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Obama budget to propose spending lift for military, domestic programs

WASHINGTON (Reuters) – President Barack Obama’s budget will call for an increase in U.S. domestic and military spending that would end spending caps known as ‘sequestration,’ a White House official said, setting up a new source of conflict with Republicans in Congress.

Obama intends to announce his plans during a meeting with congressional Democrats in Philadelphia on Thursday.

The fiscal 2016 budget, which the White House intends to unveil on Monday, would fund a host of programs that Republicans are unlikely to support.

It is the latest salvo by the Democratic president lobbed at a Congress controlled by the opposition party and follows a defiant State of the Union address last week that critics said betrayed an unwillingness to seek compromise.

The White House rejects that criticism and hopes Obama can find common ground with lawmakers from both parties to prevent sequester cuts from going back into full force when the next fiscal year begins on Oct. 1.

Obama’s budget, which is as much a political document as a fiscal road map, would do that by trimming “inefficient spending programs” and eliminating tax loopholes, the official said.

It proposes a roughly 7 percent spending increase over the sequester limits.

That includes $530 billion in non-defense discretionary spending, which is $37 billion above the caps, and $561 billion in defense outlays, which is $38 billion above the caps.

“The president will propose to end the across-the-board sequester cuts that threaten our economy and our military,” the official said. “The … budget will fully reverse those cuts for domestic priorities, and match those investments dollar-for-dollar with the resources our troops need to keep America safe.”

His proposals got an early brush-aside from Republican Senate Majority Leader Mitch McConnell’s office, which noted the administration had tried unsuccessfully to do away with the cuts before.

“This is not a surprise,” said Don Stewart, McConnell’s deputy chief of staff, in an email. “Previous budgets submitted by the president have purported to reverse the bipartisan spending limits through tax increases that the Congress, even under Democrats, could never accept.”

The automatic spending cuts went into effect in 2013 but were lessened in 2014 and 2015 under a bipartisan bill negotiated by Democratic Senator Patty Murray of Washington state and Republican Representative Paul Ryan of Wisconsin.

That compromise bill ends with the current fiscal year on Sept. 30.

A spokesman for Republican House of Representatives Speaker John Boehner said Obama’s solution of raising taxes for some would not fly.

“Republicans believe there are smarter ways to cut spending than the sequester and have passed legislation to replace it multiple times, only to see the president continue to demand tax hikes,” said Cory Fritz. “Until he gets serious about solving our long-term spending problem it’s hard to take him seriously.”

The budget will likely propose spending increases that would help fund infrastructure projects as well as research and development initiatives. Following through on Obama’s State of the Union address, it will propose raising taxes on the wealthy to cover tax credits and educational programs for the middle class. That drew praise from Democrats.

“The president’s plan to replace the sequester with a budget that creates jobs and opportunities for the middle class is just what the American people need,” said House Democratic leader Nancy Pelosi.

(Additional reporting by Steve Holland; Editing by James Dalgleish)

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