Obama budget proposal includes cuts to Social Security, Medicare-as it happened

We're going to wrap up our live blog coverage of the president's budget proposal. Here's a summary of where things stand:

The president pitched a deal he said would gather $580bn in new tax revenue and $630bn in Medicare and Social Security savings over 10 years. The budget aims to reduce deficits by $1.8tn. Obama said he had already gone more than halfway to meet Republicans on deficit reduction and it was time for the other party to show they are "serious."

The budget calls for an immediate $50bn in spending on infrastructure. It also calls for new research and job training, and for universal pre-kindergarten education to be paid for through a cigarette tax.

New tax revenues would be gathered through a combination of closing tax loopholes, ending deductions and instituting the Buffett Rule whereby households earning more than $1m would have to write checks to the IRS amounting to at least 30% of their incomes.

Republican rejected the president's plan as not doing enough to reduce the deficit, while welcoming his inclusion of possible cuts to social insurance programs. The GOP did not budge in its opposition to new tax revenue, which the president insisted on.

Senators Manchin and Toomey announced a bipartisan deal on expanded background checks for gun sales. The deal will amend legislation that Senate leader Harry Reid promised to introduce. If the bill passes it would go to the House, where its fate is uncertain.

Greg Sargent thinks Republicans are shooting themselves in the foot by reflexively opposing Obama's budget plan:

If the White House’s political goal in calling for Social Security cuts in its budget was to reveal the GOP as the intransigent, uncompromising party in Washington, it’s having the desired effect...

And so, if the White House budget was partly intended as a trap, Republicans walked into it, revealing themselves as the only real obstacle to compromise. Indeed, as Steve Benen points out, Paul Ryan helped underscore the point when he struggled to name anything Republicans could support that their base wouldn’t like.

Read the full piece here.

Spencer Ackerman identifies six weapons programs that turned out to be winners in the FY2014 budget proposal. The six include the F-35 joint strike fighter:

No big surprise here. The three versions of the stealth jet -- for the Air Force, Navy and Marines -- live to fly another day. Billed as the most advanced aircraft ever, it's also the most expensive weapons program in human history. In all, the Pentagon proposes spending $8.4 billion for development and acquisition, to buy the Air Force 19 new F-35s, the Marines six and the Navy four. That's less than the $9.1 billion it wanted in last year's budget, but it's still the largest single thing the Pentagon wants to buy this year.

View all six weapons systems here. As Ackerman notes, "Budgets -- even fantasy ones -- are statements about priorities. "

Treading lightly so as not to anger the gun lobby:

Now the Carney event is done.

Who else wants to hold a press conference on the budget? We seem to have temporarily run out of them.

Not the last question after all: a reporter gets in a Q about Medicare means testing.

Here's how it would work: Currently households on Medicare pay about 20% of Part B costs, which goes to doctor coverage.

Under the new budget, couples making $170K and above would payer higher than 20% of Part B.

The rate would jump to 35%-40% and could go even higher for couples earning more than $400k.

Carney says the Republican budget doesn't say how it cuts spending. He calls last question. The question is: why did it take so long to roll out this budget [which is months overdue]?

"The prime budget season is November-December, and given what was going on in the fiscal cliff negotiation, we had to put much of it on hold," Zients says. "Coming out of that [there was a tax deal] and changes to discretionary caps. Those had major impacts."

The sequester kicking in on March 1 further delayed the process, Zients says.

What's the rationale for using war savings to pay for new programs?

"This is directly a result of the president's decision to end the wars in Iraq and Afghanistan," Zients says. 

He says using decreased war spending as a budget line in this way is consistent with the CBO baseline.

We're going to head back over to the budget panel, where Zients and the others are taking questions.

Back to North Korea: What is Kim Jong-un up to? Is he looking for war? Are we headed towards war?

Hagel says Kim "doesn't check with me" on his feelings. "The reality is that he is unpredictable, that country is unpredictable. You prepare for every contingency, and we are."

