By Ceci Connolly and Lori Montgomery
Washington Post Staff Writers
Saturday, February 21, 2009
Less than a week after signing the largest economic stimulus package in U.S. history, President Obama is turning his attention to the nation's long-term financial condition with an unprecedented effort to rein in government spending.
To kick off the effort, the new president has invited about 130 people to the White House State Dining Room on Monday for a "fiscal responsibility" summit, a marathon session on long-term budget-busters such as Social Security, Medicare, federal purchasing and tax policy.
The session is intended in part to counter Republican criticism that the new administration's costly response to the economic crisis is needlessly pushing the country deeper into debt.
First as a senator and then as president, Obama has presided over the fastest, largest outlay of federal money since World War II. Over the past 12 months, the government has pumped more than $2 trillion into initiatives to ease the nation's financial and economic crisis, driving the federal deficit to historic proportions.
Coupled with slowing tax collections because of the recession, the spending spree is pushing the budget deficit toward $1.4 trillion this year, or nearly 10 percent of the nation's overall economy. Absent dramatic action or an economic miracle, trillion-dollar deficits are projected to persist throughout the coming decade, by some estimates, and the bills are forecast to run headlong into the skyrocketing costs of caring for the retiring baby boom generation.
"Societally, everybody's living for today and not taking steps to create a better tomorrow," said David Walker, a former government comptroller who is chief executive of the Peter G. Peterson Foundation, which advocates for federal fiscal responsibility.
The White House summit is the first step in a process to help the public "understand how the financial balance sheet of the federal government comes back into order," said John D. Podesta, an informal Obama adviser and president of the left-leaning Center for American Progress policy group.
Obama is hardly the first president to stage a jazzy event demonstrating his heartfelt concern about the country's long-term financial health. And participants of previous economic summits voiced skepticism that the meeting, being organized by White House Chief of Staff Rahm Emanuel, will spark significant change.
"It's a media event," said former senator John C. Danforth (R-Mo.), who co-chaired a similar commission under President Bill Clinton.
Monday's bipartisan meeting, which will feature five topic-specific breakout sessions, will include lawmakers, economists and a range of special interest leaders. Invitations were still going out yesterday, but the list includes representatives from the Business Roundtable, AARP and the Concord Coalition, a nonpartisan group that promotes balanced budgets.
The breakout sessions will be led by high-ranking administration officials: Treasury Secretary Timothy F. Geithner will discuss the tax code. White House economic adviser Lawrence H. Summers will focus on Social Security. White House budget director Peter Orszag will lead the health-care session. And CIA Director Leon Panetta (an old budget hand from the Clinton administration) will oversee the discussion on federal budget rules.
"I think the word 'summit' suggests that decisions are going to be made, and that's clearly not possible," said Clinton budget director Alice M. Rivlin, who has been invited. "The method may be a little helter-skelter. But the objective is extremely important."
Even as he lobbied for the $787 billion economic stimulus bill, Obama was promising to craft a so-called grand bargain with Republican and Democratic lawmakers aimed at addressing Washington's most intractable budget problems. The effort, he has said, will include revamping a Byzantine tax code that doesn't collect enough money and controlling spending on a vast social safety net for the elderly and the poor that threatens to bankrupt the government.
The administration is facing both an immediate budget crunch and longer-term financial pressures.
In addition to the two-year stimulus package and bailouts of the auto, banking and housing industries, Congress is expected to approve a $410 billion budget bill covering most of the government's expenses for the rest of this fiscal year. Lawmakers also will be asked to dedicate more money to the wars in Iraq and Afghanistan and perhaps another round of cash to prop up the crippled financial system and to stimulate the sagging economy.
Over the longer term, as things now stand, Social Security is projected to run out of money by 2041 and the Medicare health program will be bankrupt by 2019, according to trustees of the Social Security and Medicare trust funds.
"We have promised benefits to the baby boom generation, which because of its size is going to bankrupt the country," said Sen. Judd Gregg (N.H.), who will attend the summit as the top Republican on the Budget Committee.
The long-term solvency of Social Security "is an arithmetic problem," said Michael O. Leavitt, who was health and human services secretary in the Bush administration.
Policy experts long ago outlined the handful of changes that would prevent the retirement fund from going bankrupt. The primary options include raising the retirement age, increasing payroll taxes or adjusting the benefits structure.
"You could put 10 people who know Social Security around the table, and they could make Social Security solvent for the next 50 to 70 years within a day or so," Gregg said. "It's the politics that are very hard."
Constraining Medicare spending is more complicated, in part because mathematical tweaks similar to those proposed for Social Security will not generate large savings.
"The only really good option is dealing with health-care costs," said Karen Davis, president of the private Commonwealth Fund foundation. In her view, that means dramatically improving the health of the nation, reducing hospital admissions, increasing prevention and targeting chronic conditions such as diabetes and heart disease, which are responsible for 75 percent of health-care costs nationwide.
For that reason, the administration is expected to fold its efforts on Medicare into a broader push to reform the entire U.S. health system.
Even some of the guests expressed concern that the summit will go the way of so many before it. But Rep. Chris Van Hollen (D-Md.) said raising public awareness will make it more difficult for politicians to ignore the looming crisis.
"It turns up the heat on the issue, and I think it makes it much harder for the president and the Congress to duck the issue going forward," he said.
Staff researcher Madonna Lebling contributed to this report.