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Political Economy
Posted at 09:05 AM ET, 06/14/2011

Domestic spending, foreign aid to top White House budget talks this week


Vice President Joe Biden talks to reporters just off the Senate floor after trying to bridge the gap between Republicans and Democrats in Congress on how to solve America's debt crisis, at the Capitol May 24. (J. Scott Applewhite - AP)
The White House budget talks shift into high gear today as the deficit reduction group led by Vice President Biden begins to debate sensitive issues that they have purposely sidestepped during their six earlier meetings. At the top of the agenda for the next three days: deep cuts on domestic spending and foreign aid and imposing a dollar limit on federal spending — a measure that Republicans and some Democrats have supported but the White House has vehemently opposed.

Although the panel’s formation in May was greeted with open skepticism, many in Washington now have high hopes that it will be the forum where a budget compromise will be brokered.

House Majority Leader Eric Cantor (R.-Va.), who had previously dismissed the group as “yet another arena of political theater,” on Monday went out of his way to praise Biden’s efforts.

“I’ve been very impressed with the way he conducts these meetings. … I do believe he has conducted these meetings in a way that has kept the ball rolling,” Cantor told reporters.

President Obama, in an interview with NBC’s “Today,” reaffirmed his confidence in the talks. “There is a way of solving this problem that doesn’t require any big, radical changes,” he said. “What it does require is everybody makes some sacrifices.”

The group is racing to try to come up with the beginnings of an agreement by July 1 so that the final deal can be in place by Aug. 2 when the government is projected to hit its $14.29 trillion debt ceiling.

Budget state of play: Janet Hook and Carol E. Lee break down what will and won’t be debated this week. Off the table: tax increases, Social Security, major overhaul of Medicare. On the table: farm subsidies, federal employment retirement programs, Medicare waste and abuse and prescription drug programs. To be considered: cap on federal domestic spending, Pentagon spending, changes in the federal budget process.

“Wheels started to come off at the Appropriations Committee level two weeks ago”: David Rogers points out that the half-dozen 2012 appropriations bills moving in the House illustrate that the arithmetic of the crisis remains unchanged. “A $72.5 billion military construction and Veterans Affairs bill, reflecting only modest cuts, is expected to pass easily Tuesday. But fast on its heels is a $17.25 billion agriculture and rural development measure, which has had to absorb a $2.67 billion reduction on top of what was an almost $3.4 billion cut in April from 2010 funding… [T]he bill risks a trade fight with Brazil while pitting the cotton lobby against a nutrition program for low-income mothers and their infants. And amid rising world food prices, the bill’s manager, Rep. Jack Kingston (R-Ga.) appears to be having second thoughts as well about his proposed 26 percent, $487 million cut in overseas food aid.”

Potential losers: Among the groups likely to find their government assistance slashed during the Biden talks are farmers, according to Phil Rucker. Dramatically cutting or even eliminating direct crop subsidies — which cost the U.S. government about $5 billion last year — has emerged as one of the few areas of agreement between Democrats and Republicans who had long protected such programs. “The GOP plan includes a $30 billion cut to direct payments over 10 years, which would slash them by more than half. Those terms are being considered in the debt-reduction talks led by Vice President Biden, according to people familiar with the discussions. … President Obama has also taken aim at farm subsidies, with a plan to scale back payments to farmers with incomes of more than $250,000 a year.”

The case for the Gang of Six: Sen. Mark Kirk and Sen. Mark Udall have penned an opinion piece for Politico that argues that the gang’s bipartisan approach is Washington’s best shot for coming up with a viable deficit plan. “Only a bipartisan, all-of-the-above plan, with shared sacrifices from both parties, will show the public that Congress recognizes the serious nature of the nation’s current economic crisis and is willing to fix it. The gang’s plan is our best hope, and we would like to see all senators encourage its momentum.”

The flagging economy and the deficit: After a handful of recent economic indicators provided evidence that the economic recovery is faltering, Andy Sullivan of Reuters reports that the possibility of legislation that would spur job growth or provide tax cuts is throwing a monkey wrench into the debt ceiling talks. “As one of the few pieces of must-pass legislation on the agenda this year, the debt-limit increase could serve as a vehicle for job-creation efforts. Because most stimulus, whether tax cuts or increased spending, has the effect of worsening budget deficits in the short term, it could complicate the Biden group’s mission of reducing deficits that have hovered at their highest levels relative to the size of the economy since World War Two.”

By and  |  09:05 AM ET, 06/14/2011

 
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