"As to should the American people be concerned: We have every capacity to protect this country."

Next question: would US military action be merely responsive to something North Korea does, then?

Hagel: "I don't discuss operations, and the specifics of what our contingency plans are."

Hagel wraps.

Hagel's asked why the budget cuts are backloaded – meaning they won't begin to hit for five years.

"I'm not going to get into debating whether it should come at the front end or the back end," he says. "It is what it is."

Next question, about health care costs for the Pentagon. What's different this time, from when you were in Congress, Hagel is asked.

Hagel says he left Congress in January 2009, at the front end of the global financial crisis. "We didn't have the kind of pressures at all to what we're dealing with now. That's the big difference. The fiscal realities.

"We don't have any choice here. If we don't start getting ahold of this... Congress is going to have to be a partner here."

A next question: What about plan B, if the president's budget does not pass?

Hagel: "That's why I directed Ash Carter and the joint chiefs to perform a management review. To address the reality we're living with now. Sequestration is law. Both the House and Senate budget resolutions and the president's budget are about the same when it comes to the Defense budget. We're preparing for the reality of sequestration. But at the same time we have an opportunity to get beyond that and hopefully find a budget resolution that will allow us not only new flexibility but new funding.

"This is a $600bn enterprise. You can't shift budgets or planning in a month or two."

Hagel is asked about the threat of a North Korea missile launch.

Hagel: "North Korea, with its bellicose rhetoric, with its actions, has been skating very close to a dangerous line.... it is very important that that rhetoric be ratcheted down, that those actions be neutralized.

"Our country is fully prepared to deal with any contingency, any action, or any provocation. We have contingencies prepared."

Hagel refers to the "strategic choices and management review" he directed of the Pentagon. Hagel says the review would identify ways to restructure the department and look for budget excess.

Speaking next will be Gen Martin E Dempsey, chairman of the joint chiefs of staff; undersecretary Bob Hale; and Gen. Mark Ramsay of the joint chiefs.

Pay and benefits for military personnel constitutes $170.2bn, a third of the budget, Hagel says. He presents "a new package of military compensation proposals." The package includes a 1% pay raise for service members in 2014.

"Current fiscal realities demand we make tough decisions that have been put off in the past," Hagel says. "The longer we put this off, the tougher it's going to be."

Hagel says the 2014 Pentagon budget supports troops in Afghanistan and sustains the quality of an all-volunteer force.

The budget saves $34bn over five years by "changing the way we do business and reducing support costs," Hagel says.

He says the civilian workforce will be restructured and health care spending will decline 4% from two years ago.

The department will close bases in 2015, Hagel says. BRAC: Base Realignment and Closure.

"This process is an imperfect process," Hagel says. "There are upfront costs... but in the long term there are significant savings."

Secretary of Defense Chuck Hagel is about to hold a briefing on the proposed Pentagon budget for FY2014.

Jeremy Herb and Carlo Muñoz, writing in the Hill, describe budget cuts coming from new base closures and military benefit cuts:

The 2014 defense base budget is set at $526.6 billion, a slight reduction from the Pentagon’s plans last year for $534 billion in 2014.

But the budget still remains $52 billion above the budget caps set under sequestration, meaning that the Pentagon would take another across-the-board hit in 2014 if sequestration is not reversed.

The president’s budget does in fact reverse sequestration, through a mix of tax increases and $200 billion in spending cuts, including $100 billion to the Pentagon budget over the next decade.

Alan Krueger, chair of the White House council of economic advisers, says the budget projects an economy that will grow more strongly.

The housing sector is picking up. Household debt is declining. Corporate balance sheets are strong, he says.

"Unfortunately the sequester is a step backwards."

The advisers project long-run potential growth of 2.2%-2.4%, which he notes is close to the Congressional budget office numbers.

Unemployment is projected to fall from 7.6% to 7.5% by the end of 2013 and "then to come down half a percentage point over the next three years" to 6.5% in 2016.

