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President Obama's budget includes $1 trillion tax hike and $744 billion deficit

President Obama on Wednesday unveiled his $3.8 trillion budget proposal for 2014, calling for higher taxes in exchange for cost reductions in Social Security and Medicare, a proposal swiftly rejected both by his Republican rivals and Democratic allies.

The president's budget -- which would produce a $744 billion deficit next year -- includes about $1 trillion in new taxes over the next decade, including nearly doubling the federal tax on cigarettes to $1.95 a pack, increasing the estate tax, and eliminating some tax deductions and loopholes for wealthier Americans.

The budget would raise the national minimum wage to $9 an hour and spend an additional $50 billion on public works projects that could generate jobs.

From the White House Rose Garden on Wednesday, the president said he would support cuts to entitlement programs only if Congress approves his proposed tax increases.

"If anyone thinks I'll finish the job of deficit reduction on the backs of middle-class families or through spending cuts alone that actually hurt our economy short-term, they should think again," the president said. "When it comes to deficit reduction, I've already met Republicans more than half way."

But Republicans and Democrats were both quick to reject the president's budget proposal.

Obama is taking heat from Republicans for the proposed tax increases. He's being battered from the left for recommending reductions in spending on Social Security by changing the way cost-of-living increases are calculated.

Obama is proposing $1.8 trillion in savings over the next decade, but because his plan would replace $1.2 trillion in across-the-board spending cuts that went into effect in March -- and include war savings from Iraq and Afghanistan -- it would actually reduce borrowing by less than $200 billion, budget analysts said. Republicans say such an offer proves Obama isn't serious about slowing a soaring national debt.

"We don't need an extreme, unbalanced budget that won't balance in your lifetime or mine," said Senate Minority Leader Mitch McConnell, R-Ky.

Added House Budget Committee Chairman Paul Ryan, R-Wis., "This is worse than a status-quo budget. A take-it-or-leave-it approach is disappointing -- we deserve better."

Presenting his budget more than two months late, Obama is recommending raising the tobacco tax to pay for expanded preschools. The tobacco tax is tricky, though, because a price increase can deter people from smoking, which reduces how much the tax increase would generate for schools.

The budget also includes the so-called Buffett Rule, which sets a minimum 30 percent tax rate for households earning more than $1 million a year.

The budget is largely a repackaging of the offer Obama made to House Speaker John Boehner, R-Ohio, during "fiscal cliff" negotiations earlier this year. The deal they eventually struck included higher income taxes for households earning more than $450,000 annually -- a return to the Clinton-era rates.

Republicans on Wednesday drew a firm line on taxes, saying they wouldn't go beyond the $660 billion they agreed to earlier this year.

Obama rejected the GOP's claim that his budget was a toxic mix of greater spending and higher taxes.

"The numbers work," Obama insisted. "There's not a lot of smoke and mirrors in here."