Financial Regulatory Forum

Feb 2 (Reuters) – U.S. President Barack Obama faces major hurdles to get his $3.8 trillion budget plan through Congress. Obstacles include members of his own — at times fractious — Democratic Party.

Obama proposed and Congress ignored many of the same policies last year, though expiration of individual tax cuts enacted by former President George W. Bush at the end of this year virtually ensures individual tax issues will be addressed.

Below is a summary of roadblocks facing some of Obama’s key proposals.

TAX INCREASES FOR THE WEALTHY

Fulfilling a campaign pledge, Obama proposed extending the Bush tax cuts for individuals earning less than $200,000 and couples making less than $250,000. For those making more than that, Obama proposed letting the cuts expire. That would bring the top two income tax brackets back to 39.6 and 36 percent, from 35 and 33 percent respectively.

Some fiscally conservative Democrats in the House of Representatives have called for keeping the rates lower for at least two years to sustain the economic recovery.

Democratic Senate and House leaders are generally believed to back letting the lower rates expire for the upper income groups, although they have not addressed the issue recently.

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By Martin Hutchinson

WASHINGTON, Feb. 1 (Reuters Breakingviews) – President Obama’s 2011 budget underlines the depth of U.S. fiscal woes. By then, bailouts and stimulus outgoings will be all but over, recovery should be under way, and Obama’s promised spending freezes should be in place. Yet the deficit next year will still be an eye-watering $1.3 trillion. Bigger spending cuts are needed — and soon.

Monday’s budget for the year ending in September 2011 includes higher federal spending than the Congressional Budget Office estimated as recently as Jan. 26, despite Obama’s freezes. With lower revenue as well — thanks largely to the CBO’s overly optimistic assumptions about tax revenue — the deficit is projected to be $287 billion bigger than the CBO expected.

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By Al Yoon

WASHINGTON, Feb 1 (Reuters) – The Obama administration must ensure U.S. housing market stability is retained as it reforms the nation’s two largest providers of home mortgage credit, a top Treasury Department official said on Monday.

The administration will further outline principles that will guide the reforms of Fannie Mae and Freddie Mac, two government-sponsored enterprises, said Michael Barr, the Treasury’s assistant secretary for financial institutions.

“We want to be sure, that as we move to reform the GSEs, we are focused on retaining strong market stability in our housing sector,” Barr told a conference of the American Securitization Forum, a group that promotes interest in the public and private bond markets.

By Jeff Mason

WASHINGTON, Feb 1 (Reuters) – The White House has dropped projected revenues from a “cap-and-trade” mechanism to fight climate change from its new budget, an administration official said, bowing to the possibility that the U.S. Congress may not pass it.

Last year the Obama administration forecast revenues of $646 billion in the years 2012-2019 from an emissions trading program that formed the crux of its proposal to fight global warming.

The legislation that contains that proposal is now stalled in the U.S. Senate and cap-and-trade, which sets limits on greenhouse gas emissions and allows companies to trade permits to pollute, may be cut from a final bill if one is passed.

WASHINGTON, Feb 1 (Reuters) – President Barack Obama appeared to scale back his ambitious plan to close loopholes global companies use when accounting for taxes on profit earned overseas in his 2011 budget blueprint released on Monday.

Obama, who has used heated rhetoric to blast corporations that keep profits overseas to avoid U.S. tax, proposed changes that he said would raise $122 billion over a decade.

He mentioned the issue in his State of the Union address last week, saying: “To encourage these (energy and manufacturing companies) and other businesses to stay within our borders, it’s time to finally slash the tax breaks for companies that ship our jobs overseas and give those tax breaks to companies that create jobs in the United States of America.”