approved by Congress to take effect, which is unlikely. The conservative Republican party now controls both houses of Congress for the first time in Obama's presidency. Many Republicans support extra military spending, which Obama is proposing to do by reversing defense spending limits, but oppose increased domestic outlays.

Obama maintains the US economy has recovered enough to justify his tax plan. But Republicans disagree: they say the budget should focus on eliminating the foreshadowed $474 billion deficit. House Speaker John Boehner and other Republican leaders say the budget they'll produce later this year will achieve balance within 10 years.

"Today, President Obama laid out a plan for more taxes, more spending, more of the Washington gridlock that has failed middle-class families... the American people can't afford a repeat of the same old top-down policies of the past," Boehner said. Republican Hal Rogers, chairman of the House Appropriations Committee, criticized the budget as "irresponsible" and a "huge wish list of additional spending."

But rejecting the plan could put the Republicans in the awkward position of rejecting tax cuts for middle-class families.

Nancy Pelosi, leader of the Democratic minority in the House, said the plan was "a forward-looking budget" that "contributes to our long-term economic growth by providing bigger paychecks and better infrastructure for working families."

jr/bk (dpa, Reuters, AP)