Obama budget sets up battle with GOP-controlled congress

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Obama budget sets up battle with GOP-controlled congress
President Barack Obama, joined by from left, House Minority Leader Nancy Pelosi of Calif., House Speaker John Boehner of Ohio, and Senate Majority Leader Mitch McConnell of Ky., pauses after speaking to media as he met with bipartisan, bicameral leadership of Congress to discuss a wide range of issues, Tuesday, Jan. 13, 2015, in the Cabinet Room of the White House in Washington. (AP Photo/Carolyn Kaster)
WASHINGTON, DC - JANUARY 13: U.S. President Barack Obama (R) speaks as Speaker of the House Rep. John Boehner (R-OH) (3rd L), House Minority Leader Rep. Nancy Pelosi (D-CA) (2nd L), and House Majority Leader Rep. Kevin McCarthy (R-CA) (L) listen during a meeting in the Cabinet Room of the White House January 13, 2015 in Washington, DC. President Obama met with congressional leaders to discuss issues including the economy and the nationals security. (Photo by Alex Wong/Getty Images)
US President Barack Obama speaks alongside Senate Majority Leader Mitch McConnell (R), Republican of Kentucky, prior to a meeting of the bipartisan, bicameral leadership of Congress in the Cabinet Room at the White House in Washington, DC, January 13, 2015. AFP PHOTO / SAUL LOEB (Photo credit should read SAUL LOEB/AFP/Getty Images)
House Speaker John Boehner of Ohio listens at left as President Barack Obama speaks to media during his meeting with bipartisan, bicameral leadership of Congress to discuss a wide range of issues, Tuesday, Jan. 13, 2015, in the Cabinet Room of the White House in Washington. (AP Photo/Carolyn Kaster)
President Barack Obama, joined by House Speaker John Boehner of Ohio, left, and Senate Majority Leader Mitch McConnell of Ky., right, speaks to media before his meeting with bipartisan, bicameral leadership of Congress to discuss a wide range of issues, Tuesday, Jan. 13, 2015, in the Cabinet Room of the White House in Washington. (AP Photo/Carolyn Kaster)
WASHINGTON, DC - JANUARY 13: U.S. President Barack Obama (R) speaks as Speaker of the House Rep. John Boehner (R-OH) (3rd L), House Minority Leader Rep. Nancy Pelosi (D-CA) (2nd L), and House Majority Leader Rep. Kevin McCarthy (R-CA) (L) listen during a meeting in the Cabinet Room of the White House January 13, 2015 in Washington, DC. President Obama met with congressional leaders to discuss issues including the economy and the nationals security. (Photo by Alex Wong/Getty Images)
President Barack Obama, joined by from left, Rep. Xavier Becerra, D-Calif., House Majority Leader Kevin McCarthy of Calif., House Minority Leader Nancy Pelosi of Calif., House Speaker John Boehner of Ohio, and Senate Majority Leader Mitch McConnell of Ky., speaks to the media before his meeting with bipartisan, bicameral leadership of Congress to discuss a wide range of issues, Tuesday, Jan. 13, 2015, in the Cabinet Room of the White House in Washington. (AP Photo/Carolyn Kaster)
Before heading to the White House today to meet with President Barack Obama, House Speaker John Boehner of Ohio, tells reporters that the House of Representatives will pass a budget for the Department of Homeland Security but will block President Barack Obama's executive actions on immigration, Tuesday, Jan. 13, 2015, on Capitol Hill in Washington. Obama has repeatedly threatened to veto bills that Republicans have put forward as their priorities. Senate and House Republicans, now in control of Congress, will leave Washington Thursday for a two-day policy retreat in Hershey, Pa. (AP Photo/J. Scott Applewhite)
File- This Jan. 9, 2015, file photo shows President Barack Obama speaking about the France newspaper attack. President Obama wants Congress to pass legislation requiring companies to inform customers within 30 days if their data has been hacked. Obama will also propose a bill that would prevent companies from selling student data to third parties. (AP Photo/Carolyn Kaster, File)
US President Barack Obama speaks on new proposals for higher education accessibility at Pellissippi State Community College in Knoxville, Tennessee on January 9, 2015. AFP PHOTO/MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
US President Barack Obama arrives on stage to speak on new proposals for higher education accessibility at Pellissippi State Community College in Knoxville, Tennessee on January 9, 2015. AFP PHOTO/MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
US President Barack Obama makes his way to board Air Force One on January 9, 2015 at Andrews Air Force Base in Maryland. Obama is heading to Tennessee to speak on new proposals for higher education accessibility. AFP PHOTO/MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
US Vice President Joe Biden(L) shake hands with US President Barack Obama after introducing him at Pellissippi State Community College in Knoxville, Tennessee on January 9, 2015. AFP PHOTO/MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
US President Barack Obama speaks about the attacks in France, saying 'the United States stands with you' at Pellissippi State Community College in Knoxville, Tennessee on January 9, 2015. AFP PHOTO/MANDEL NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)
US President Barack Obama speaks about home purchases and refinancing at Central High School in Phoenix, Arizona, January 8, 2015. AFP PHOTO / SAUL LOEB (Photo credit should read SAUL LOEB/AFP/Getty Images)
WASHINGTON, DC - JANUARY 13: U.S. President Barack Obama (4th L) speaks as Speaker of the House Rep. John Boehner (R-OH) (3rd L), Senate Majority Leader Sen. Mitch McConnell (R-KY) (R), House Minority Leader Rep. Nancy Pelosi (D-CA) (2nd L), and House Majority Leader Rep. Kevin McCarthy (R-CA) (L) listen during a meeting in the Cabinet Room of the White House January 13, 2015 in Washington, DC. President Obama met with congressional leaders to discuss issues including the economy and the nationals security. (Photo by Alex Wong/Getty Images)
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WASHINGTON (AP) -- After a year of relative peace in Washington's budget battles, President Barack Obama will lay out a $4 trillion budget on Monday that needles Republicans with proposals for higher taxes on the wealthy and businesses to pay for education, public works projects and child care.

