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By David Lawder
WASHINGTON (Reuters) - President Barack Obama's fiscal 2015 budget request would boost U.S. tax revenue by nearly $1.4 trillion over 10 years if fully enacted, cutting deficits by $1.05 trillion while funding new spending, the Congressional Budget Office said on Thursday.
But the non-partisan agency's analysis was less optimistic than the White House's own projections - showing that cumulative deficits would total $6.6 trillion over 10 years, compared to $4.9 trillion under the Obama plan when it was released in March.
A key difference between the two deficit pictures is CBO's projection of slower economic growth, partly resulting in lower revenue collections.
The likelihood that Congress will advance Obama's plan in its entirety is virtually nil, but the CBO's latest analysis will feed campaign messaging by Democrats and Republicans ahead of congressional elections in November.
The analysis by the nonpartisan agency compares Obama's request with a new CBO "baseline" estimate released last week that assumes no changes to current tax and spending laws.
Obama's budget plan is loaded with policy changes, including an assumption that sweeping immigration reforms will be enacted, producing a net 10-year deficit reduction of $158 billion.
It proposes to boost revenue by limiting tax breaks for wealthy Americans and businesses, imposing a new tax on millionaires, raising tobacco taxes, and restoring estate and gift taxes to their previously higher, 2009 levels.
At the same time, it would boost spending by expanding cash tax credits for low-income Americans, canceling the "sequester" automatic spending cuts to military and domestic programs, and increasing funds for job training programs, among other changes.
The Republican Party's leading voice on budgetary matters, Representative Paul Ryan, said the report shows that Obama's budget plan "keeps getting worse" because of the tax and spending increases it proposes.
In a statement, Ryan said that the Obama budget would never reach balance and would run a $746 billion deficit in fiscal 2024. By contrast, Republicans in the House of Representatives last week passed a Ryan budget that envisions a small surplus that year after deep cuts to domestic programs, especially those that aid the poor. That budget contains no tax increases.
"This new report is just more confirmation: The president's budget would take us in the wrong direction," said Ryan, the House Budget Committee chairman. "It would take more from families to spend more in Washington."
Democrats, who are basing their re-election campaigns on efforts to reduce the gap between rich and poor, are expected to tout Obama's proposals to aid the middle class and the poor.
The CBO analysis finds that Obama's budget plan would slightly increase deficits relative to current law in fiscal 2014 and 2015, with annual shortfalls just above $500 billion in both years.
Deficits in later years of the 10-year budget window would begin to rise again in both Obama's plan and the current-law CBO estimate as growing numbers of Americans reach retirement age and draw federal benefits. But deficits under Obama's plan in those years would be lower than the CBO baseline as the new revenue measures gain steam and spending on foreign wars presumably falls.
Congress can simply ignore Obama's and Ryan's budget plans because a bipartisan deal cut last year has already set top-line spending levels for fiscal 2015, which starts October 1. The House and Senate are now concentrating on passing the spending bills that allocate those funds.
However, if Republicans are successful in wresting control of the Senate from Democrats in November, they could push through some of the budget cuts they have advocated in Ryan's past budgets, testing Obama's veto powers.
This would mark a significant change from the bitter budget standoffs of recent years, which have required numerous stop-gap spending measures and threatened government shutdowns, including the 16-day closure of federal agencies last October, said Douglas Holtz-Eakin, a former CBO director and Republican campaign adviser who now heads the American Action Forum, a Washington think tank.
"If it's status-quo and we get back the same cast of characters, we will get back the same deadlock and autopilot until the after the next presidential election in 2016," Holtz-Eakin said.
(Reporting by David Lawder; Editing by Eric Beech, Steve Orlofsky and Andrew Hay)