Obama: 'Critical error' if budget investments not passed

President Barack Obama defended his fiscal year 2016 budget proposal on Monday, saying it would be a "critical error" if his spending plans are not passed.

"America can't afford being short-sighted, and I'm not going to allow it," Obama said, adding that he challenged Republicans to propose better ideas for strengthening the country on a balanced budget.

The White House submitted the proposed $3.99 trillion budget earlier Monday, predicting a $474 billion deficit if passed.

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Despite this deficit, Obama said his budget is "fully paid for through a combination of smart spending cuts and tax reforms."

"We can afford to make these investments while remaining fiscally responsible," the president said. "In fact ... we would be making a critical error if we avoided making these investments, we can't afford not to."

He argued that smart spending now will keep government deficits lower in the future.

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The president's opposition, however, did not see the White House's proposal working out.

"Like the president's previous budgets, this plan never balances—ever. It contains no solutions to address the drivers of our debt, and no plan to fix our entire tax code to help foster growth and create jobs," House Speaker John Boehner said in a statement. "Worse yet, President Obama would impose new taxes and more spending without a responsible plan to honestly address the big challenges facing our country."

President Barack Obama delivers remarks on his Fiscal Year 2016 Budget at the Department of Homeland Security (DHS) in Washington, D.C., U.S., on Feb. 2, 2015.
Kristoffer Tripplaar | Bloomberg | Getty Images
President Barack Obama delivers remarks on his Fiscal Year 2016 Budget at the Department of Homeland Security (DHS) in Washington, D.C., U.S., on Feb. 2, 2015.

Obama emphasized that this proposal is based on the principles of "middle-class economics" that he addressed in his State of the Union last month. The government, Obama said, should work to make sure that every citizen has a fair shot at success.

The president spoke from the Department of Homeland Security, where funding will dry up in a few weeks. He said Congress is using the department as a bargaining chip against his immigration reform proposals.

"I think we can have a reasonable debate about immigration," he said. "But don't jeopardize our national security over this disagreement."

The White House is also working to fully end "sequestration," Obama said, adding that he will not accept any budget that locks in these defense-spending cuts.

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Obama said he wanted to work with Congress "to replace mindless austerity" with smart investments.

Obama's budget will have to be approved by the Republican-controlled Congress, whose members have already indicated opposition to several of the budget's key elements.

"When ... he devotes his time and energy to talking about the new tax-and-spend policies that progressives like and Republicans universally oppose, he signals to Congress that he is once again looking to argue rather than to legislate," Keith Hennessey, a former economic adviser to Republican President George W. Bush, told Reuters.

In addition to deficit reductions from White House-led health care and immigration reform—both measures the GOP has opposed—Obama's proposal assumes some degree of tax reform. Some Republicans have indicated that they would be willing to work with Democrats on this subject, but little progress has been made.

The budget proposal called for a one-time, 14 percent tax on an estimated $2.1 trillion in profits piled up abroad by companies such as General Electric and Microsoft, while imposing a 19 percent tax on U.S. companies' future foreign earnings.

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As for spending, the document allocated $14 billion to boost American cybersecurity defenses, funded efforts to defeat militants in Iraq and Syria, and supported NATO and European allies.

The budget proposes a 7 percent rise in U.S. domestic and military spending, ending the sequester caps with reforms to crop insurance programs and closing tax loopholes such as one on "carried interest." Those moves would help fund investments in infrastructure and education.

—Reuters contributed to this report.