WASHINGTON — President Obama's effort to control federal spending would require the largest cuts from the government's biggest programs — health care and the military — while preserving or increasing spending on favored initiatives like early education, manufacturing and research.
The president's proposed budget, for the fiscal year beginning Oct. 1, will be extensively rewritten in Congress, but is designed to reduce the growth of federal health spending by $401 billion over 10 years.
The budget would require $57 billion in higher payments by Medicare beneficiaries, cut $306 billion in projected Medicare payments to health care providers and squeeze $19 billion out of Medicaid, the program for low-income people.
Kathleen Sebelius, the secretary of health and human services, said Wednesday that the president was requesting $1.5 billion to operate health insurance supermarkets, known as exchanges, in 2014. In addition, the administration plans to raise $450 million by charging insurance companies fees to sell their products to consumers and small businesses in the exchanges. The federal government will have the primary responsibility for operating the exchanges in more than 30 states.
The largest share of the new payments by Medicare beneficiaries, $50 billion over 10 years, would come from additional premiums paid by high-income people for coverage of doctors' services and prescription drugs.
The Defense Department's proposed $526.6 billion base budget is a reduction of $3.9 billion, or 0.7 percent, from the enacted budget for 2012. It includes substantial reductions for the Army, which has carried the bulk of the combat operations over the past decade. The Army's budget proposal is 4 percent lower in constant dollars, while the Air Force's rose 3 percent and the Navy's, which includes Marine Corps spending, was steady.
The budget proposes spending $2.4 billion over five years to conduct another round of politically difficult base closings, which Defense Secretary Chuck Hagel said would deliver "significant savings" over the long term.
The inventory of remotely piloted vehicles, commonly called drones, would grow through 2017 and then level off, Pentagon officials said, and money would be preserved for the new way of war as fought by Special Operations forces and in cyberspace.
While the budget outlines sizable cuts at many agencies, it proposes a 4.6 percent increase in discretionary funding for the Education Department over 2013 spending.
At the center of Mr. Obama's education agenda is a program that would guarantee public preschool for all 4-year-olds from families with low and moderate incomes. To pay for it, the administration has proposed an increase in federal cigarette taxes to $1.95 per pack from $1.01. That would cover the $66 billion cost of providing preschool and the $11 billion cost of voluntary home-visiting programs for poor families, both over 10 years.
The budget also calls for a one-time outlay of $11.8 billion to preserve teaching jobs and increase hiring as the economy recovers.
The president's budget reflects his determination that manufacturing will be a major component of American middle-class job growth and a worthy recipient of increased federal spending.
In his budget message to Congress, Mr. Obama called manufacturing a "first priority," and he noted that manufacturers had added more than 500,000 workers in the last three years after a decade of precipitous decline.
"Companies large and small are increasingly deciding to bring jobs back to America," Mr. Obama wrote, urging Congress to devote federal money to accelerate the trend. His budget requests financing for 15 manufacturing research and training "hubs," tax credits, and incentives to draw foreign business to the United States.
The White House offered a pre-emptive reduction for the Environmental Protection Agency, a favorite target of Republican budget-cutters on Capitol Hill. The administration's proposed budget provides $8.2 billion for the E.P.A., a decrease of $296 million, or 3.5 percent, from current spending.
The cuts would be felt most deeply by state and local governments, whose federal financing for drinking water and wastewater treatment projects would fall by $472 million. The agency said smaller and underserved communities would be spared, although the broader programs are shrinking. The Clean Water and Drinking Water State Revolving Funds would receive $1.9 billion, down from nearly $2.4 billion in the current year.
On health care, the president would require new Medicare beneficiaries to pay co-payments for home health services, starting in 2017. And he would impose a surcharge on Medicare premiums for new beneficiaries who buy the most generous private insurance policies to supplement Medicare. Such Medigap policies reduce the incentive for beneficiaries to consider the costs of services, the White House said.
The home health co-payments and premium surcharges would raise $3.6 billion from 2017 to 2023, the administration said. Mr. Obama would require drug manufacturers to provide additional discounts, or rebates, to Medicare for prescription drugs bought by low-income beneficiaries. Medicare would thus get discounts similar to those that drug makers now provide to Medicaid.
The White House said this proposal would reduce budget deficits by $123 billion over 10 years. Drug makers have beaten back similar proposals in the past, saying they amount to price controls.
John M. Broder and Annie Lowrey contributed reporting from Washington, and Motoko Rich from New York.
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