Inflation is projected to average 2.2% over the 11-year forecast, Krueger says.

"There are of course risks to any forecasts," he says. Again he mentions the sequester. "That's expected to shave around six tenths of a percent off of GDP growth this year."

Zients has a chart of spending pluses and minuses. The budget, he says, includes:

-$400bn in Medicare savings

-$200bn in farm subsidies cuts and real estate sales

-$230bn in Social Security cuts

-$200bn discretionary savings

-$580bn in new tax revenue

-savings in reduced interest on debt

And on the spending side:

+ $50bn immediate investment in infrastructure

+ pre-K for all, paid for by a cigarette tax

+ job training

+ research

"This offer includes difficult cuts.... including chained CPI, which the president is only willing to do with protection for the most vulnerable and as part of this balanced plan," Zients says.

Zients says by 2016 the deficit will fall below 3% of GDP and by 2023 it will hit 1.7%. The debt's going down too, he says.

Zients says "deficit reduction over the past couple of years" has amounted to more than $2.5tn, through the Budget Control Act, the fiscal cliff agreement, and a reduction of interest payments, Zients say.

The administration is aiming for the Bowles-Simpson benchmark of $4tn in deficit reduction, he says.

"The president's budget finishes the job with more than $1.8tn in deficit reduction."

White House spokesman Jay Carney is introducing OMB acting director Jeff Zients and top finance advisers to talk about the budget.

Carney will take questions after the budget presentation.

Zients digs in. The budget replaces the sequester "with balanced deficit reduction," he says.

"It turns the sequester off."

Anne Daguerre takes a look at the political calculus of the president's budget plan:

One way of seeing this is that Obama is setting a trap for Republicansaround a grand bargain on entitlement reform, which he likely knows if impossible for them to agree to; but the public blames the GOP for the lack of agreement on a budget compromise, then voters may punish them, rather than the president's party, at the next midterm 2014 elections....

Obama is telling the electorate that – unlike stubborn, obstructive Republicans – he's willing to compromise for the nation's sake. Of course, he cannot say this openly. But it's clear that Republicans' predictably dismissive response to his gentle coaxing can only sharpen the apparent contrast between his reasonable approach and his adversaries' unwillingness to compromise.

Read the full piece here.

A quick summary before OMB acting director Zients speaks (Defense secretary Chuck Hagel also will release the Pentagon budget requests today):

President Obama unveiled a budget proposal that would cut $400bn from Medicare and $230bn from Social Security over the next 10 years. The budget also claims $580bn in new revenue from closing tax loopholes and instituting the so-called Buffett Rule. An overview of the proposal is here.

Republicans rejected the proposal, saying it ran unacceptably high deficits. Speaker Boehner did, however, acknowledge the president's apparent willingness to compromise on social insurance programs. Obama "does deserve some credit for some incremental entitlement reforms that he has outlined in his budget," Boehner said.

Bad news for smokers, good news for pre-schoolers:

The Guardian's Dan Roberts attended the Manchin-Toomey press conference and explains the details of the proposed legislation:

Senators have moved to close loopholes on gun background checks in a carefully worded deal that seeks to keep Republicans on board.

Under the proposal, sales of weapons at gun shows and online would require the same federal screening of criminals and the mental ill as currently apply in gun shops. Private sales would remain exempt.

Announcing the deal, senator Pat Toomey, a relatively conservative Republican from Pennsylvania, said he had spoken to colleagues in the House and "a substantial number were supportive of the general approach".

The proposal will be the first amendment to a bill on gun control that Senate Majority leader Harry Reid will try to push forward on Thursday with a motion to prevent opponents from using a filibuster to block it.

Senator Joe Manchin, the co-sponsor of the amendment, rejected criticism that such a deal would be incremental. "To get anything of this proportion would be amazing," he told reporters following a press conference at the Senate.

"Criminals and the dangerous and mentally ill shouldn't have guns," Senator Toomey said. "I don't know anyone who disagrees with that premise.

