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

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."

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