Republicans Grill Lew Over Budget as Battle Escalates

By Catherine Dodge -

Copies of the Fiscal Year 2012 Budget are unloaded in the Senate Budget Committee hearing room in Washington, D.C. Photographer: Andrew Harrer/Bloomberg

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Feb. 14 (Bloomberg) -- U.S. President Barack Obama, House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, and David Stockman, U.S. budget director in the Reagan administration, offer their views on Obama's budget proposal. This report also contains comments from White House Budget Director Jacob "Jack" Lew; former Senator Judd Gregg, a New Hampshire Republican who chaired the Senate Budget Committee; Stanley Collender, managing director of Qorvis Communications and a former congressional budget analyst; Maya MacGuineas, president of the Committee for a Responsible Federal Budget, and Jeffrey Sachs, a professor at Columbia University. (Source: Bloomberg)

House Republican Budget Committee Chairman Paul Ryan told White House budget director Jacob Lew the president has “disappointed us all” with his $3.7 trillion budget request because the plan doesn’t go far enough on spending cuts.

“Why did you duck?” Ryan said at a House Budget Committee hearing where Lew defended the proposal President Barack Obama unveiled yesterday. “You know the drivers of our debt are entitlement programs, and yet you do nothing to address that.”

The fight over government spending between Democrats and Republicans intensifies today as Lew meets with lawmakers on the president’s fiscal 2012 budget and House Republicans begin debating their plan to cut $61 billion in spending for the last seven months of this fiscal year. Democrats say those reductions are excessive.

Lew said the president’s budget puts the nation “on a path toward fiscal sustainability” by making significant spending cuts while still investing in areas such as education, infrastructure and research to fuel economic growth.

“We need to demonstrate to the American people we can live within our means and invest in the future,” Lew said.

He said more work is needed to pay down the nation’s debt and address long-term fiscal challenges. “Cutting our spending and deficits requires us to put political differences aside,” he said.

Energy, Transportation

Obama’s budget for 2012, his first since Republicans took control of the House, seeks to narrow deficits by more than $1 trillion in the coming years. The plan includes spending cuts to energy, transportation, housing and other programs popular with his fellow Democrats.

The spending plan 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 president’s budget doesn’t offer ideas to overhaul Medicare, Medicaid or Social Security, the entitlement programs that represent about 40 percent of the federal budget.

House Republicans have vowed to propose broader program cuts in an alternative budget they plan to release in April.

“Republicans will not punt,” House Speaker John Boehner of Ohio told reporters today. Pressed about details of possible changes to Medicare and Social Security, Boehner declined to give specifics, saying he wanted to let the Budget Committee members “do their work.”

‘We’re Broke’

Boehner also said he wasn’t concerned about whether budget cuts would result in the loss of some federal jobs. “So be it, we’re broke,” he said.

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.

Ryan said the president’s budget was forecasting economic growth in 2013 that was 1.3 percentage points higher than what the Congressional Budget Office projects and that the administration was claiming economic growth would occur in a year when it would raise taxes.

‘Doesn’t Square’

“History doesn’t square with your comments,” Ryan said.

The top Democrat on the House Budget Committee, Chris Van Hollen, called Obama’s plan “a tough love budget” that cuts spending and invests in the future.

He called Obama’s budget a “stark contrast” to House Republicans’ spending proposal for the rest of fiscal 2011 that ends Sept. 30.

“That plan would recklessly slash important programs immediately, disregarding the impact to American workers and our fragile recovery,” Van Hollen said.

“Last week Federal Reserve Chairman Ben Bernanke testified before this committee about the importance of targeted national investments to help grow the economy and keep America competitive,” Van Hollen said. “This budget does that.”

House Republican leaders last week increased their proposed spending cuts for this year to $61 billion from $35 billion after rank-and-file members demanded deeper reductions.

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.

Representative Mike Simpson, an Idaho Republican, said Obama’s plan fails to fix the nation’s fiscal problems because it doesn’t address entitlement programs or get to a balanced budget.

“If this was the tough love that my father showed me when I was young, I’d still be a juvenile delinquent,” he said.