Obama sets stage for 2016 vote with budget

US President Barack Obama has put forward a budget loaded with Democrat-championed spending and tax reforms.

President Barack Obama

US President Barack Obama has put forward a $5.16 trillion budget loaded with tax reforms. (AAP)

US President Barack Obama has put forward a $US4 trillion ($A5.16 trillion) budget loaded with Democrat-championed spending and tax reforms that will likely be dead on arrival at the Republican-controlled Congress.

Using a healthier economy to pivot away from years of austerity, Obama's plan would add $US474 billion to the debt, overturning mandatory caps on defence and other spending.

"These proposals are practical, not partisan," said Obama on Monday.

But the budget will frame arguments about equality and responsibility likely to dominate the 2016 race to succeed him as president.

Democrats are sure to use opposition to the text to paint Republicans as anti-middle class, while Republicans will argue Democrats are promoting class warfare and are fiscally irresponsible.

The budget includes $US478 billion to upgrade infrastructure and sizeable measures to cut costs for people paying for child care and education - touchstone issues for Democrats.

Obama said his plan would "help working families feel more secure with pay-cheques that go further".

If some of those proposals may be hard to swallow for Obama's fiscally hawkish political opponents, the way he wants to pay for them - by taxing business and the rich - will make them gag.

Spending would be paid for in part by an increase in capital gains tax and a one-time 14 per cent tax on the estimated $US2 trillion of untaxed earnings held by US firms overseas.

In a sign Obama is willing to embrace the fight, he was to detail his plans in a speech at the Department of Homeland Security, an agency that is currently the subject of a funding fight with Republicans.

Obama's 2016 budget assumes the world's largest economy will grow at about 3.1 per cent this calendar year, with unemployment at 5.4 per cent and inflation of 1.4 per cent.

The deficit for 2016 would stand at 2.5 per cent, comfortably below the three per cent level economists deem sustainable.

The budget also includes spending to counter "Russian pressure and aggressive action" in eastern Europe.

Ukraine would receive $US117 million in funding, as well as a possible $US1 billion sovereign loan guarantee for 2016.

There would also be funding to help defeat the Islamic State group, around $US1 billion to boost governance in Central America and $US14 billion to support cyber security.


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