Battle Lines Quickly Set Over Planned Policy Shifts
Massive Budget Marks Largest Ideological Swing Since the Reagan Era

By Lori Montgomery
Washington Post Staff Writer
Sunday, March 1, 2009

Battle lines are rapidly hardening over the broad policy shifts, massive deficits and tax increases President Obama unveiled last week in his first budget request, a 10-year spending plan thick with political friction points.

Yesterday, the president used his weekly radio and Internet address to declare his budget plan a fundamental reordering of federal priorities that would deliver "the sweeping change that this country demanded when it went to the polls in November."

The budget proposal "reflects the stark reality of what we've inherited: a trillion-dollar deficit, a financial crisis and a costly recession," Obama said. He warned off lobbyists and other critics, who, he said, "are gearing up for a fight as we speak."

"My message to them is this: So am I," he said. "The system we have now might work for the powerful and well-connected interests that have run Washington for far too long, but I don't."

Republicans and Democrats alike say the budget request, which seeks $3.6 trillion for the fiscal year that begins Oct. 1, marks the biggest ideological shift in Washington since the dawn of the Reagan administration. Fierce clashes are likely on an array of fronts, from Obama's plan to spend at least $634 billion to expand health care for the uninsured to his proposal to raise a similar sum by taxing industries that generate greenhouse gases.

The central political battle so far, however, centers on cost. The White House budget request seeks to increase federal spending by at least $500 billion over the next decade, excluding the cost of health-care reform. While Obama would pay for that initiative as well his plan to lower taxes for the middle class by raising taxes on high earners and corporations as well as cutting federal health spending, his budget would not generate enough cash to finance the additional spending he seeks for routine government programs.

As a result, his plan would produce annual deficits far larger in dollar terms than any recorded before the recession. As a percentage of the overall economy, the budget gap is projected to settle down to a more manageable 3 percent by the end of Obama's term. But Washington would continue to borrow heavily, and the national debt would double over the next five years.

As Congress this week begins reviewing Obama's request, Republicans are blasting the proposal as a historic and irresponsible enlargement of the federal bureaucracy that ultimately will force Obama to break his pledge to avoid a broad-based tax increase.

"If you think with this kind of incredible growth in government that they're going to only tax wealthy people, then I have some old lottery tickets I want to sell you," said Rep. Paul D. Ryan (R-Wis.), the senior Republican on the House Budget Committee.

Democratic congressional leaders say they expect to endorse Obama's agenda in April. But they warned that it will not be easy and predicted that a proposal to limit tax deductions taken by the wealthy for charitable giving, mortgage interest and other items may not survive.

"Folks are a little skittish. It's asking a lot," a senior Democratic aide said. "This is a tax-and-spend budget the likes of which we haven't seen in years."

In his radio talk, Obama did not address the charge that his plans are simply too expensive. But he reasserted his commitment to fiscal discipline, saying his budget team has "identified $2 trillion worth of deficit reductions over the next decade" by scouring the budget "line by line" for wasteful and inefficient programs.

Obama first made that claim in his address to Congress on Tuesday. But administration officials have since acknowledged that his budget plan does not contain $2 trillion in spending cuts. It includes $1.5 trillion in "savings" generated by comparing Obama's plan to wind down the war in Iraq against a scenario many consider unrealistic -- one in which war spending consumes more than $200 billion a year for much of the next decade. Because Obama wouldn't be borrowing to pay for a war that costly, he also says he would save more than $300 billion in interest on the national debt.

The claim of $2 trillion in savings is "easily blown apart," said Robert Bixby, executive director of the nonpartisan Concord Coalition, a deficit watchdog group, and one of several deficit hawks briefed on the plan by White House budget director Peter R. Orszag.

Administration officials say they intend to identify additional spending cuts when they deliver their final budget to Congress in April. But they acknowledge that any savings generated by eliminating ineffective programs is likely to be plowed back into programs that work better or represent the president's priorities.

For example, in the Agriculture Department, Obama proposes to cut $15 billion in subsidies to big farms and crop insurance. But he would spend an extra $10 billion on child nutrition. In the Education Department, Obama would slash $54 billion from student loan programs, in large part by cutting private banks out of the system. But he would spend an extra $120 billion expanding the Pell Grant college aid program and creating a new "college access and completion fund."

"The president honestly lays out that he'll be spending more than in the past and more than projections would be," said Richard Kogan, a senior adviser to Orszag. "This is a reordering of priorities from defense, particularly the war budget, to domestic priorities. That's what President Obama campaigned on and won on."

The result is a federal government that would expand from about 20 percent of the nation's overall economy before the recession to about 22 percent after, a level matched only eight times since the end of World War II, primarily during the Reagan administration, said Brian Riedl, a budget analyst at the Heritage Foundation. With revenue projected to grow to about 19 percent of the economy, the Treasury would be forced to add to the massive borrowing it is doing now to finance various financial-sector bailouts.

Obama's budget plan projects that the Treasury will borrow a record $2.6 trillion this year, and another $1.1 trillion in 2010, leaving the nation deeper in debt than at any time since the 1950s.

Sen. Kent Conrad (D-N.D.), a deficit hawk who chairs the Senate Budget Committee, said he is "very uncomfortable with the buildup of debt" and urged Obama to make good on his promise to overhaul federal retirement and health-care programs. Also, Conrad said, "More discipline on the spending side is also going to be required."

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