The plan, expected to be dismissed by GOP lawmakers now running Capitol Hill, rolls out as the deficit is dropping and Obama's poll numbers inch higher. Though Republicans will march ahead on their own, they ultimately must come to terms with Obama, whose signature is needed on anything that is going to become law.

Big challenges loom: the need to increase the government's borrowing limit; a deadline for sustaining highway funding; a bipartisan effort to ease painful, automatic cuts to the Pentagon and domestic agencies. Those cuts are the byproduct of Washington's previous failures to tackle the government's deficit woes.

First on the agenda is the need to finalize the current-year budget for the Department of Homeland Security. It's tied up over a GOP demand to reverse Obama's November executive actions that extended work permits and temporary deportation relief to some 4 million people in the U.S. illegally. Funding for the department runs out Feb. 27. Obama planned a budget speech at the department Monday.

A defiant Obama challenged the GOP in his radio and Internet address Saturday.

"If they have ideas that will help middle-class families feel some economic security, I'm all in to work with them. But I will keep doing everything I can to help more working families make ends meet and get ahead. Not just because we want everyone to share in America's success - but because we want everyone to contribute to America's success," he said.

Republicans insisted they are the champions of the middle class.

"Expanding opportunity, protecting middle-class savings, holding government accountable: These are your priorities, which means they are Republicans' priorities," said Kansas Rep. Lynn Jenkins said in the GOP response to the president's radio address.

Obama's plan will contain familiar prescriptions. He wants higher taxes on upper bracket earners and the oil and gas industry. He is proposing new initiatives for education and child care. He is pitching investments in roads, bridges and other projects. And he is pushing for increases for annual agency operating budgets.

The requests come after a mostly tranquil year when Senate Democrats and House Republicans put in place the second year of a 2013 deal that eased the harshest of the automatic cuts. Republicans backed away from a confrontation over raising the government's borrowing cap.

This year will not be peaceful, though, largely because the White House will ask for a $38 billion increase for the Pentagon that Republicans probably will want to match. Obama's demand for a nearly equal amount for domestic programs sets up a showdown that may not be resolved until late in the year.

The centerpiece of the president's tax proposal is an increase in the capital gains rate on couples making more than $500,000 per year. The rate would climb from 23.8 percent to 28 percent. Obama wants to require estates to pay capital gains taxes on securities at the time they are inherited. He also is trying to impose a 0.07 percent fee on the roughly 100 U.S. financial companies with assets of more than $50 billion.

Obama would take the $320 billion that those tax increases would generate and funnel them into middle-class tax breaks. His ideas: a credit of up to $500 credit for two income families, a boost in the child care tax credit to up to $3,000 per child under age 5, and overhauling breaks that help pay for college.

The ideas, billed as a boost for the middle class, drew scorn from GOP tax-writers who want to focus on revamping tax laws.

But the tax increases, combined with the spending cuts, would allow the White House to say it can cut the deficit by about $1.8 trillion over the upcoming 10-year window, according to people briefed on the basics of the plan. The tax increases, especially the increase on capital gains, bring in far more over the longer term, helping the White House claim it would stabilize the debt in relation to the size of the economy for 25 years.

An outcry from his Democratic allies led the White House to retreat from a proposal to tax withdrawals from popular 529 college savings plans.

On spending, there's a plan for $60 billion over the next 10 years to pay for two years of community college for an estimated 9 million students and $80 billion to increase access to child care for low- and middle-income families. The administration wants to pay for a six-year renewal of highway and transit programs by taxing overseas business profits that would be "repatriated" back to the U.S.

In dysfunctional Washington, hard feelings linger still from the early 2013 tax increase that Obama forced upon Republicans. There's little hope of a "grand bargain" to fix the government's budget woes for the long term, but a need to address problems such as a shortfall in highway funding and easing cuts to the Pentagon's budget. Even such smaller steps will test the ability of Obama and Republicans controlling Congress to work together.

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