"Background checks are not a cure-all by any means, but they can be helpful."

More from the Senate announcement of bipartisan legislation requiring background checks on all firearm purchases:

"Truly the events at Newtown changed us all," Senator Manchin said. "This amendment will not ease the pain... but nobody here could sit by and not try to prevent an event like that from happening again."

In addition to a deal on background checks (which is still a long way from passing either chamber of the legislature), Manchin announced an agreement on legislation "to prevent criminals and the mentally ill from getting firearms."

"We also need to protect legal gun owners, like myself and Pat [Toomey], who cherish the gun rights we have," Manchin said.

Will the carried interest deduction that infamously reduced Mitt Romney's effective tax rate to 14.1% (and that only after he failed to deduct all his charitable donations) survive the current budget negotiations?

Or will carried interest be one of the loopholes the president closes?

Will the president close any loopholes whatsoever? His pitch calls for $580m in new revenue from closing loopholes and ending deductions, and through the "Buffett rule," which requires households with more than $1m in income to pay at least 30% in income tax (i.e. more than double Romney's rate).

There's what might be characterized as a healthy skepticism out there about whether any of this will actually happen.

Sens Joe Manchin, Democrat of West Virginia, and Pat Toomey, Republican of Pennsylvania, have just wrapped a press conference to talk about a possible new gun control law.

The two are spearheading a bipartisan effort to require background checks for all firearm purchases. They say they've got the broad outlines of a deal.

Toomey was asked whether a Senate bill could ever clear the House. "There are definitely Republicans in the House who support this," he said.

But there's another player at the bargaining table:

The White House says this budget proposal is not a starting point for negotiations, but a final offer on how far the president is willing to go in cutting Social Security and Medicare.

We'll find out in the coming weeks how final "final" is.

The president is done speaking.

His insistence on new tax revenue was as vociferous on the Republicans' vow that it would never happen. He claimed that his concessions on social insurance programs meant he was meeting Republicans "more than halfway." He said the next couple weeks would demonstrate whether Republicans are "serious" about cutting deficits.

Let the negotiations begin.

Obama: "My budget does also contain the compromise I offered Speaker Boehner at the end of last year.

"If we're serious about deficit reduction, these reforms have to go hand-in-hand with reforming our tax code.

"That's the bottom line. If you're serious about deficit reduction, then there's no excuse to keep these loopholes open. .. All they do is to let people who are already wealthy and well-connected game the system.

"I've already met Republicans more than halfway. So in the coming weeks I hope they'll come forward and show that they're really as serious about reducing the deficit as they claim to be."

Obama turns to deficits, and then Medicare.

He presents a "clear and unassailable fact: Our deficits are already falling."

"My budget would reduce deficits by nearly another $2tn" for a total of $4tn in cuts, he says.

On Medicare, "The truth is, for those like me who deeply believe in our social insurance programs ... if we want to keep Medicare working, then we're going to have to make some changes. But they don't have to be drastic ones."

Obama says the budget makes "targeted investments" to create jobs.

He lists new manufacturing hubs; new research for example brain mapping; energy independence; green energy; and private investment in infrastructure – roads, bridges and schools.

As he did in his State of the Union, Obama calls for pre-school for every child, paid for by raising taxes on "tobacco products that harm our young people."

An applause line. A budget gets an applause line.

The president calls for a higher minimum wage, another applause line.

Obama says his budget would replace the sequester – and takes a dig at Republicans:

"I have to point out that many of the same members of Congress who supported deep cuts are now the ones who are complaining about them the loudest."

Obama says that because of the sequester, "there are kids who have had to enter a lottery to see who can stay in Head Start programs." He says some seniors have lost Meals on Wheels food delivery services.

"We've got to get smarter about our priorities as a nation," Obama says.

"For years the debate in this town has raged between reducing the deficit at all costs and making the investments necessary to grow our economy.... This budget answers that question because we can do both."

President Obama is speaking in the White House Rose Garden.

