Obama to propose spending cuts in budget plan aimed at countering conservatives

February 13, 2011

President Obama will respond to a Republican push for a drastic reduction in government spending by proposing sharp cuts of his own in a fiscal 2012 budget blueprint that aims to trim record federal deficits by $1.1 trillion over the next decade.

Obama would reach his target in part by raising taxes, an idea that Republicans refuse to consider. But two-thirds of the savings would come from spending cuts that are draconian by Democratic standards and take aim at liberal priorities, such as a popular low-income heating assistance program and community development block grants.

Obama also targets the Pentagon, traditionally considered untouchable by both parties, by adopting $78 billion in savings proposed by Defense Secretary Robert M. Gates.

The White House proposal, outlined Friday by a senior administration official, would barely put a dent in deficits that congressional budget analysts say could approach $12 trillion through 2021. But the policies would stabilize borrowing, the administration official said, while reversing the trend of ramping up spending to blunt the trauma of the recent recession.

"After a decade of rising deficits, this budget asks Washington to live within its means, while at the same time investing in our future," Obama said Saturday in his weekly national address. "It cuts what we can't afford to pay for what we cannot do without."

When it lands Monday on Capitol Hill, Obama's plan will launch a bidding war with Republicans over how deeply and swiftly to cut, as the two parties seek a path to fiscal stability for a nation awash in red ink. The effort could lead to a landmark agreement akin to the bipartisan deficit-reduction deals struck under Presidents Ronald Reagan and Bill Clinton - or it could produce congressional gridlock of epic proportions, possibly resulting in a government shutdown, while allowing long-term fiscal problems to fester.

While Obama would save money primarily through a five-year freeze in domestic spending, Republicans are calling for cuts in those programs, starting immediately. The House will begin debate Tuesday on a plan to slash $61 billion over the next seven months from a broad range of programs, including areas that Obama deems critical to economic growth - such as high-speed rail, scientific innovation and education.

The 359-page measure filed Friday by House Republicans would cut $600 million from IRS budgets for enforcement and computer modernization and eliminate a program that puts thousands of police officers on local streets. It would also wipe out two decades of education initiatives by pulling nearly $5 billion from the Education Department, including funds for math and science and the popular Teach for America program, which puts well-trained teachers in needy schools.

And that is just the start for Republicans, who are eager to satisfy the tea party voters who helped the GOP win control of the House in November.

"Next week, we are going to cut more than $100 billion. And we're not going to stop there," House Speaker John A. Boehner (R-Ohio) told a conference of conservative activists Friday. "Once we cut the discretionary accounts, then we'll get into the mandatory spending. And then you'll see more cuts."

Seeking a middle ground

Obama is sending a similar message, but to a different constituency: the independent voters who abandoned Democrats in droves last year and who are crucial to the president's 2012 reelection prospects. This bloc shares the tea party's alarm over the $14 trillion national debt but takes a more nuanced view of how to achieve fiscal balance.

"Anything considered draconian is going to appeal to a certain crowd that's out there saying we've got to cut our way out of the problem," said Sen. Ben Nelson (Neb.), a key moderate Democrat. "But for most of us, if you cut the wrong things, then you impair your ability to grow your way out."

Obama's goal is to set realistic spending targets that appeal to Democrats as well as moderate Republicans, forging a core of support in the Senate to counter the more conservative House. For example, only a third of Obama's $1.1 trillion in deficit-reduction proposals would come through higher taxes - a ratio that acknowledges political realities while still calling for additional revenue.

The Obama blueprint also seeks to eliminate two budget gimmicks that Congress has long used to mask the true depth of the red ink: His proposal would offset higher Medicare payments to doctors by cutting $62 billion from other areas of federal health spending. And it would adjust the alternative minimum tax through 2014 to prevent it from hitting middle-class taxpayers, covering the cost by limiting the value of itemized deductions such as charitable contributions and mortgage interest for wealthy households.

The blueprint ducks the harder task of tackling the biggest drivers of future deficits: Social Security, Medicare and Medicaid, and a tax code that offers more in tax breaks than it collects in revenue. Obama will endorse a long list of actions recommended by his bipartisan fiscal commission, but he will not embrace the major elements of its $4 trillion deficit-reduction agenda, including a government-wide shift in inflation calculations that deficit hawks had been expecting as a gesture of goodwill, according to people with knowledge of the document.

Obama's blueprint does not even hit the short-term goal he set for his commission - reducing deficits to 3 percent of the economy by 2015. But it would do so soon after, the senior administration official said.

"The goal was fiscal sustainability. I think we hit that target," said the official, speaking on the condition of anonymity because the budget blueprint has not been released.

Showdowns in springtime

House Budget Committee Chairman Paul Ryan (R-Wis.) is crafting his own budget plan, due in April. But his work could be overshadowed by two brewing battles that threaten to dominate the broader fiscal debate. The first begins this week, when House Republicans will vote on their spending plan. Congress failed to pass any budget bills last year, and the government is operating on a temporary resolution that expires March 4.

Later in the spring, Congress must act to raise the national debt limit, an otherwise routine step that conservatives have turned into a litmus test for tea party authenticity. House Republican leaders want to use the bill to enact structural changes to the budget process to force austerity. Democrats say that debate should be conducted separately from discussions over a higher debt ceiling, to avert the risk of destabilizing global financial markets.

To reach consensus on the nation's biggest budget problems, Democrats and Republicans must survive the spring with some semblance of bipartisan goodwill intact. But the notion of compromise is anathema to many House conservatives, who succeeded last week in nearly doubling the proposed GOP spending cuts for this year.

House Minority Leader Steny H. Hoyer (D-Md.), a vocal proponent of dramatic changes to reduce deficits, said House Democrats are also reluctant to pursue compromise until Republicans make their intentions known. Pointing to the GOP spending package, Hoyer said Democrats want to "get out of the way and just watch them act. Let the American public see what they're trying to do."

Senate's pivotal role

The Senate, by contrast, is emerging as the focal point for fiscal reform. Since last summer, Democrat Mark R. Warner (Va.) and Republican Saxby Chambliss (Ga.) have been meeting with other moderates about the debt problem. The group has grown to at least 31 senators.

In recent weeks, Warner and Chambliss have begun meeting with four senators who served on Obama's deficit commission in hopes of advancing its blueprint for raising revenue and restraining entitlement programs. The four include Senate Budget Committee Chairman Kent Conrad (D-N.D.), Majority Whip Richard J. Durbin (D-Ill.) and two Republicans who are influential on fiscal issues: Tom Coburn (Okla.) and Mike Crapo (Idaho).

Chambliss said he is optimistic that the group can agree on a strategy, perhaps in time for the debt-ceiling debate. But the group may have more success, budget analysts said, if it waits for the spending-cut frenzy to play out and for gridlocked lawmakers to start looking for a better solution.

"We've got to solve this problem. And if the time is ripe to do it now, then we've got to continue," Chambliss said. "You've already got Tom Coburn and Dick Durbin sitting in the same room together talking about these issues. That's pretty significant in and of itself."

murrays@washpost.com montgomeryl@washpost.com

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