Winners and losers in the White House budget

Every federal budget is an exercise in trade-offs — especially budgets that aim to shrunk the deficit. Some programs get pared back. Others get protected or even expanded. Some taxpayers end up paying more, others pay less.

So here’s a quick rundown of the biggest policy winners and losers in the White House’s $3.78 trillion budget for 2014, which would cut $1 trillion in spending and raise $800 billion in new revenue over the next ten years. It’s a good way of identifying where President Obama’s priorities are.

WINNERS

Medicaid: The White House budget does propose $370 billion in cuts to Medicare, but Medicaid is largely spared. The latter program, which covers low-income Americans, has been shielded from reductions as the White House tries to entice Republican governors around the country to participate in Obamacare’s Medicaid expansion.

Low-income taxpayers: Back in 2009, the stimulus bill expanded two tax credits for low-income workers and families — the Earned Income Tax Credit and the Child Tax Credit. The EITC, for instance, was increased for families with three or more children. Both of these expansions are set to expire in 2017, but the White House wants to make them permanent. That will cost an additional $161 billion over 10 years.

Hospitals:  Hospitals have asked the Obama administration to reverse previous cuts to reimbursements for treating the uninsured, cuts that could prove especially severe in states that don’t expand Medicaid in the years ahead. As Sarah Kliff explains, the White House budget proposes delaying $500 million of those cuts which were supposed to start in 2014.

Scientists: Plenty of scientists have bemoaned the fact that federal funding for R&D is set to decline in the coming years. The White House wants to reverse that. The budget boosts spending for non-defense science and research by 9 percent over 2012 levels. The National Science Foundation gets an extra $593 million. The budget would also fend off cuts that have been scheduled for the $31 billion National Institutes of Health.

Highway pavers: The White House wants an extra $40 billion to repair aging highways, bridges, transit systems and airports across the country. There’s also an additional $10 billion for newer infrastructure, such as expanding the nation’s seaports.

Preschool: The White House is proposing a large expansion of preschool to cover all low- and middle-income 4-year-olds across the country. This would be done in partnership with the states and cost the federal government $66 billion over the next 10 years, paid for by new taxes on cigarettes.

Food aid recipients: There’s a big overhaul of the U.S. food aid program proposed in the budget. No longer would aid agencies have to buy food in the United States and ship it abroad — a process that can take months. Instead, agencies can buy food in nearby developing countries. Proponents say these changes will allow food aid to reach an additional 17 million people.

LOSERS

Wealthy taxpayers and the finance industry: The budget includes a number of tax hikes on upper-income Americans. Hedge fund managers and private equity partners will have to pay higher tax rates on their income (this is known as closing the “carried interest” loophole). The estate tax would revert to higher, 2009-era levels. And the budget would levy a new fee on the largest financial institutions. These three measures alone would raise $154 billion over 10 years.

Upper-income Medicare recipients: The budget proposes a hike in premiums for upper-income seniors enrolled in Medicare Parts B and D. This will raise $50 billion over 10 years.

Many Social Security recipients: The White House included a proposal to use “chained CPI” for Social Security. As my colleague Dylan Matthews detailed here, this is essentially a cut to benefits, which would grow more slowly over time. (The tweak would also increase taxes for all workers by altering tax brackets slightly.) The White House claims that it will include “protections for the most vulnerable” — poorer and older seniors. All told, this change is expected to save $230 billion over ten years.

Farms and agribusinesses: The budget cuts a variety of subsidies to farms, including direct farm payments, crop insurance subsidies and conservation programs over the next 10 years. All told, this is expected to save some $37.8 billion over 10 years.

Smokers: The federal tax on cigarettes would increase from $1.01 to $1.95 a pack under the White House proposal. This would raise some $78 billion over 10 years, with the revenues used to finance universal preschool and child-care programs.

Pharmaceutical makers: The Obama administration is proposing to change the rebates that drug companies have to offer low-income Medicare beneficiaries. (The rebates would be similar to those offered under Medicaid.) That would save the government an estimated $123 billion over a decade and is generally considered a big loss for pharmaceutical makers.*

Oil, gas and coal companies: The White House budget would raise $44 billion over the next 10 years by eliminating various tax breaks and deductions for fossil fuel companies. That includes repealing the manufacturing credit for coal, oil and gas, and changing the tax code so that oil and gas companies could no longer expense all of their drilling costs.

The EPA: The Environmental Protection Agency gets $8.2 billion in the White House’s budget, a 3.5 percent cut from 2012 levels — the fourth straight proposed decrease for the agency. The budget proposal says these savings come from eliminating some overlapping programs and cutting funds for state wastewater and drinking water programs.

A few other notable agencies: The federal agencies that get budget cuts in this spending plan include the Defense Department, State Department, Homeland Security, the Army Corps of Engineers, the Small Business Administration. There’s also a smaller $50 million cut to NASA. (All other agencies get a budget boost.)

My colleagues have a more detailed breakdown of all the changes to agency budgets here. Note that the White House is proposing to cut the Defense Department’s budget by about $150 billion over the next decade, and 1 percent next year, but this is essentially assuming that the sequester will be repealed — which is far from certain.

* Correction: An earlier version of this post said that the White House budget would give Medicare bargaining power on drugs. That’s not accurate. Under the change, pharmaceutical companies would have to offer low-income Medicare beneficiaries rebates for drugs along the lines of those offered in Medicaid.