Obama's budget focuses on path to rein in deficit

Obama's budget focuses on path to rein in deficit

February 15th, 2011 in Local - Breaking News

Copies of the U.S. Government budget for Fiscal Year 2012 are stacked up at the U.S. Government Printing Office in Washington, Monday, Feb. 14, 2011.(AP Photo/Alex Brandon)

WASHINGTON - With President Barack Obama's release Monday of a budget proposal for next year and the House planning to vote this week on a Republican plan for deep spending cuts this year, the nation is getting its clearest view since the president took office of the parties' competing visions of the role of government, the urgency of addressing the deficit and the best path to long-term economic success.

Obama used his budget for the fiscal year 2012 and beyond to make the case for selectively cutting spending while increasing resources for areas like education and clean energy initiatives that hold the potential for long-term payoffs in economic growth. With this year's deficit projected to hit a record, $1.6 trillion, he laid out a path for bringing down annual deficits to more sustainable levels over the rest of the decade.

Republicans said it was not nearly enough to address chronic fiscal imbalances and reduce the role of the federal government in the economy and society.

Neither party has put forward any specific proposals to begin grappling with the most pressing long-term budget problem: the huge costs in the Medicare, Medicaid and Social Security programs as the population ages and medical costs rise, a bill that could overwhelm the government and crimp the economy if not addressed.

"We're doing things that are the most painful and of least long-term economic value because we're not willing to do the things that everybody, at least privately, agrees are necessary," said Vin Weber, a Republican Party strategist and former congressman.

Nonetheless, with his budget, Obama was pivoting from the emphasis in his first two years on costly efforts to revive the economy. He said his plan would reduce projected deficits over the next decade by $1.1 trillion, or about 10 percent.

His budget, for the fiscal year that begins Oct. 1, would cut spending for an array of domestic programs, including community services and environmental protection, and reduce the Pentagon's previously proposed budget by $78 billion over five years. At the same time, it would make room for spending increases for education, infrastructure, clean energy, innovation, as well as research to promote long-term economic growth and global competitiveness.

"Even as we cut out things that we can afford to do without, we have a responsibility to invest in those areas that will have the biggest impact in our future," Obama told students at a science and technology school in Baltimore. "And that's especially true when it comes to education."

On Capitol Hill, Republicans rejected what Obama's called budgetary "investments," calling them runaway spending by another name, and blamed him for the fact that the projected deficit for this fiscal year will set a record. But that deficit projection swelled mostly because of the costly tax cuts deal that Republicans negotiated with Obama in December. Republicans plan to vote on proposals this week in the House that would begin the budget cutting immediately and on a scale well beyond what Obama is proposing for coming years. They will begin three days of debate Tuesday on a package slashing at least $61 billion from nonsecurity domestic spending just in the remaining seven months of the current fiscal year.

In an interview, Rep. Paul D. Ryan, R-Wisc., the new chairman of the House Budget Committee, accused the president of "an abdication of leadership" for not being bolder in trying to reduce the long-term debt, as a majority of Obama's own bipartisan fiscal commission recommended in December.

While Republicans will not write their own budget for fiscal year 2012 and beyond until April, making comparisons with Obama's agenda difficult for now, their assault on 2011 spending showed how much deeper the new House majority is prepared to cut. They are shrinking or eliminating programs for education, environmental and energy initiatives, health services, border security, law enforcement and much more, both to downsize government and reduce deficits and to make room for more tax cuts.

Yet even as Republicans criticized Obama for fiscal timidity, dissension in their ranks over those spending cuts suggested their challenges in writing their own budget. For the past two years, with Democrats in control of both chambers of Congress and the White House, Republicans could attack freely without any responsibility to produce alternatives.

For all the partisan invective, however, both sides are far from taking the comprehensive long-term approach that a bipartisan majority of Obama's fiscal commission recommended and that most people in both parties in Washington acknowledge privately is necessary.

The commission majority, including liberal and conservative lawmakers, proposed to save $4 trillion over 10 years by reducing all domestic and military spending and by overhauling the tax code, throwing out a raft of tax breaks for individuals and corporations to both reduce rates and raise additional revenues for deficit reduction.

Unlike the commission's majority, neither Obama nor congressional Republicans are tackling Medicare, Medicaid and, to a lesser extent, Social Security.

As for new tax revenues, Republicans want only to cut taxes further while Obama refuses to consider any tax increases on the 98 percent of American households earning less than $250,000 a year.

Instead, to reduce what are the biggest annual deficits since World War II, measured as a share of the gross domestic product, the White House and congressional Republicans are competing to cut just 12 percent of the federal budget, the so-called nonsecurity discretionary spending that Congress appropriates each year.

Yet that small slice covers a wide range of public services, including air-traffic control, disease research, transportation, food safety and rural development programs.

"I'm a real hawk on cutting discretionary spending, but that won't come close to doing it," said Sen. Tom Coburn, R-Okla., who was part of the fiscal commission majority.

In his budget preface, Obama simply called on Republicans to join him in negotiating a bipartisan agreement overhauling corporate taxes and securing Social Security's actuarial solvency over 75 years.

Following the approach of his fiscal commission's recommendation, but without its specifics, Obama proposed eliminating corporate tax loopholes and using the savings to lower the corporate income-tax rate. But unlike the commission majority, he did not propose dedicating some of the savings to deficit reduction.

Some administration advisers wanted him to propose some specific changes to fix Social Security, which has accumulated surpluses to date but before long will begin paying out more than it takes in from payroll taxes.

But, Democrats say, Obama and his political team figured that Republicans are unwilling to talk compromise this soon after their return to power in the House; a president facing re-election next year would be unwise to risk proposing bold but controversial ideas, like small reductions in cost-of-living adjustments for future Social Security beneficiaries, only to be rebuffed.

Ryan, the House Republican budget chairman, rejected that reasoning: "Presidents are elected to take the country's challenges on and fix them before they get out of control. Everybody knows the debt is out of control, the president set up a commission to that effect, and he doesn't even take on any of the commission's big recommendations."

But, asked whether House Republicans would propose a bold budget this spring that would truly rein in future deficits as the fiscal commission proposed, Ryan demurred. "I wish I could tell you the answer to that," he said.

Referring to the scores of new Republican lawmakers, many of them elected with the support of antispending Tea Party conservatives, Ryan said, "I've got 87 new people who are just getting to learn the process, who are just getting to learn the issues." And, he added, "Everybody who comes in learning the budget finds out that things are more difficult than they at first seemed."

Obama is happy to lose the competition to cut the most, Democrats say, and they contrast his approach with what they describe as Republicans' slash-and-burn budgeting.

"He's talking about stuff that the public is for, making the kinds of investments that are really critical to business success as well," said John Podesta, president of the Campaign for American Progress and a former chief of staff to President Bill Clinton.

Republicans, of course, disagree. "Being on the smaller side of a spending fight in this environment is the place to be," said Don Stewart, deputy chief of staff to the Senate Republican Leader, Sen. Mitch McConnell of Kentucky.