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Obama Seeks Rules to Restrain Spending

By Lori Montgomery
Washington Post Staff Writer
Tuesday, June 9, 2009

With the budget deficit soaring toward a record $1.8 trillion, the Obama administration is planning to propose tough new rules that would require lawmakers to pay for new initiatives -- including an overhaul of the health system -- or face automatic spending cuts.

The new rules, which could be rolled out as soon as today, come amid growing anxiety among the nation's foreign creditors and some of its top economic policymakers about the tide of red ink. Surveys show ordinary citizens, too, are growing concerned, with the public divided in a new Gallup poll on President Obama's handling of the deficit.

Obama has said since taking office that he would support a push to enact budget rules similar to those that were in effect during the Clinton administration, when big deficits were briefly transformed into surpluses. Obama plans to make good on that promise by proposing his own set of pay-as-you-go initiatives, known as PAYGO, according to congressional sources.

If approved by Congress, the rules would forbid lawmakers from expanding entitlement programs such as Medicare and Social Security, creating new entitlement programs or cutting taxes unless the cost is covered by spending cuts or tax increases. If lawmakers fail to pay for their initiatives, Obama's rules would subject entitlement programs to automatic cuts, said sources who spoke on condition of anonymity because the plan has yet to be announced.

Deficit hawks applauded the move, saying the automatic trigger, known as sequestration, would mark a return to more serious budget restraint.

"If the administration is going to say, 'We need to start afresh here and go forward on a pay-as-you-go basis, including health-care reform,' this is a good way to start out," said Robert Bixby, executive director of the nonprofit Concord Coalition, which champions deficit reduction.

The administration will propose that many costly items get a pass under the new rules, sources familiar with the proposal said. Lawmakers would be able to extend the tax cuts passed by the Bush administration past their 2010 expiration date, prevent the alternative minimum tax from ensnaring millions of additional taxpayers and increase payments to Medicare physicians without offsetting the enormous costs. Administration officials have argued that those actions would merely extend current policy.

That part of the plan is less appealing to fiscal conservatives, who argue that the nation cannot afford to keep the Bush tax cuts in place.

But Obama's plan "does reinforce the importance of paying for health care reform," said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. "And that's the fight that the administration is pinning its fiscal responsibility credentials on this year."

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