Obama Budget Plan Sets Stage for Fight With Republicans Over Depth of Cuts
House Speaker John Boehner. Photographer: Brendan Hoffman/Bloomberg
Feb. 14 (Bloomberg) -- White House Budget Director Jacob "Jack" Lew talks about President Barack Obama's $3.7 trillion budget proposal and deficit reduction efforts. The president’s spending blueprint sets the stage for a battle with Republicans in Congress who have already deemed the plan insufficient to reduce federal debt. Lew speaks with Peter Cook on Bloomberg Television. (Source: Bloomberg)
Feb. 15 (Bloomberg) -- U.S. Representative Mick Mulvaney, a South Carolina Republican, talks about President Barack Obama's budget proposal for fiscal 2012. Mulvaney speaks with Peter Cook on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
President Barack Obama’s $3.7 trillion budget request was met with demands for a bolder reshaping of the government by Republicans, who said they want deeper cuts than the Democratic administration put forth.
Obama’s budget for the 2012 fiscal year, his first since Republicans took control of the U.S. House, aims to reduce deficits by more than $1 trillion in the coming years. The plan includes cuts to energy, transportation, housing and other programs popular with his fellow Democrats.
It also would allow income and capital gains taxes to rise after 2012 for individuals earning more than $200,000 annually and married couples making more than $250,000.
The document doesn’t offer ideas to overhaul Medicare, Medicaid or Social Security, the entitlement programs that represent about 40 percent of the federal budget and are primary drivers of long-term deficits. That sparked criticism from Republicans.
“This budget was an opportunity for the president to lead,” said Senate Minority Leader Mitch McConnell, a Kentucky Republican. “He punted.” McConnell previously has said the initial push to overhaul entitlement spending must come from the president.
‘Destroy Jobs’
House Speaker John Boehner, an Ohio Republican, said Obama’s plan “will destroy jobs by spending too much, taxing too much and borrowing too much.”
House Republicans said they will propose broader program cuts in an alternative budget blueprint that they release. They wouldn’t say whether they will put entitlements on the block in that plan.
White House budget director Jacob Lew defended the spending blueprint against criticism over its failure to recommend major steps to reduce the cost of entitlements.
“I know that would make a lot of people happy for there to be a big, bold proposal,” Lew said in a Bloomberg Television interview. “My experience over the last 30 years is that when you put a proposal out there, before you’ve laid the foundation for a bipartisan discussion, it actually doesn’t move the process forward.”
Senator Rob Portman, an Ohio Republican and director of the White House’s Office of Management and Budget under former President George W. Bush, said Obama’s plan was a “political document” that ignored a $3.8 trillion debt-reduction proposal presented to a presidential commission late last year. The plan, ultimately rejected by the commission, would have cut Social Security benefits and Medicare.
‘Family Conversation’
House Majority Leader Eric Cantor, a Virginia Republican, said his party will propose “very bold” changes to entitlements in their 2012 budget resolution.
House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, said Republicans first “have to have a family conversation to get consensus” on the issue, and that he couldn’t specify what his party’s plan will look like.
The deficit for the current fiscal year is forecast to hit a record $1.6 trillion -- 10.9 percent of gross domestic product. Under Obama’s plan it would be $1.1 trillion in 2012, 7 percent of GDP. The budget forecasts the deficit will be $627 billion in 2017, or 3 percent of GDP, a level the administration says is sustainable. The shortfall would grow in subsequent years, reflecting the impact of Baby Boomers drawing Social Security payments and Medicare benefits.
Obama Pledge
About two-thirds of the deficit reduction comes from cuts. Obama previously pledged to freeze non-security discretionary spending for the next five years, and under his budget about half of all federal agencies would see their budgets reduced from levels in 2010, the last time agencies operated under an enacted budget, according to administration documents.
Spending on housing programs would go down by $1.1 billion. Funding for the Environmental Protection Agency would be reduced by 13 percent, to $8.97 billion. The budget cuts $1 billion from airport grants and $950 million from water-treatment plants and other infrastructure.
The plan calls for more resources to aid financial regulatory efforts and tax enforcement.
Obama requested $6.5 billion, spread over eight agencies that include the Securities and Exchange Commission and the new Consumer Financial Protection Bureau, to help pay for 5,000 new employees to implement tougher regulation of the financial industry brought on by the financial crisis. The SEC’s budget would total $1.4 billion, up $304 million from fiscal 2010.
The Internal Revenue Service would get a 9.4 percent budget increase, to $13.3 billion, to hire more than 5,000 new employees, most of whom would pursue tax cheats.
War Spending
Obama is seeking $553 billion for the Defense Department, up 4.3 percent from fiscal 2010. For the wars in Afghanistan and Iraq, Obama is asking Congress to approve $126.5 billion, down from this year’s $164.7 billion and the lowest since 2006, reflecting the winding down of the war in Iraq.
Democrats praised Obama for taking steps to stabilize the economy and put the nation on a stronger fiscal path.
“The president’s budget makes the tough choices we need to reduce spending and put our nation’s fiscal house in order,” said House Minority Whip Steny Hoyer, a Maryland Democrat. He said the budget also “identifies those investments we need to grow our economy and create jobs -- investments in out-building, out-innovating, and out-educating competitors around the world.”
Senate Majority Leader Harry Reid, a Nevada Democrat, said Obama’s plan was a “serious attempt” to address the deficit, while Republicans are seeking to “slash the programs that keep us safe and make us competitive.”
Democratic Criticism
Some Democrats criticized Obama for wanting to cut too much.
Representative Ed Markey of Massachusetts, the top Democrat on the Natural Resources Committee, lambasted the proposal to cut by half the funds for heating assistance for the poor and for Community Service Block Grants that provide aid for low- income people.
“These programs aren’t just lines in a budget -- they’re lifelines for our most vulnerable, and they must be preserved,” Markey said in a statement. “We must not balance the budget on the backs of disadvantaged citizens in our communities.”
2011 Fight
Even as the battle lines over the 2012 budget were being drawn, Congress and the administration continue to haggle over spending for the 2011 fiscal year, which began Oct. 1.
The government has been operating under temporary spending measures known as continuing resolutions; the latest one ends March 4.
Last week, after House Republican leaders said they would propose reducing the 2011 budget by about $35 billion over 2010 spending levels, their members forced them to come up with more cuts for a $61 billion reduction. The revised plan outlined Feb. 11 would end more than 100 government programs and cut spending on areas including the environment, health care, energy and transportation.
Also looming is a fight later this year when Obama seeks to increase the nation’s $14.3 trillion debt limit, needed to prevent a default on government obligations. Republican leaders have said they will demand deep spending cuts in exchange, and a number of Tea Party-backed members want to go further than their leaders may propose.
Some Democrats urged a long-term view.
Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, said Obama’s budget “gets it about right in the first year” by making a priority of infrastructure, energy and other programs that could help spur job creation. Still, he said, “We need a comprehensive long-term debt reduction plan.”
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