He's joined by OMB director Jeff Zients.

Obama says the point of the budget is to grow the middle class. He says corporate profits are "at an all time high but we have to get wages and income raising as well."

There's a bird chirping its head off in the background. It's spring!

Before the Republicans were against the president's budget proposal, they embraced its key offers as just the kind of reform the country needed.

"Those are the kinds of things that would get Republicans interested in new revenue," Senator Mitch McConnell said last November.

Eric Cantor may even have suggested that additional taxes could be part of a quid pro quo with Social Security and Medicare cuts. John Harwood quoted Cantor as saying, if "Mr. Obama shows he is ‘serious about fixing the problem,” he said, "then we’ll see" about additional taxes.

But this morning Republicans are showing no such sign of willingness to embrace a new budget deal. "The president's budget never comes to balance," Boehner said.

As the president rolls out his new budget, the Senate is holding a confirmation hearing on the nomination of Sylvia Mathews Burwell to take over as director of the Office of Management and Budget.

Burwell would replace acting director Jeffrey Zients, whom we'll hear from later today when he makes a presentation of his own about the FY2014 White House proposal.

To follow the Senate Budget Committee proceedings, chaired by Washington Democrat Patty Murray, visit CSPAN-3 here.

The press conference is wrapped. President Obama is scheduled to speak in about a half hour.

On Social Security the president has proposed changing the way that cost of living is calculated, to a formula that would produce lower estimates of what seniors need to live on and thereby decrease their benefits. The new formula is known as chained CPI, for the consumer price index.

On Medicare, the president would cut payments to drug companies and care providers by an estimated $370bn. Seniors with means could pay more for coverage.

Both proposals have been attacked from the left. "This gambit is misguided, unfair and may also be illegal," Irwin Kellner writes on Marketwatch of the chained CPI proposal. "It makes it seem that the president either doesn’t know or doesn’t care about the needs of our senior citizens."

The first question for Boehner is about the potential for a gun control bill.

Boehner says he'll wait to see what the Senate does.

Second question is about background checks for gun purchases.

"We'll wait and see what the Senate does," Boehner says. "We're going to review whatever the Senate might pass."

"One of the issues that we have today is that if there is a background check required, they don't actually check all the backgrounds. We're not enforcing the laws that are on the books today."

Not a rosy welcome for the president's budget from the Republican leadership.

They don't like this budget. They just don't like it.

Obama gets a nod for his willingness to deal on entitlements. Boehner said he "does deserve some credit." Cantor said "we can find some agreement."

But both say the underlying framework of the president's budget is flawed.

Boehner is speaking.

"Unfortunately, the president's budget never comes to balance," he says.

He rejects any deficits out of hand. Spending must not exceed revenue, he says.

"[The president] does deserve some credit for some incremental entitlement reforms that he has outlined in his budget. But I hope he doesn't hold hostage these reforms to his demand for greater tax hikes.

"The president raised taxes in January. [We don't need more.]"

House majority leader Eric Cantor speaks. He says there are features of the budget that "frankly, we can find some agreement on. ... We ought to see if we can set aside the divisiveness and come together to produce some results."

President Barack Obama released early Wednesday an overview of his budget proposal for fiscal year 2014, and this morning he'll talk about what's in it. The overview confirms prior reports that the White House would ask for cuts to Social Security and Medicare while closing tax loopholes for top earners.

The proposal is generating more than the usual buzz outside Washington (is that accurate? can you hear buzz where you're at?) because a Democratic president is prepared to budge on so-called entitlements in hopes of scoring a broader deal to ratchet down the deficit. Obama's proposal claims is $1.8tn in deficit reduction over 10 years. You can read the six-page overview here.

Before the president explains his plan, the House speaker, John Boehner, is scheduled to make a statement about it. With the president's willingness to talk turkey on the so-called entitlement programs, there is supposedly some pressure on the speaker, whose party prioritizes such cuts, to make a deal. We'll watch to see whether Boehner makes any such sign.